With the fallout taking place in the financial services sector as represented by rampant layoffs everywhere you might have noticed that more and more people are going out on their own and hanging their shingle as having a certain tax expertise. It is a natural transition for many but beware usually these people lack acumen as a novice to most any industry would. Worse still many of these sales people are used to working for commissions and as such can only think in terms of wringing money our of your pocket and dripping it into theirs. It never ceases to amaze me what people will stoop to in chasing the almighty dollar. As the Vice President of the Colorado Society of Enrolled Agents I routinely find myself getting reports of specific and egregious allegations of tax practitioner misconduct in violation of United States Treasury Department Circular 230. The point of this blog post is to choose your tax ‘expert’ with care. Take ownership of the process. Make sure that you trust the person you are choosing to be reliable and consistent. Also make sure this person has a reasonable knowledge base and a solid support network. Ultimately you are legally responsible for what is reported on your tax return.

To make an effort at mitigating fraud and abuse starting this year the IRS has mandated that tax preparers who sign tax returns must enter their required IRS Preparer Tax Identification Number (PTIN). The following are some other helpful points to ponder as most recently produced by the IRS.

1. Check the preparer’s qualifications. New regulations require all paid tax return preparers to have a Preparer Tax Identification Number. In addition to making sure they have a PTIN, ask if the preparer is affiliated with a professional organization and attends continuing education classes. The IRS is also phasing in a new test requirement to make sure those who are not an enrolled agent, CPA, or attorney have met minimal competency requirements. Those subject to the test will become a Registered Tax Return Preparer once they pass it.

2. Check on the preparer’s history. Check to see if the preparer has a questionable history with the Better Business Bureau and check for any disciplinary actions and licensure status through the state boards of accountancy for certified public accountants; the state bar associations for attorneys; and the IRS Office of Professional Responsibility.

3. Ask about their service fees. Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers.  Also, always make sure any refund due is sent to you or deposited into an account in your name.  Under no circumstances should all or part of your refund be directly deposited into a preparer’s bank account.

4. Ask if they offer electronic filing.  Any paid preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless the client opts to file a paper return.  More than 1 billion individual tax returns have been safely and securely processed since the debut of electronic filing in 1990.  Make sure your preparer offers IRS e-file.

5. Make sure the tax preparer is accessible.  Make sure you will be able to contact the tax preparer after the return has been filed, even after the April due date, in case questions arise.

6. Provide all records and receipts needed to prepare your return. Reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items. Do not use a preparer who is willing to electronically file your return before you receive your Form W-2 using your last pay stub. This is against IRS e-file rules.

7. Never sign a blank return. Avoid tax preparers that ask you to sign a blank tax form.

8. Review the entire return before signing it.  Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.

9. Make sure the preparer signs the form and includes their PTIN.  A paid preparer must sign the return and include their PTIN as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return.  The preparer must also give you a copy of the return.

10. Report abusive tax preparers to the IRS. You can report abusive tax preparers and suspected tax fraud to the IRS on Form 14157, Complaint; Form 3949-A, Information Referral (PDF 94K). Or directly contact The Office of Professional Responsibility (OPR). Also be sure to check out - Where Do You Report Suspected Fraud Activity?

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