Most tax preparers are ethical and honest professionals who properly service and represent their clients. However, every year many people fall victim to scams perpetrated by their tax preparer. In one common scam the tax preparer will offer the taxpayer their refund immediately in return for signing over the refund on the tax return to them, but then a different return is filed showing a different amount. For example, the tax return shows a refund of $1,000. The tax preparer offers the taxpayer $990 right now to sign over their refund on the return. This seems like a great scenario because the taxpayer gets the refund immediately. The tax preparer then files an alternate return which shows a refund of $10,000. All of this takes place without the taxpayer ever knowing because the return is deposited directly to the tax preparer. Years later, the taxpayer gets a letter from the IRS that their refund was overstated, tells them the proper amount, and asks for payment of the overstated refund. At this point, the taxpayer does have the ability to file the proper fraud claims against the tax preparer but it is not an easy or quick process. Other common scams involve variations of identity theft, false items on the tax return, and improper reporting of tax credits. All of these situations can create a financial and personal nightmare for the taxpayer.
Taxpayers can take precautions to avoid these problems. First, make sure your tax preparer is a reputable, trusted member of the professional community. Try to use tax preparers recommended by friends, coworkers or colleagues. Avoid tax preparers offering too good to be true results or with other questionable advertising methods. Only sign over a refund if you can completely trust the preparer and have an established relationship, even then, it may be advised to simply wait the conventional way for your refund. Also, you have to take responsibility for every item on your tax return. Even if you do not understand the technical aspects, review the return and make sure the numbers are familiar or make sense. Ask questions if there is anything that looks out of place or you do not remember. Lastly, NEVER ignore letters from the IRS. The IRS has become very good at detecting fraud and correcting mistakes. The sooner you reply the easier it may be to reach resolution. The longer you wait the more difficult the process can be, and, most of all, it is not going to go away so waiting solves nothing. (Click here for more)
If you think you have been victim of a tax scam or need a recommendation for a tax preparer contact us at Hone Maxwell LLP today. As mentioned above, ignoring the problem is never the answer and the longer you wait the worse it can get. Also, you can follow us on twitter @HMLLPTax or facebook at www.facebook.com/HoneMaxwellLLP for more tax tips and the latest updates on tax news.