Now that it’s getting close to filing time, you might be wondering how to choose a tax preparer. Before long, there’ll be advertisements for tax return preparation services everywhere you look. Because you may not have chosen a tax preparer yet, you should know the warning signs to look for along the way, as there are several red flags to watch out for when choosing a tax preparer.
Consider How to Choose a Tax Preparer By PTIN
This is probably one of the easiest the easiest red flags to pick up on because any person paid to prepare tax returns is legally required by the IRS to have a preparer tax identification number, or PTIN. If your preparer does not have a number, it’s highly advisable to find yourself a preparer that does. There is no reasonable excuse as to why a preparer would not have a PTIN.
If you suspect that a preparer’s tax preparer identification number is fraudulent, consider referencing the IRS’s Directory of Federal Tax Preparers. There, you can find the name and PTIN of any preparer in good standing.
The Preparer Bases Fees on Your Return
Be sure that you ask the preparer how he or she calculates their fees before you agree to have this person prepare your tax returns. If the preparer claims to charge fees based on the refund you’re entitled to, there’s a problem. Deducting a percentage of your return is an odd and perhaps irresponsible way to set fees because it’s likely to give the preparer incentive to get you a bigger return.
But isn’t that good?
Yes and no. While it’s good that the preparer wants to ensure that you get the money you’re entitled to, their methods may not be in your best interest. If the preparer wants a percentage of your return for their fee, they may be inclined to try claiming deductions and credits that you’re not entitled to. Doing this could very easily lead to an audit. A preparer charging a flat fee does not have any incentive to stretch the truth when it comes to your finances.
The Preparer PROMISES the Highest Returns
Everyone wants a high tax return. When you’re considering how to choose a tax preparer, don’t let this often-loaded promise be something you desire. Much like the above-mentioned topic, a preparer promising higher returns than any other company might be a red flag for the same reason. When thinking about how to choose a tax preparer, one of the top items on your checklist should be choosing a professional who prepares your returns legally. If the preparer brags about their ability to get the highest returns for clients, those returns might not be legitimate.
Claiming credits and deductions that you aren’t entitled to in an attempt to get a higher return is technically lying to the government, and because the IRS is very diligent, they’re going to find falsified information. If you’re audited because your tax preparer stretched the truth too far, that high return isn’t going to matter much. Depending on the lie, an audit may be the least of your problems, paling in comparison to tax fraud.
The Preparer Does Not Ask for Last Year’s Return
While failing to ask for last year’s tax return might not make your preparer “bad,” it certainly does not make them diligent. A professional preparer will ask you for the tax returns from the previous year to scan over them for anything that might have been overlooked during that tax return. If your preparer does not ask you for last year’s return, they might be overlooking important items that are needed on this year’s return.
The Preparer Just Sounds Shifty
Sometimes going with your gut is the greatest instinct to follow. If the tax preparer that you’ve considered working with says or suggests anything strange, don’t ignore it. If something doesn’t sound right, it usually isn’t. If it doesn’t make sense, it’s usually because something is wrong. Here are a couple of examples just to begin with:
Sign a Blank Return?
If your preparer asks you to sign a blank return, don’t do it. Not only should you avoid making this mistake, you should absolutely consider taking your business elsewhere. Never agree to anything that isn’t written clearly enough for you to understand, and never put your signature on a blank document. It’s a disaster waiting to happen.
Deposit Your Money in Someone Else’s Account?
Depositing your tax return into someone else’s bank account does not go over well with the IRS, and it’s an easy way to lose your return. It doesn’t matter what reason the preparer gives for making this suggestion, the IRS is likely to have a problem with it. Most of the time, it’s prohibited by the government and the IRS will only issue tax returns to an account where the information matches the name on the tax check.
Marking Your Return as Self-Prepared?
The reason you’re visiting a tax preparer is simple: you need someone to prepare your taxes for you. If you’re paying a person to prepare your taxes, the forms should not say that they were self-prepared. They weren’t. You have a preparer, and if there is any problem with your return, having the forms marked as self-prepared puts you on the hook when it comes to addressing those problems.
The Preparer Has a Questionable History
When determining how to choose a tax preparer, be on the safe side and check the credentials of your preparer with the State Boards of Accountancy or through the IRS Preparer Directory. On these pages, information is kept up-to-date and correct, and any issues regarding licensure will show up on your preparer’s report. If their license is in good standing, you’ll know. If the preparer has received any disciplinary action or has had their license suspended or revoked, you’ll know.
It’s getting more important every single year to be confident in the preparer you choose. Tax scams are still circulating, and people are falling victim to fraud and identity theft all the time. It’s better to be sure than sorry, and any professional will understand your concern. If they’re annoyed by your inquiries, carefully consider another preparer.
If you’re in the market for a professional CPA to handle your tax returns this year, consider West Austin Tax for your income tax questions and services. You can visit their website for information, video resources, or to schedule an appointment with one of their professional CPAs. You can also call (512) 330-9400 for more support.
*West Austin Tax is not a CPA firm.