With tax season officially under way, plenty of taxpayers will decide to outsource the job of filling out their returns to paid tax preparation professionals.
But just because someone walks like a tax professional and talks like a tax professional, that doesn't always mean he or she really is a tax professional.
Even excluding your garden variety predatory tax scammers, there are far too many "experts" out there with the best of intentions who are too incompetent to handle the job.
Here's how to tell you've picked the wrong person to do your taxes:
1. They ask you to inflate your claimed charitable donations. If they're asking you to fudge your charitable donations, chances are you're working with someone who charges you a percentage of your refund. Steer clear of these types. So long as their pay is tied to the size of your refund, they'll do whatever it takes to maximize it -- even if it could land you in trouble with the IRS.
2. They're working out of a sign-less, empty storefront. Not that you should always judge a book by its cover, but if the tax preparer you plan on trusting with all of your most personal financial records can't generate enough business to invest in a coat of paint and a sign, maybe you should take the hint.
3. They don't ask you for thorough financial records. "If anyone promises a refund without looking at all your info, they're probably running a scam," said Kay Bell, a tax professional and principal tax reporter for Bankrate.com. "When they don't want a lot of documentation, that's a big red flag they're not on the up and up."
Never use a tax preparer who's willing to e-file your return with your last pay stub before you receive your Form W-2, the IRS warns.
Here's what a legitimate tax preparer will ask for, at a minimum:
- W2
- Children's Social Security numbers
- Annual reports from all of your investments
- Pay stubs other employment info
- Child custody proof in order to claim dependents, and so on.
4. They're spinning tales about ethnic tax breaks. If your tax preparer is selling you on the idea that you're entitled to a special tax break based on your religion or ethnicity, run for the hills. Some African-American consumers have been duped into scams that promise slavery era reparations. This scam has been running rampant for at least a decade, and even though the IRS and the Justice Department have both helped put culprits behind bars, vulnerable taxpayers are still being targeted.
5. They have a history of bad business practices. To quickly and easily check out a tax preparer before committing your tax return to his care, run the business name through the Better Business Bureaus' database. Any red flags will likely turn up there. If you're working with a Certified Public Accountant, your state's board of accountancy will have his records. Check out your state bar association for attorney complaints.
6. They don't want to share their credentials. Genuine tax preparers should have a Preparer Tax Identification Number, which is issued by the IRS. Don't be shy about asking for it. When your final return is completed, it should have their PTIN included, and you should get a copy as well. Also, ask if they belong to a professional tax organization, or are enrolled continuing education classes.
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