Each year our tax attorneys in Chapel Hill review common tax scams. One particular scam the Internal Revenue Service is highlighting this tax season concerns tax preparer fraud.
More than half of United States taxpayers use a tax preparer to file their returns. Several North Carolina tax preparer scams have made headlines the past few years. Carolina Journal reported in 2014 that an anonymous tax preparer witnessed multiple other preparers fraudulently claiming tax credits for children that do not exist.
Clayton, NC: 34 counts of aiding or assisting in the preparation of fraudulent income tax returns and two counts of attempting to evade or defeat the state’s individual income tax.
Garner, NC: 29 felony counts of aiding or assisting in the preparation of fraudulent North Carolina individual income tax returns.
East Bend, NC: 14 counts of obtaining property by false pretenses and 12 counts of aiding or assisting in the preparation of a fraudulent return.
Clover, SC: preparation of fraudulent North Carolina individual income tax returns, among other charges.
What problems could a fraudulent tax preparer cause? Some dishonest preparers advise filers to take deductions they are not qualified for, and in turn the tax preparer receives a larger fee. Fraudulent preparers might not strike the first year you use them. In future tax years a filer might learn their return was already filed and someone else collected a refund. Taxpayers should make sure to find a reputable tax professional to work with in the long-term.
To ensure your tax preparation provider is legitimate, ask for verification of their credentials and their PTIN (Preparer Tax Identification Number provided by the IRS). Before working with a provider, request a breakdown of tax preparation fees in writing. A warning sign to look for in costs are preparers whose fees are conditional and fluctuate depending on the value of the return the filer receives. Do not use a preparer who says they receive your refund and disburse it to you.
The IRS should send tax refunds directly to the taxpayer, not the preparer. If you have already started using a preparer and they provide you a blank tax return to sign—do not sign it, and seek an alternative tax professional.
If you suspect tax fraud, complete and send a Tax Return Preparer Complaint Form 14157 to the IRS.