As you begin to prepare your taxes this year, it is crucial to ensure you avoid common red flags if you are using a new tax preparer. Many types of tax preparer scams can be costly for you and even result in identity theft in some cases. This article will walk you through some of the warning signs to look for. It will also provide you with advice on how to choose a reputable tax preparer.
Tax Preparer Scams in 2024
If you are a victim of a tax preparer scam, you may have many issues after you file your tax return. You may not receive the full refund you deserve, and the preparer may charge you extra fees. In extreme cases, the tax preparer may not even file your return and fraudulently use some of the personal information that you share with them.
Accordingly, it is very important to spend a lot of time examining the quality of your tax preparer before you choose their services. Some tax preparers who intend to scam customers may bait them by offering lower rates and/or promising high refunds.
Common Red Flags to Watch Out For
It can be very helpful to start looking for common warning signs before filing your return. Some similarities among fraudulent filers include filers who request you to sign a blank form, promise a large refund, or want the money refunded to a different account.
Moreover, some fraudulent filers may also make the fee based on the return you receive instead of charging a flat fee. These preparers may also file the tax return with only your name, leaving you solely responsible for your tax filing.
One way to mitigate this risk is to check the credentials of the person filing your taxes and to find out as much information about them beforehand. It may be helpful to have someone in your community or network refer you to someone.
The Most Common Tax Preparer Scams
Now that you know about some common red flags, we will cover some of the most common types of tax preparer scams that people encounter.
Phantom Tax Preparers
Phantom tax preparers are tax preparers who charge individuals for a tax filing service but do not file the tax return. Many of these preparers may offer their services for a very attractive rate and then fail to follow through and file the return.
If you are a victim of this activity, you can file a formal complaint, but you will likely still be responsible for paying interest on taxes that you owe. In some cases, you can file Form 843 and explain the circumstances that led you to file your tax return late.
Inflated Refund Claims
One very enticing scam is when filers promise their clients substantial refunds before they file the tax form. You should be very cautious of any tax preparer who makes these promises without being fully aware of your financial situation.
While it may sound appealing to receive a large refund, it can also be a sign of a scam, as fraudulent filers can falsify information on your tax returns to help you receive a larger refund. If the IRS discovers you received a fraudulent refund, you will have to pay back the amount you owe plus interest.
Identity Theft Schemes
Other fraudulent tax preparers may be more interested in gaining some of your information for malicious purposes. These tax preparers may access some of your personal and financial information and use this information to commit identity theft later. In particular, these individuals may want to gain access to your social security number to file a fraudulent return and obtain a refund.
One common warning sign to look for is if the tax preparer wants to set up an IRS account for you online and asks you for personal information. Other tax preparers may post advertisements related to the Employee Retention Credit or other popular legal events. Finally, some may even try to be the IRS and send you fake notices about an unclaimed refund or state that you owe money to the IRS.
Unauthorized Charges
It is also very crucial for you to understand the company’s pricing structure and ensure you do not face any unexpected charges. Some tax preparers may add hidden fees to their structure and make extra charges without your permission. Moreover, some preparers could even choose to refund portions of your refund to your account. In all cases, you should ensure that your refund goes directly to your personal banking account.
Protecting Yourself from Tax Preparer Scams
There are many steps that you can take to protect yourself from tax preparer scams.
Even though you are not filing taxes alone, it can still be helpful to know about the tax preparation process. You may be more likely to spot any errors in the process and to ask relevant questions that help you qualify the credentials of the person filing for you.
If somebody files a fraudulent return on your behalf, you are still responsible for the consequences of these actions. Victims of tax fraud may run into legal issues and may have debt because they received refunds based on fraudulent information. You may owe the IRS money and have to pay interest and penalties on this amount.
What to Do If You Suspect You’ve Been Scammed
Unfortunately, some people may not notice any of these warning signs, or may not realize they are a victim of a tax preparer scam until it is too late.
If you believe that you are a victim of tax fraud, your first logical step is to contact the IRS and explain your situation. It may also be a good idea to report this person to the authorities. You are ultimately responsible for the contents of your tax return, so it is ideal to take all of these steps to protect yourself and avoid potential legal repercussions.
After you do this, it is also crucial to make sure that your financial information is secure. If you gave the tax preparer any of your credit card information, you should check your bank statements to see if there are any fraudulent charges. If you think the tax preparer has other sensitive information, such as your social security number, it may also be a good idea to investigate this. You should check and see if someone filed a fraudulent return on your behalf so that they could claim the refund.
How to Find a Qualified Tax Preparer
There are many common qualities that you can look for if you are trying to find a solid tax preparer. You should ensure that the tax preparer has a very clear fee structure and that they are transparent about the filing process. Moreover, you can also check their credentials, such as their PTIN and academic background.
You may also be able to find online reviews about the company or ask people in your network if they have used these services. If you are knowledgeable about tax filing, you may also be able to ask them specific questions to gauge their knowledge and professionalism. If you are still looking for a tax preparer, it is best to rely on the IRS resources and your trusted professional network.
Closing Thoughts on Tax Preparer Scams
It is very crucial to vet your tax preparer before you file taxes to ensure that you avoid common tax preparer scams. Although this topic may seem overwhelming, there are plenty of common red flags you can look out for to avoid being a victim. Fortunately, most tax preparing services are trustworthy professionals, and the cases of tax preparer scams are relatively rare. You can avoid this risk by finding a professional from your network, educating yourself about the tax filing process, and looking out for common red flags. Shared Economy Tax is the leading tax firm for Airbnb pros and real estate investors. Our veteran tax pros know the industry inside out, and we can help you rack up huge tax savings with cutting-edge strategies customized for your business. Get started now with a one-on-one strategy session with one of our tax pros.
