LIMA — Tax preparation services often boast of their ability to help individuals claim larger tax refunds, due in large part to unclaimed tax credits for which the individual may be eligible. Fraudulent or inexperienced tax preparers may apply a credit or deduction the taxpayer is not entitled to, one of several types of fraud targeting taxpayers.
“A minority of dishonest preparers operate each filing season perpetrating refund fraud, identity theft and other scams that hurt innocent taxpayers,” the IRS said in a warning earlier this month.
While the IRS imposes civil penalties against fraudulent tax services, the agency says individuals are still responsible for their own returns.
That’s why Cheryl Parson, president of the Better Business Bureau’s Lima branch, said it’s important to check a tax preparer’s credentials before paying for any service.
“You want to go with a good, reliable company,” she said. “If it’s someone we haven’t heard of or don’t have record of, that’s someone you want to avoid. You’re giving them all of your personal information, so you want to know who you’re dealing with and that your information is secure.”
Parson said scammers will often tell clients they can pick up their refunds at the agency, rather than through direct deposit or a check from the IRS, a sign that the refund may be misdirected into the preparer’s bank account.
“You might not ever receive that money,” she warned.
Another sign of a potentially fraudulent service: Tax prep companies that close shortly after tax season ends.
Parson has received several complaints over the years regarding short-term tax companies. She said it’s difficult for taxpayers who use a short-term service to amend their returns later in the year.
“The only thing they can do if they filed with one of those companies, they’re going to have to go to another tax preparer,” Parson explained.
Some professional tax service agencies will fix or take a second look at a person’s tax refund to make sure it’s accurate.
“We can go back to 2015 and review their return and make sure there were no mistakes,” said Deborah Earl, an enrolled agent with H&R Block in Lima. “That’s a good way of double checking if a person is a little uncomfortable.”
Parson’s advice: Don’t sign a blank return, and make sure to double-check the preparer’s work before filing.
“Make sure that you’re signing the agreement or the tax statement and that everything is correct on that statement, you’re not letting the tax preparer sign your name,” she said.
The IRS maintains a directory of federal tax return preparers and their credentials, which taxpayers can check before hiring someone to file their taxes. The Better Business Bureau and state agencies such as the State Board of Accountancy are other sources regarding a preparer’s work history and disciplinary actions.
Taxpayers who wish to report misconduct may do so through the IRS, such as when a tax preparer alters a return without the taxpayer’s consent or when the preparer falsifies a return to generate a larger refund.
The IRS recommends several other steps to avoid tax scams:
• Double check the routing number and bank account number before submitting a return,
• Make sure to get a copy of the completed return.
• Paid tax preparers are also required to sign the return with a Preparer Tax Identification Number.
Reach Mackenzi Klemann at 567-242-0456.