"Did You Know?" #12

DID YOU KNOW that you are responsible for what’s on your tax return even if it was prepared by a paid tax preparer?

When you sign your tax return, you are signing “Under penalties of perjury, I …have examined this return…and to the best of my knowledge… [it is] are true, correct, and complete.” Even more sobering, when you sign the return you become responsible for whatever is on the return, even if the preparer did something dishonest, whether or not you know.

Let me begin by saying there are many honest and competent tax preparers. But what you need to know is that there is also a fair share of tax preparers who are not honest, incompetent, or possibly both. The sad truth is that there is very little regulation of tax preparers, and the consequences of an incorrect or dishonest tax return are going to fall on the taxpayer. The IRS will expect the taxpayer to pay the tax owed, even if it’s due to a mistake made by a paid tax preparer.

Step 1. Find a reputable tax preparer.

Make sure they are someone with a brick-and-mortar office where you can find them after tax season is over. Pick someone with licensure or credentials such as a CPA, Attorney, Enrolled Agent, Annual Filing Season Program Participants, or PTIN Holders. Another incredible option is the Volunteer Income Tax Assistance (VITA) program.  This is a free service to taxpayers with income under $66,000. All VITA volunteers have to pass testing every year before they are allowed to prepare returns, and every return is quality-checked by a second volunteer. Did I mention it’s FREE? You can locate a VITA site at https://www.irs.gov/individuals/free-tax-return-preparation-for-qualifying-taxpayers.

Step 2. ALWAYS review the information in your tax return before you sign it.

Make sure the income listed and deductions taken are correct. And make sure every tax credit listed is something you qualify for. If you don’t know what a “fuel tax credit” is, you need to consider that you might not qualify for it. If your niece or nephew doesn’t live with you, you can’t claim them on your tax return.

These two scenarios are common ways tax preparers can inflate your tax refund. Why would anyone want to inflate your refund, you ask?  Because those false credits that you don’t qualify for increase your refund and therefore increase the amount of money available for their fees. Once they have that money, it’s likely gone for good. But if you weren’t eligible for the credits, the IRS likely will be insisting on getting that money back.

Trust your intuition. If something sounds too good to be true or someone is claiming they can get you a much larger refund than anyone else, please get a second opinion!