Federal tax officials are reminding taxpayers to beware of tax-preparer scams, which can lead to significant penalties and interest, as well as possible criminal prosecution.
The Internal Revenue Service (IRS) Criminal Investigation Division works closely with the Department of Justice to shutdown scams and prosecute the criminals behind them, according to IRS Spokesman Mark Green.
One such scam is tax-return preparer fraud.
Green said about 60 percent of taxpayers will use tax professionals this year to prepare, and file, their tax returns. He said most preparers provide honest service to their clients, but as in any other business, there are some who prey on unsuspecting taxpayers.
The tax professional acknowledged that questionable preparers have been known to skim off their clients’ refunds, charge inflated fees for return-preparation services, and attract new clients by promising guaranteed or inflated refunds.
Federal courts have issued hundreds of injunctions ordering individuals to cease preparing returns, and the Department of Justice has pending complaints against many others, according to Green.
In 2012, he said, every paid preparer needs to have a Preparer Tax Identification Number (PTIN) and enter it on the returns he or she prepares. He said taxpayers should use the PTIN as a means of checking the preparer’s qualifications and history.
Green said taxpayers should remain diligent, and be on the watch for signs that they may be dealing with an unscrupulous return preparer.
One sign of warning is when a tax preparer does not sign the return or place a Preparer Tax Identification Number on it, or give the taxpayer a copy of the tax return, according to the IRS.
The IRS web site points to other warning signs, including when the tax preparer promises larger than normal tax refunds, charges a percentage of the refund amount as a preparation fee, requires the taxpayer to split the refund to pay the preparation fee, or add forms to the return the taxpayer has never filed before.
Green said tax preparers should not encourage taxpayers to place false information on their returns, such as false income, expenses and/or credits.
For tips and advice on choosing a competent tax professional, visit the IRS web site at www.irs.gov.