Tax fraud, including filing fraudulent tax returns, costs taxpayers billions of dollars each year and continues to grow. The Internal Revenue Service reports that criminal investigations into fraudulent tax return preparers continue to grow.
Dishonest accountants can commit fraud in a number of ways. They can claim excessive personal or business expenses, false deductions, improper credits, or excessive returns waivers for their customers. Fraudulent creators can also manipulate income numbers to obtain fraudulent tax credits like the Earned Income Tax Credit.
The lack of evidence that a creator may be abusive could create significant financial problems for the taxpayer. Some of the most common signs are:
• Claiming that they can get bigger refunds than other creators.
• The fee is based on a percentage of the refund amount. Fees should be based on the complexity of the return, never the amount of tax saved or refund.
• If you claim you can pay for your return immediately. Remember this is a loan. Fraudulent accountants often fill their pockets by giving cash upfront at a high interest rate and presenting it as an instant refund from the federal government.
• Refusal to sign the tax return or provide the taxpayer with a copy of his / her records. Always make sure you have something on hand that provides evidence of what happened and you should have a receipt for the services provided.
Taxpayers should be very careful when choosing a tax advisor. While most preparers provide good service to their clients, some unscrupulous tax preparers file bogus and fraudulent tax returns and ultimately defraud their clients. It is important for taxpayers to know that even if someone else prepares their tax return, they are ultimately responsible for all of the information in the tax return. The Better Business Bureau, along with the IRS, recommends taxpayers to follow these tips when hiring a preparer:
• Receive referrals from happy customers and check out their BBB Business Review.
• Ask the creator about their training, experience and current knowledge of tax law.
• Find out if the creator has ever represented taxpayers in an audit or if they have ever been denied permission to do so.
• Consider if the person or company is there to answer questions about preparing the tax return months or even years after filing the tax return.
New tax laws regarding COVID-19 can create confusion that will benefit dishonest creators. Therefore, taxpayers should always review their tax returns before signing them and ask questions about entries they do not understand. Also, make sure you have a copy of the return for your records. Never sign a blank tax form or one filled out in pencil.
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