How To Avoid Income Tax Preparer Fraud

You can never be too careful with your money, especially during tax season. If you're thinking of getting someone to do your taxes for you, be wary of frauds. Many paid tax preparers out there will prepare and file false income tax returns (ITR) by inflating personal and business expenses, making fraudulent deductions, and/or claim excessive exemptions and unallowable credits for their clients. They can also alter your income numbers to obtain tax credits. 

All this might happen right under your nose. The IRS will eventually come calling, and you'll end up paying additional taxes, plus interest and penalties. You might even be subject to criminal prosecution, as tax evasion is a felony punishable by a $250,000 fine and up to five years imprisonment.

All this trouble can be avoided with a little careful selection of who prepares your taxes for you. These are a few things to consider when choosing your return preparer:

• Avoid preparers who promise you larger refunds than other preparers. These are come-ons by scammers who look to attract more customers. The bigger refunds often result from dubious activity.
• Be wary of those who base their fees on a percentage of your refund. These could be individuals looking for a big payday.
• Ask your preparer to sign your return and provide you a copy. Keep the copy in your records for investigation purposes.
• Make sure that your preparer will cooperate in the off-chance that your return will be investigated. Get his or her contact number, working address, and other pieces of information that'll help you find him or her.
• Double-check your return before you sign it. Ask your preparer to clarify the points you don't understand. Don't be afraid to ask any question - it's your right to be informed.
• NEVER sign a blank form. This immediately puts you at risk, as you give your preparer free reign to do absolutely anything with your taxes.
• When hiring a preparer, immediately ask for his or her credentials. Check to see if the individual is accredited or belongs to an accredited agency, a certified public accountant, a licensed public accountant, or a tax attorney. Only CPA's, attorneys, and agents can represent you before the IRS in audits, appeals, and all other matters. The others can only represent you for audits.
• Check your preparer's affiliations. Members of professional organizations are typically safer bets as they're usually held to a strict code of ethics.
• Be vigilant and never leave anything to chance. Remember that while your preparer may be the one committing the fraud, you will ultimately be the individual held responsible for his or her activity.

The IRS runs a Return Preparer Program which focuses on increasing compliance with tax laws by acting as a watchdog for fraudulent activity. If you suspect your preparer of tax fraud, you may file a report at your nearest IRS field office. You can also call the IRS at 1-800-829-0433 or visit their website at www.irs.gov for pressing concerns.