One of the ways you can increase your tax refund and ensure that you aren’t leaving money on the table is to have a professional prepare your taxes. This year will be the seventh that I’ve used an accountant to prepare my taxes, and I don’t regret it at all.
However, you can’t just take a tax preparer’s word for it that they are doing what they should be. Almost anyone can do your taxes for you. You need to be careful about tax preparers that don’t have the right credentials, or who try to take advantage of you. A recent warning from the Consumer Federation of America takes a look at some of the things to watch out for when looking for a tax preparer.
What Credentials Does Your Taxpayer Have?
First of all, it’s important to understand that most states don’t have requirements for tax preparers. This means that you need to look for credentials elsewhere. My tax preparer is a CPA and maintains his credentials. You can check with your state to verify a tax preparer’s CPA credentials.
You can also check to see if your tax preparer is an enrolled agent, which is a credential from the IRS. Even when you go to a professional tax preparation service, you might not get an enrolled agent. If you want an enrolled agent to prepare your taxes, you have to ask for someone with that certification. CPAs and enrolled agents are required to pass a test, and these are the best credentials to look for.
Also, you can benefit from having your tax return prepared with someone from the Volunteer Income Tax Assistance (VITA) and AARP Tax-Aide programs. These are the only other tax preparers, aside from CPAs and enrolled agents, who are required to take a test and pass specific standards. VITA and AARP Tax-Aide can help you prepare your tax return at a low cost if you qualify.
Before you go to just anyone, double-check to ensure that his or her credentials are up-to-date.
Red Flags of Shady Tax Preparers
Don’t forget to pay attention to the red flags of a shady tax preparer. In many cases, some fraudsters will tell you that by filling out a special form you might qualify for a government grant.
Also, be wary of tax preparers that encourage you to leave out some of your income, or who try to bend the rules a little bit in order to help you “qualify” for a deduction or credit that doesn’t really apply to you. These shady tax preparers are trying to get you a higher refund, but you might be at greater risk for an audit — and these types of preparers aren’t the kind to help represent you later.
Finally, watch out for tax preparers who base their fees on a percentage of your refund. This offers an incentive for them to fudge the numbers a bit. Instead, only work with tax preparers who have transparent fees, and who are willing to share them with you upfront.
As you have your taxes prepared this year, make sure you are on the watch for shady practices that could put you in trouble.