How you can avoid the scams, missteps and high fees that are rife in the industry.
It’s sad. Many highly ethical tax professionals are working hard to help taxpayers, but tax season brings out fraudsters, scammers and plain vanilla take-advantage-of-you-while-your-guard-is-down types. It can be hard to tell the difference.
From fraud to incompetence to hinky tricks to outright ripoffs, the field of tax preparation is a magnet for some of the worst consumer abuses. In the video below, Money Talks News founder Stacy Johnson describes common tax-time schemes to part you from your money. After watching, read on to find out what the worst tax preparers won’t tell you.
1. I’m incompetent and untrained
Tax preparation is a mostly unregulated field. According to The National Consumer Law Center, in a report called “Riddled Returns: How Errors and Fraud by Paid Tax Preparers Put Consumers at Risk and What States Can Do“:
There are no minimum educational, training, competency or other standards. In 47 states, there are more regulatory requirements for hairdressers than tax preparers.
Preparers commit errors, misclassify taxpayers’ filing status, mishandle tax credits and even falsify information on tax returns, the report says. These aren’t just a few bad eggs, either. The problems involve “a significant percentage of the preparers tested,” the report says.
It’s no joke for taxpayers. “Consumers who select incompetent or unscrupulous preparers could face audits by the Internal Revenue Service (IRS) or even criminal sanctions,” a NCLC press warns.
Stay safe with tax preparation experts who are:
- Licensed CPAs (certified public accountant).
- IRS enrolled agents.
- Trained volunteers with one of two programs, Volunteer Income Tax Assistance or AARP Tax Aide (details below).
2. You could do this yourself
Doing your own taxes saves the $273, on average, that National Society of Accountants says taxpayers will spend for tax preparation assistance this year. According to Huffington Post financial contributor Carrie Smith, you’re a good DIY candidate if you:
- have just one job.
- no major changes in your income or filing status last year.
- own no property or investments.
- can understand the tax laws.
- are “a numbers person.”
- didn’t marry, divorce, lose a spouse or have a child last year.
- didn’t start a new business.
- aren’t easily overwhelmed by money issues.
One possible reason to consult an expert, Smith says, is that tax credits and deductions for dependents expire, depending on their ages:
If your child goes to college full-time, you can still claim them — and any education expenses — until they’re 24. Determining these situations accurately takes someone who is knowledgeable.