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You might want to think twice before hiring a so-called tax professional to prepare your taxes. The Government Accountability Office released the findings of an audit of tax preparers this week, and the results are surprising.
USA Today said the GAO’s small undercover study focused on 19 tax preparers selected at random in states that don’t regulate tax preparers. Some of the findings include:
- Inaccuracies. Seventeen of 19 preparers made errors on customers’ tax returns.
- Count those tips. The most common mistake was not reporting tips. Twelve of the 19 tax returns had errors on tip reporting.
- Big and small mistakes. “Errors ranged from giving the taxpayer refunds $52 less than due to a refund of $3,718 more than due,” USA Today said.
A GAO survey from 2006 through 2009 showed that returns by tax preparation professionals had a higher rate of mistakes — 60 percent — than those done by taxpayers themselves (50 percent).
That’s not really a surprising statistic considering pretty much anyone can claim to be a tax professional and charge you money to prepare your taxes.
“A lot of people think a tax preparer is an accountant or someone who has special training, but that’s not necessarily true,” said Chi Chi Wu, an attorney with the National Consumer Law Center. “My middle school-aged son could set up a card table and prepare taxes. There’s nothing to stop him.”
Most states – 46, to be specific – do not regulate tax preparers. In fact, PBS said that “42 million tax returns are prepared by tax professionals who are unaccredited and unregulated by the IRS.”
Several years ago, my husband and I had our taxes prepared by a woman we thought was a professional. I had no idea that any Joe Blow off the street could advertise tax preparation services. We answered all her questions, some of which we thought were weird, paid her $300 for her services, and went on our merry way.
We ended up with a huge refund, both from the state and the feds. We were thrilled, but a little confused as to why our refund was so much bigger. A year later, we were contacted by the state Department of Revenue. The tax “professional” we had worked with was under investigation for fraud.
In the end, we had to pay back the majority of the refund we received. We learned an important lesson, and we’ve worked with a CPA to prepare our taxes ever since.
The IRS does not have the ability to regulate tax preparers, so taxpayers are on their own when it comes to deciding how to file their tax returns.
“We’re clearly on record for encouraging the IRS to educate the taxpaying public between various classes of preparers,” Ed Karl, vice president of taxation at the American Institute of Certified Public Accountants, told USA Today.
Who does your taxes? Are you a self-preparer or do you hire a pro? Share your comments below or on our Facebook page.