Pay Someone to Do Your Taxes? New Study May Make You Reconsider

Photo (cc) by 401(K) 2013

Preparing your taxes can be confusing and time-consuming, which is why many people pay a tax preparer to do it for them. Unfortunately, just because you’re paying someone doesn’t mean they’re doing things correctly.

Prepared in Error, a new study on tax preparers, uncovered some serious issues with tax preparation services. The study, which was funded by consumer advocates, was limited to Florida and North Carolina. It involved 29 mystery shoppers armed with one of two types of hypothetical tax returns – one for a single parent, and another for a graduate student.

The results of the mystery shopping test were startling.

Of the 29 tax returns prepared by paid tax preparers, 27 had errors. That’s a 93 percent inaccuracy rate. Yikes.

The errors included improperly claiming an Earned Income Tax Credit, not reporting side income, failing to use the correct forms, forging signatures, and making up a fictitious business expense.

“To see this level of errors is extremely disturbing,” said Chi Chi Wu, staff attorney at the National Consumer Law Center, which helped fund the study. “A tax return may be the most important financial document for an American consumer during the year, and consumers who use paid preparers are placing their financial well-being in the preparers’ hands.”

The Prepared in Error report is far from an isolated case. The study cited a 2014 report by the U.S. Government Accountability Office that found that 2 of 19 returns prepared by tax pros came up with accurate refund amounts.

While more than 70 million Americans rely on a paid tax preparer, the report said just four states, including Maryland, Oregon, California and New York, regulate so-called tax professionals. This means that elsewhere, pretty much anyone can be paid to prepare taxes. There are no real standards.

“It shows the dire need for competency and ethical standards in the two states that were tested, as well as the 44 other states that do not prescribe minimum credentials for tax preparers,” the report said.

I had one horrible experience with a so-called tax professional several years back. She messed up our taxes so badly that we had to meet with our state Department of Revenue and the IRS to get things straightened out.

We found out that we were just two of a few hundred very unhappy customers. Needless to say, she’s no longer preparing people’s taxes. Now, my husband and I work with an accountant at a reputable CPA firm, and we haven’t had any issues.

Are you surprised to see how many errors some paid tax preparers make? Who prepares your taxes? Share your comments below or on our Facebook page. And share this article on your Facebook page.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

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