Tax returns can be protected and avoid unnecessary stress.
Tax preparation and tax preparer selection are not all that difficult, but there are those who make it difficult by not adhering to a few simple rules.
Avoid tax fraud by choosing your tax preparer carefully, and carefully communicating with your tax preparer once he or she is chosen. You can pay taxes online with the new IRS systems.
The IRS defines someone who is an Abusive Tax Preparer as someone who prepares fraudulent or abusive tax returns for compensation. Here are some of the ways they prepare false tax returns that are easily detected by the IRS.
- They may inflate expenses related to business or personal use.
- State false deductions, give tax credits that are not allowed, state excessive exemptions
- Give false tax credits, such as business equipment credits or personal Earned Income Tax Credit (EITC)
- Claiming false income and loss statements
- Claiming non-existent charitable contributions
- Claiming false dependents
- Preparing fraudulent schedule C (for business expenses)
- Claiming false medical and dental expenses; usually over inflating medical cost so they can deduct them.
These and other deductions are usually caught with the IRS “red flag” system as tax fraud. The return is rejected for review because it does not make sense according to computer analyses of the return. You can check own tax forms, filing your own tax forms, and pay taxes online.
The IRS has a special division whose sole purpose is to investigate tax preparer abuse and fraud. It is the IRS Criminal Investigation Return Preparer Program (RPP) that flags the fraudulent returns. Through the RPP, all fraudulent tax preparers are subject to criminal charges.
The abusive tax preparer usually prepares taxes for large numbers of people. The people, who use the services and receive bad tax preparation, will later be charged with interest, penalties, and sometimes civil and even criminal charges.
In 2010 the IRS launched the tax preparer oversight program. This allows the IRS to monitor and catches tax preparers easier. It is important for every taxpayer to make absolutely sure they have closely researched their tax preparer, so they can choose a preparer carefully. The taxpayer is responsible for every single item their tax preparer places on their return.
With electronic filing of income tax returns, and refund anticipation loans (RAL), came new abuses in filing for tax preparers. There were fake tax preparers, filing fake electronic returns and taking fake RAL’s. Since 1977 the Criminal Investigation Unit in the 10 IRS campuses, monitor returns for fraud at their Fraud Detection Centers (FDC). The FDC’s role is to detect tax fraud and tax fraud schemes, and send them to the Criminal Investigation Unit of the IRS.
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Here are questions you can ask your tax preparer before you get started.
1. What are your qualifications?
A CPA or Enrolled agent are the best qualified to do taxes. Both of these designations regularly take classes and take an exam for their designations. A CPA or certified public accountant is the highest qualified in the tax field.
2. Would you be willing to lie on my return?
If your preparer says yes, run as fast as you can. This can get both of you in trouble so why would he/or she be willing to lie. Perhaps your preparer is not licensed. Licensed preparers can lose their designation if they are caught lying on a return.
3. How is your information protected in their office?
The computer and backup files should be secure during and after hours. All paper files should be secured in locked cabinets. Identity theft is on the rise.
4. What are your costs?
Agree on a tax preparation fee before you hand over your information, so there are no surprises.
5. Can I pay you extra to re-check my return against documents I have given you?
Ask your preparer to re-check your return. If you have the ability to check your return against your documents that is fine. But, you absolutely should check for the small things: correct spelling of your name, correct social security number, correct occupation, correct income, and any other minor items, which could turn major if entered incorrectly.
6. How Long Will It Take?
It is your responsibility to organize your tax information and submit it to your tax preparer early. It is your tax preparer’s responsibility to get the information back to you in a timely manner, so you can file your taxes well before the tax deadline.
The Internal Revenue Service has several ways to find dishonest tax preparation. They have a series of checks and balances in their system that can signal fraud.
Why would you risk getting caught by the Internal Revenue Service when the penalties are far, far greater than the savings you will get for dishonesty, by you or your tax preparer? There are many ways your preparer can be dishonest about preparing your tax return.
He or she can make it seem as though you have more business or personal expenses than is true. I have listed many of the ways dishonest tax preparers try to fool the IRS. Some of the more common are; going through the trouble of presenting false receipts for equipment or furniture not purchased.
They can get you a credit where you do not deserve one. They can make false claims about deductions you are not entitled to. False receipts can be detected by the IRS, as well as other forms of fraud.
Understand how tax preparers charge. This is another area where you can get scammed. Tax preparers charge according to the difficulty of your tax return. This should be a flat fee. If a tax preparer charges you according to the percentage of the money you receive from your return or if they claim they can get you a higher return than anyone else, run, as fast as you can. This should raise a red flag in your mind.
You have heard this in other articles I have written, but I will say it over and over. You are responsible for every item that goes into your tax return. You will be heavily fined and penalized for dishonesty in your tax return. So, check your tax return carefully. If there is something you don’t understand, ask your tax preparer to explain it. As you can see from all of the above, you will sleep better for years to come if you file an honest return.
But, better yet, you will save money, lots of money in the long run if you are honest with your return, and you choose an honest tax preparer. You can pay taxes online when you find you own money after tax preparation.
Be sure your preparer signs your return and gives you a signed copy of the return, so you can verify everything on your return is correct before you mail it, and avoid tax fraud at all cost.
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