Taxpayers must exercise caution when dealing with unscrupulous tax return preparers. The IRS advises individuals to watch out for warning signs such as fees based on the refund size or “ghost” tax preparers who refuse to sign the tax return or ask individuals to sign a blank return. To avoid these pitfalls, it is essential to rely on a trusted tax professional, and the IRS provides a range of resources to help individuals make informed decisions.
According to IRS Commissioner Danny Werfel, while many tax professionals provide exceptional guidance to people dealing with intricate tax matters, some unscrupulous tax preparers with faulty advice frequently abandon taxpayers, leaving them in the lurch. He emphasized the importance of taxpayers availing themselves of the various tools and resources at their disposal to locate a suitable tax professional that meets their requirements.
The IRS Issues a Warning About Dishonest Tax Preparers in “The Dirty Dozen”
On day six of the annual Dirty Dozen campaign, the IRS warns taxpayers and the tax professional community about unscrupulous tax return preparers who pose a significant threat to their financial security, personal data, and more. The Dirty Dozen comprises a list of twelve scams and schemes, some of which are new, while others are making a comeback. Although it is not an official register of agency enforcement priorities or a legal document, the Dirty Dozen is designed to raise awareness among taxpayers and tax professionals about various fraudulent activities.
Since 2015, the IRS, state tax agencies, and the tax industry, including tax professionals, have collaborated as the Security Summit to caution the public about prevalent scams and schemes that can heighten the risk of identity theft during and beyond tax season. The Security Summit’s objective is to safeguard taxpayers, businesses, and the tax system from fraudsters and identity thieves.
Choose Carefully and Check Your Tax Return Preparer’s Credentials
Just as individuals are careful in selecting a doctor or lawyer, they should exercise the same level of caution when choosing a tax preparer, as the tax preparer is entrusted with sensitive personal and financial information. Although there are various types of tax preparers with varying levels of credentials and qualifications, certain criteria should be considered when selecting a preparer:
- The unique needs of the taxpayer should determine the type of preparer that is most suitable for them.
- Regardless of who prepares the return, taxpayers are ultimately responsible for all the information contained in their income tax return.
- Tax professionals must possess an IRS Preparer Tax Identification Number (PTIN) to prepare federal tax returns.
To assist taxpayers in learning about various types of preparers and their representation rights, the IRS provides educational resources. Additionally, the agency offers a Directory of Federal Tax Return Preparers with Credentials and Select Qualifications that can aid in identifying a preparer with specific qualifications to meet their needs. The directory is both searchable and sortable.
Don’t Let Fraudulent Tax Preparers Fool You: Here’s All You Need to Know
The majority of tax return preparers offer exceptional and professional services, but it’s crucial to steer clear of unethical preparers. One of the warning signs to watch out for is when a preparer refuses to sign the tax return. These “ghost” preparers may prepare the return but omit their IRS Preparer Tax Identification Number (PTIN), which is required by law.
If a preparer doesn’t sign the return, it could indicate that they’re only interested in making a quick profit by making false promises of a significant refund or charging fees based on the refund’s size. This puts the taxpayer at risk and liable for any inaccuracies on the return. It’s important for taxpayers to never sign an incomplete or blank tax return.
Reporting Fraud, Scams, and Schemes to Avoid Them to Affect Others
The IRS urges individuals to participate in the Dirty Dozen awareness campaign by reporting those who endorse improper and abusive tax schemes, as well as tax return preparers who intentionally prepare inaccurate returns.
To file a report against an abusive tax scheme or a tax return preparer, individuals may send a completed Form 14242, Report Suspected Abusive Tax Promotions or Preparers, along with any relevant supporting documents, via mail or fax to the Lead Development Center of the Office of Promoter Investigations within the IRS.
The Dirty Dozen Warnings From the IRS – Avoid Getting Charged
The list includes several high-risk strategies such as cryptocurrency, non-filing, abusive syndicated conservation easement and abusive micro-captive insurance arrangements. The IRS has emphasized its focus on high-income taxpayers who engage in tax violations, ranging from failing to file returns to more sophisticated transactions involving abusive deals.
As part of its broader effort to combat abusive schemes, the IRS has announced the hiring of up to 200 additional attorneys to focus on abusive syndicated conservation easements and micro-captive transactions, as well as other abusive schemes.
The agency encourages individuals to report individuals who promote abusive tax schemes and tax return preparers who deliberately prepare improper returns. The Dirty Dozen list also covers scams that target average taxpayers, including email scams, and schemes that typically target high-net-worth individuals looking to avoid paying taxes.