The Internal Revenue Service (IRS) has issued FS 2008-10 warning taxpayers about tax fraud by tax preparers. The IRS points out that while most tax return preparers are honest a few are not, and that taxpayers need to be careful when choosing a tax return preparer. While it may seem like a tax preparer who’s willing to break the rules may save you some money in the long run it’s the taxpayer not the tax preparer who will pay the additional taxes, plus penalties and interest. As the IRS points out tax evasion or tax fraud is a felony punishable by years in prison, and a $250,000 fine.
A few of the IRS suggestions for finding a reputable tax preparer include:
Avoid preparers who base their fee on a percentage of the amount of the refund.
Review your return before you sign it and ask questions on entries you don’t understand
Find out the person’s credentials. Only attorneys, certified public accountants (CPAs) and enrolled agents can represent taxpayers before the IRS in all matters including audits, collection and appeals. Other return preparers may only represent taxpayers for audits of returns they actually prepared
The IRS also states: “Reputable preparers will ask to see your receipts.” Here we have to disagree with the IRS. Many reputable tax return preparers DO NOT ask to see receipts; nor are they required to. Recent guidance, by the IRS with respect to tax return preparer penalties pursuant to Internal Revenue Code Section 6694 confirms this. See IRS Notice 2008-13. While it may be helpful for a tax return preparer to look at some of your receipts to get a sense of whether you are doing a good job with your recordkeeping looking at all your receipts will in most cases land you with a bill larger than necessary.
Brager Tax Law Group, A P.C. represents taxpayers who have had tax returns prepared improperly. We also represent tax return preparers including attorneys, CPAs and enrolled agents who have been accused of preparing improper tax returns for their clients. For more information contact California tax attorney Dennis Brager.