During the 2017 tax season, the MD Comptroller suspended a total of 54 tax preparers who have been involved in potentially fraudulent behavior.
Among the suspicious activities are:
-Business income reported when taxpayers did not own a business.
-Refund amounts requested much higher than previous year tax returns.
-Inflated and / or undocumented business expenses.
-Dependents claimed when taxpayer did not provide required 50 percent support or care.
With a spike in these suspensions, it is imperative that you choose a tax preparer that has the educational and professional background to properly assist you. Unfortunately, there are no educational or professional qualifications required for someone to be a ‘tax preparer’ and it is estimated that nearly 60% of tax professionals are not certified. Many unlicensed preparers set up shop during tax season and disappear after the filing deadline.
Here are 4 red flags you should look for when hiring a tax preparer:
1. If they promise you a larger refund than other preparers. This may sound great initially, but it usually involves improper practices that can lead to an audit.
2. Avoid preparers who base their fee on a percentage of the amount of your refund. They may try to bend the rules to get you a larger refund.
3. Do not sign a blank tax form. If you are asked to by your preparer, this should raise concerns.
4. A tax professional that does not ask you questions. They should ask questions to not only gain a clear view of your financial picture, but also to understand your long term financial goals.
Hiring a CPA or enrolled agent guarantees that there is an educational background as well as professional experience. Enrolled agents must pass a 3 part exam and complete continuing education courses approved by the IRS every 3 years. They are also authorized to represent clients before the IRS in the event of an audit. This is important to note because if you are audited you want someone who is going to defend your return and assist you through the process. A certified public accountant must pass the CPA exam and is licensed through state boards. In addition to tax planning and preparation, CPA services can include accounting and bookkeeping services. They can assist you in developing a long term and short term strategy that can help you to save money and increase your profits.
Overall, your tax professional should be able to clearly explain all aspects of tax planning, tax preparation and your financial picture and make recommendations based upon the information you provide.