With tax season upon us, it is certainly tempting to hire someone to prepare your tax return. And, in many cases, hiring an expert can save you a lot of time and money, according to the Better Business Bureau (BBB) of Mississippi.
Since you are legally responsible for your tax return, whether or not someone else prepares it, here are some guidelines for selecting a tax preparer.
“Choose a preparer to whom you will have easy access,” suggested Bill Moak, of the BBB Mississippi. “If the firm delegates your work to someone with less training – or to an unknown worker – take your business elsewhere.”
Water Valley CPA Joe Black added that you should never deal with a tax preparer who guarantees you a refund or says they can get a larger refund. Every legitimate preparer should have fairly similar tax results.
Black, who has 26 years experience, said that you should beware if the preparer bases their fee on the percentage of the amount of your refund as this is not allowed under IRS regulations.
“Make sure to get a copy of the completed return,” he emphasized and said to make sure that the preparer signs the return. Black also suggested you ask questions if you don’t understand something on the return.
“Pick a preparer who meets your needs,” Black said. “You don’t need a tax attorney if you are filing a simple individual return.” However, he added that a small business person is probably going to need at least a CPA.
Many taxpayers are in a hurry to get their refund and some are being taken advantage of by preparers who offer tax refund anticipation loans (RALs), according to the Center for Responsible Lending.
Tax Refund Anticipation Loans (RALs) are short-term cash advances against a customer’s anticipated income tax refund. But the loans are offered at high interest rates, ranging from about 40% to over 700% APR. In many cases, they only speed up the refund process by as little as one week.
Black warned to also beware of preparers who offer to apply you anticipated refund as a down payment for furniture, cars or other high-ticket consumer items. “Use the same common sense that you use to select a doctor or lawyer or to make a major purchase,” he said about picking a tax preparer.
Consumers are also being warned about possible identity theft and other crimes during tax season. Current scams include phony e-mails which claim to come from the IRS and which lure the victims into the scam by telling them that they are due a tax refund. “The IRS will not send you an email about your taxes or tax refund,” Black said.
The loss prevention department of Renasant Bank has reported on another scam in which individuals in the area are soliciting elderly and disabled citizens in order to file fraudulent tax returns on their social security, disability and retirement benefits.
“In this scam, someone tells a retired person that they are due a tax refund and offers to file their return for a fee,” said Bill Taylor, Community Bank President. “They file the return showing retirement benefits as earned income and get a refund.”
“This summer, when returns start getting matched up with W-2s, the IRS realizes that the income wasn’t a paycheck from which taxes were withheld, and asks for the refund back with penalties and interest,” Taylor continued. “By that time, the preparer has been paid several hundred dollars per return and is long gone.”
Always get references, Black commented. “You want to pick a tax preparer who is going to be there after tax season.”