By Megan Sayles
AFRO Business Writer
msayles@afro.com
Tax season is upon us, with tax returns due to the IRS on April 15. If you brought in less than $64,000 last year, you qualify for free tax preparation through the IRS’s Volunteer Income Tax Assistance (VITA) programs, like the CASH Campaign of Maryland.
If not, you may choose to file your taxes independently, but if you don’t, choosing a qualified, trusted tax professional is crucial. According to the IRS, thousands of people have fallen victim to tax scams, losing millions of dollars and their personal information.
“I know people don’t want to spend a whole day going over the best way to file their taxes. It’s something people just want to get over with,” said John Hardt, director of the Low Income Taxpayer Clinic at Maryland Volunteer Lawyers Service (MVLS). “But, I would recommend that people take the time to pay attention to what the tax preparers are advertising, what their reputation is and to see if they can find recommendations from people who have used a tax preparer for multiple years.”
Hardt connected with the AFRO to share some of the warning signs associated with fraudulent tax professionals and offer guidance on how to find a trustworthy preparer. The responses below have been edited for length and clarity.
Q: What are some common tax scams?
A: A fraudulent tax preparer could direct the refund check from the IRS to them instead of the taxpayer if the taxpayer opts to receive their check by mail or if they leave that decision up to the preparer. Also, some tax preparers will try to convince the taxpayer to give the tax money to them instead of directly to the IRS or the Maryland Comptroller, which allows the fraudulent tax preparer to pocket the money and disappear.
Another one that is more subtle is when a tax preparer charges a commission based on the size of your refund. They can actually apply for certain tax credits and deductions that they know the taxpayer doesn’t qualify for, and, usually, the taxpayer will initially receive that credit as part of their refund if the return is not audited right away. This means a larger refund and a larger percentage for the fraudulent tax preparer.
When the comptroller or the IRS takes a closer look at the return after filing season, they will reject the credit. If that happens, the taxpayer is required to pay back all of the extra money that they received, not the preparer.
Q: Are there any groups of people who are especially vulnerable to tax scams?
A: Yes. Some of the populations that fraudulent tax preparers will go after are older or retired taxpayers. They will also go after low-income taxpayers who they believe don’t have as much education or familiarity with the tax system. The third group they definitely go after are taxpayers who don’t speak English or speak it as a second language. Our tax system is mostly in English, and a lot of the forms don’t have an official Spanish translation or translation to other languages either.
Q: What are some things to watch out for when using a tax preparer?
A: You should immediately stop working with a preparer if they ask you to sign blank or incomplete forms or if they try to get you to fill out forms in pencil. If they don’t sign their own name on the return as a preparer and don’t provide a Preparer Tax Identification Number (PTIN) that is a big red flag.
Another indicator is if they don’t ask you for important documents like your W-2. We’ve seen some fraudulent tax preparers say they can fill out a person’s taxes over the phone without any documents. No matter how good a preparer you are, it’s impossible to fill out taxes like that.
Finally, watch out for aggressive advertising. Fraudulent tax preparers often make very bold statements saying they will get you a bigger refund than any other preparer. It’s a common promise that unfortunately isn’t true. Tax preparation is more like solving a math equation. If two competent tax preparers do the same person’s taxes, they should get the same answer.
Q: How would you recommend people find a trustworthy tax preparer?
A: The IRS has a directory of all registered, federal tax return preparers in the country. They all have a PTIN and are legally authorized to prepare people’s tax returns for money. It’s not necessarily an endorsement that the preparer is going to do a good job, but it does show that the person is not pretending. Maryland also has their own state licensing board, the Maryland Board of Individual Tax Preparers, and they have a database as well.
More generally, people should be mindful of the tax preparer’s reputation. The tax preparation business is very seasonal, so scammers can open up shop at the beginning of a tax season and disappear after the filing deadline. A tax preparer is a lot more trustworthy if they’ve been in the community for a while and if they’re open year-round.
Megan Sayles is a Report For America corps member.
