By Chandra Walker, Washington Staff Writer
As the Tax Code has become more and more complex, taxpayers have increasingly relied on paid preparers to do their tax returns. With this in mind, the IRS has suggested tips for taxpayers on selecting a return preparer, including a discussion of taxpayers' responsibilities after a preparer is hired, questions to ask the preparer about the return and the types of preparers to avoid.
Verify Information
The IRS emphasizes that every taxpayer is legally responsible for all the information entered on a tax return, whether prepared by a professional preparer or self-prepared. Taxpayers can be fined $250,000 and/or imprisoned up to five year for tax evasion. The preparer should review the return with the taxpayer before having him or her sign it, according to IRS Senior Stakeholder Liaison Maria Jaramillo.
Taxpayers should ensure that all information on the return, including names and numbers, is correct before signing it. Jaramillo noted that Social Security numbers and individual taxpayer identification numbers are frequently transposed. She also mentioned that married taxpayers routinely fail to check to make sure that the name on their tax return matches the name registered with the Social Security Administration. If the taxpayer files a return with the new name, the IRS will be unable to "match" the new name with the Social Security number.
Jaramillo emphasized the need for taxpayers to be sure they understand all amounts before signing the return. "Ask your preparer how he or she arrived at the figures." She also cautioned taxpayers to "never sign a blank return and one prepared in pencil."
Dishonest preparers
Preparers who are dishonest have used a variety of methods to illegally reduce taxable income, Sheila Andrews, IRS stakeholder liaison remarked. Andrews cited examples such as claiming false dependents, inflated business losses, and false or inflated itemized deductions for charitable contributions and medical and dental expenses. "These are only some of the methods" used by fraudulent preparers, Andrews stressed. "We are aware taxpayers may not be able to detect such false or inflated information, but they are still ultimately responsible for the return."
"Avoid businesses that delegate the work (return preparation) to someone with less experience or knowledge, Andrews warned. Preparers who guarantee they can obtain a larger refund than other preparers should also be avoided, she added.
Research Qualifications
Andrews encouraged taxpayers to select a preparer who will be available for assistance in the future. "Research the preparer's credentials to ensure they meet your needs." Check to see if the preparer is affiliated with a professional organization that provides or requires their members to obtain continuing education and adhere to a code of ethics, Andrews suggested. A taxpayer can use the Internet to research the requirements of a professional organization, she added. Andrews also urged taxpayers to check a preparer's history with the Better Business Bureau, state associations for Certified Public Accountants, Attorneys General, and the IRS Office of Professional Responsibility.
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Posted February 25, 2008.
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