The Internal Revenue Service is telling taxpayers to check the qualifications of tax preparers and their history in the aftermath of a stinging defeat in the court.
Last month, the Judge James E. Boasberg of the U.S. District Court for the District of Columbia ruled that the IRS has overstepped its statutory authority in requiring tax preparers to take mandatory competency exams and continuing education programs (see Court Rules IRS Doesn’t Have the Authority to Regulate Tax Preparers). He re-affirmed his earlier ruling last Friday, while making some clarifications allowing the IRS to re-open its Preparer Tax Identification Number registration system and allow preparers to take competency tests and continuing education on a voluntary basis (see Court Modifies Ruling Invalidating Tax Preparer Regulations).
On Tuesday, the IRS issued a Tax Tips email urging taxpayers to choose their preparers carefully. “Even if someone else prepares your return, you are legally responsible for what is on it,” the IRS warned.
The IRS then offered 10 tips to keep in mind when choosing a tax return preparer:
1. Check the preparer’s qualifications. All paid tax return preparers are required to have a Preparer Tax Identification Number. In addition to making sure they have a PTIN, ask if the preparer belongs to a professional organization and attends continuing education classes.
2. Check on the preparer’s history. Check with the Better Business Bureau to see if the preparer has a questionable history. Also check for any disciplinary actions and for the status of their licenses. For certified public accountants, check with the state boards of accountancy. For attorneys, check with the state bar associations. For enrolled agents, check with the IRS Office of Enrollment.
3. Ask about service fees. Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers can. Also, always make sure any refund due is sent to you or deposited into an account in your name. Taxpayers should not deposit their refund into a preparer’s bank account.
4. Ask to e-file your return. Make sure your preparer offers IRS e-file. Any paid preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless the client opts to file a paper return. IRS has safely and securely processed more than one billion individual tax returns since the debut of electronic filing in 1990.
5. Make sure the preparer is accessible. Make sure you will be able to contact the tax preparer after you file your return, even after the April 15 due date. This may be helpful in the event questions arise about your tax return.
6. Provide records and receipts. Reputable preparers will request to see your records and receipts. They will ask you questions to determine your total income and your qualifications for deductions, credits and other items. Do not use a preparer who is willing to e-file your return by using your last pay stub before you receive your Form W-2. This is against IRS e-file rules.
7. Never sign a blank return. Avoid tax preparers that ask you to sign a blank tax form.
8. Review the entire return before signing. Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.
9. Make sure the preparer signs and includes their PTIN. A paid preparer must sign the return and include their PTIN as required by law. The preparer must also give you a copy of the return.
10. Report abusive tax preparers to the IRS. You can report abusive tax preparers and suspected tax fraud to the IRS on Form 14157, Complaint: Tax Return Preparer. If you suspect a return preparer filed or altered a return without your consent, you should also file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit. Download the forms on the IRS.gov website or order them by mail at 800-TAX-FORM (800-829-3676).