Avoiding Scam Tax Preparers

There are other types of tax preparer fraud, too — such as a scam tax preparer who charges an up-front fee to file your taxes and then disappears with your money. “The person may take a payment for doing your taxes and never do them,” says Grant. Or they may claim to identify valuable deductions and credits that can result in a big refund — but then be impossible to find when the IRS questions your return months later.

"One of the challenges is when taxpayers go to a paid tax preparer in their neighborhood that kind of pops up,” says Lorelei Salas, commissioner of the New York City Department of Consumer and Worker Protection. “They may have problems with the tax forms and are contacted by the IRS. But the tax provider may disappear after the tax season, and you can't get in touch with them again. As soon as you realize there's a problem, they're gone.” For example, her department helped a woman who worked with a local tax preparer who didn't charge an up-front fee but offered to receive her refund at his office and take out his $900 fee before sending her a check for the remaining refund. She never received the refund, and later discovered he had put false information on her return that had inflated the refund. The IRS wanted the extra money back.

Even a legitimate tax preparer can have problems if they don't take extra precautions to protect your personal information and could become a victim of a data breach, especially since they may not be meeting with you in person this year.

Red flags

• Never sign a blank tax return form. Review your return before you sign it, and ask questions about any suspicious deductions. “Before you sign the return, the tax preparer should go over the tax return with you, explain how things were calculated generally, and answer any questions that you have,” says Grant.
• Make sure the tax preparer signs the form above your name before you sign it. All paid tax preparers must have a preparer tax identification number, and they must sign the return and include their PTIN. Make sure you know how to contact the tax preparer if you have questions or hear from the IRS later on.
• Understand how you'll get your refund. Make sure your bank's routing number and your bank account number are submitted correctly on the completed return if you want to get your refund by direct deposit.
• Find out how the tax preparer charges their fee before you get started. “A red flag would be somebody who charges by a percentage of the refund you get,” says Grant. You usually have to pay a flat fee based on the complexity of your return, or you may pay an hourly rate for tax filing and tax planning from a CPA or other professional. There are also many free tax preparation services. (Keep reading for a resource list.)
• Be wary of refund anticipation loans. A preparer who offers to get your refund faster usually charges an extra fee or a high interest rate on the loan. “They say they can get your money sooner, but it comes at a cost,” says Salas. “It's not always clear what you are paying for the service.” You can usually get your refund within 21 days if you file your return electronically and have the money deposited directly into your bank account. You can check the status of your refund with the IRS’ Where's My Refund? tool. 
• Continue to watch out for scams after you file your return. Crooks claiming to be from the IRS are known for emailing or calling taxpayers and telling them they must provide their personal or banking information before they can receive their refund. “The IRS will not call you,” says Salas. “Do not answer those unsolicited calls, texts or emails.” If the IRS has questions for you, they'll send a letter. See the IRS’ Tax Scams/Consumer Alerts for the most-recent scams and what you can do to protect yourself.
• If you do have problems with a tax preparer, you can file a complaint with the IRS by submitting Form 14157, a Return Preparer Complaint. You can also report the preparer to your state or local consumer protection agency. The New York City Department of Consumer and Worker Protection, for example, has a team of enforcement inspectors who visit tax prep businesses to make sure they're complying with the law.