Even if a return was prepared by an outside individual or firm, taxpayers should remember they are legally responsible for what they file with the Internal Revenue Service, according to Michael Devine, IRS media relations, St. Louis, Mo.
“Most return preparers are professional, honest and provide excellent service to their clients, but some engage in fraud and other illegal activities,” he said.
Return preparer fraud involves the preparation and filing of false income tax returns by preparers who claim inflated personal or business expenses, false deductions, unallowable credits or excessive exemptions on returns prepared for their clients.
Preparers may, for example, manipulate income figures to fraudulently obtain tax credits, such as the Earned Income Tax Credit, Divine said.
In some situations, the client, or taxpayer, may not even know of the false expenses, deductions, exemptions and/or credits shown on his or her tax return.
However, when the IRS detects a fraudulent return, the taxpayer—not the return preparer—must pay the additional taxes and interest and may be subject to penalties.
The IRS Return Preparer Program focuses on enhancing compliance in the return-preparer community by investigating and referring criminal activity by return preparers to the Department of Justice for prosecution.
“The IRS can also assert appropriate civil penalties against unscrupulous return preparers,” he said.
Also to combat fraud, IRS Commissioner Doug Shulman recently made a series of recommendations with the twin goals of increasing taxpayer compliance and ensuring uniform and high ethical standards of conduct for tax preparers.
While most preparers provide honest service to their clients, the IRS urges taxpayers to be careful when choosing a preparer––as careful as they would be choosing a doctor or lawyer.
Even if someone else prepares a tax return, the taxpayer is ultimately responsible for all the information on the return. For that reason, taxpayers should never sign a blank tax form. And they should review the return before signing it and ask questions on entries they don’t understand.
Choosing a return preparer
Be wary of tax preparers who claim they can obtain larger refunds than other preparers.
Avoid preparers who base their fee on a percentage of the refund. Use a reputable tax professional who signs the tax return and provides a copy.
Consider whether the individual or firm will be around to answer questions about the preparation of the tax return months, or even years, after the return has been filed.
Check the person’s credentials. Only attorneys, certified public accountants and enrolled agents can represent taxpayers before the IRS in all matters, including audits, collection and appeals.
Other return preparers may only represent taxpayers for audits of returns they actually prepared.
Find out if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.
Reputable preparers will ask to see receipts and will ask multiple questions to determine whether expenses, deductions and other items qualify.
By doing so, they are trying to help their clients avoid penalties, interest or additional taxes that could result from an IRS examination.
“Tax evasion is a risky crime, a felony, punishable by five years imprisonment and a $250,000 fine,”
Free tax help available
Free tax help is available on-line, by phone, at local IRS offices and at community locations. The IRS provides free publications, forms and other materials to help taxpayers meet their tax obligations.
• On-line. People can access free tax information on the official IRS web at: www.irs.gov.
At 1040 Central on the Individuals page, individual can obtain forms, instructions and publications, learn about IRS e-file, determine your eligibility for the Earned Income Tax Credit, read about the latest tax changes and find answers to “Frequently Asked Questions.”
Most taxpayers can use Free File, available only through the IRS Web site, to electronically prepare and file their federal tax return free.
“You can also check the status of your refund at IRS.gov by clicking on ‘Where’s My Refund,’ a service available 24 hours a day, seven days a week,” Devine said.
• Telephone. Call the IRS Tax Help Line for Individuals, 800-829-1040, to get answers to your federal tax questions.
To hear pre-recorded messages covering various tax topics or check on the status of your refund, call 800-829-4477. To order free forms, instructions and publications call 800-829-3676.
• Community resources. Free tax preparation is available through the Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs in many communities.
Volunteer return preparation programs provided through IRS and its partners offer free help in preparing simple tax returns for low- to moderate-income taxpayers. Call 800-829-1040 to find the site nearest you.
• Taxpayer assistance centers. If someone believes their tax issue cannot be handled online or by phone, and want face-to-face assistance, they can find help at a local taxpayer assistance center.
Don’t be confused by internet sites that end in .com, .net, .org or other designations, he said.
For more information, visit the IRS Web site: www.irs.gov.