In the least scientific poll ever taken, we asked more than a dozen people at West Acres Mall in Fargo, North Dakota this question:
“Have you ever checked the credentials of your tax preparer?”
Like many Americans, the answer was a resounding, “NO.”
“I use a guy I went to high school with,” said one fellow. “I’ve known him my whole life.”
“We’ve had the same preparer for twenty years,” said another man.
“I use my son-in-law so I hope he’s honest,” joked a woman.
The thing is, though, tax fraud is no laughing matter. This article from Forbes.com states that the US Treasury may be losing a whopping $5 billion a year from fraudulent tax refund claims.
This paragraph from a February Boston Globe story is shocking. “A US Treasury audit released last September said that “billions of dollars in potentially fraudulent refunds continue to be paid” as a result of identity theft. If the problem is not stopped, the IRS could issue $21 billion in fraudulent refunds in the next five years, according to testimony by the Treasury Department’s inspector general for tax policy, J. Russell George.”
How Do They Do It?
These days, tax fraud occurs mostly in two ways:
Scammers steal your identity and social security number and file a fraudulent tax return.
Experts agree that reining in shady tax preparers is a more likely solution to eliminating tax fraud than arresting, charging and imprisoning countless identity theft criminals (although that would be nice, too!). It’s important to know, however, that you – NOT your preparer – are on the hook for any misdeeds in your return. You will have to pay penalties, interest and any additional taxes.
What Can Be Done to Stop This?
There are several viable solutions that can be implemented to help reduce tax preparer fraud:
- Nationwide testing and licensing standards. Only four states – Oregon, California, New York and Maryland – regulate tax preparers.
- Simplify the tax code so we can all prepare our own and be held personally accountable.
- Implement a paid voluntary certification program for tax preparers to weed out fraudulent preparers who won’t pay
- Beef up the number of questions on tax forms and introduce longer wait times for returns so information can be better verified
- Of Course Background Screening: Call us at 1-800-319-5580 to learn more about our screening process for the financial industry.
How Can I Protect Myself?
The Internal Revenue Service (IRS) also offers these helpful tips:
- Don’t get roped into prepares who promise bigger refunds than the next guy
- Steer clear of prepares who take a percentage of the refund
- Only use preparers who sign the tax return and give you a copy
- Find out if your preparer sticks around. If you have questions months or years from now, will he or she be available to answer them for you?
- The biggest tip (and our favorite!) – Check the person’s credentials. Did their company run a background check upon hiring? As we stated in this post, experts agree that anyone who has access to any of your money MUST have their credentials and criminal history verified before taking on the job.
Where to Turn For Help?
Check out this IRS page for loads of information, resources and contacts for tax scams.
Financial institutions: If you’ve decided that running a background check on your tax professionals is in your best interest (trust us, it is!), we’re here to help. Shoot us an email or log onto our live chat to get started.