Tax season is ramping up and with it comes a certain set of dangers. We recently took on the topic of tax identity theft, but the dangers highlighted aren’t confined just to stolen information. If you use a professional to prepare your taxes, there is a possibility that the preparer could be committing errors or even fraud. Of course, many tax preparers are both knowledgeable and ethical, but taking the care to be vigilant will only help you – and a trustworthy tax preparer will understand and agree with this extra care you’re taking on your taxes.
That’s why we’re sharing information which can help you review your return and nip any errors – or fraud – in the bud. Let’s make sure the worst part of tax season this year is simply having to do the taxes!
Choosing Your Tax Preparer
Unless you’re tech or number savvy, chances are you prefer to pay someone to file your taxes rather than do it yourself (even with the abundance of software available to help). The problem is, paying a professional to do something you could technically do yourself means you want to put your trust in the professional to do it correctly.
Unfortunately, this blind trust that many put into their tax preparers – even those backed by big name services – isn’t always wise. According to The National Consumer Law Center, there isn’t enough regulation holding these preparers to a set of standards which can prove their competence or trustworthiness. The result? Errors and possibly even fraud.
This isn’t to say that you should never use a tax preparer again. However, you should choose your preparer carefully and watch the process closely so you can stop any potential red flags.
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Preventing Tax Errors and Tax Fraud
Even if you’re not an expert on taxes, there are things you can do to make sure your taxes were done properly. Here are a few things to keep in mind:
Make sure you’re comfortable with the preparer and his or her office. One of the main ways to protect against fraud is to make sure your paperwork is safely stored. When you first meet your preparer, look closely at his or her desk and office space. Is someone else’s paperwork still sitting on your desk when you sit down? Or does everything appear to be under lock and key? Even if your preparer is ethical, your information could easily be stolen if he or she doesn’t keep it stored safely.
Check and recheck the information. When it comes to taxes, even the smallest of errors can mark your filing null and void. That will cause a delay in your return and/or create a massive new paper trail to file just to get things back in order. When your preparer gives you paperwork to sign, take the time to check and recheck all of the information – most importantly the spelling of your name, your social security number, and all items checked off and amounts entered in. And don’t let a signature go missing either!
Make sure all income and tax deductions are accounted for. If you worked a side job last year or built an investment portfolio or a savings account, then that counts as taxable income. You can read this article by Bankrate for a list of the forms you’d need to file in these cases. And don’t forget about your tax deductions! You can get a deduction for interest paid on student loans, money spent for your job, and more. Explore all these avenues so you can maximize your return (or minimize how much you owe). And if your preparer doesn’t seem to know how to handle this extra paperwork, you should find another preparer who does. An uneducated tax preparer could cost you a significant amount of money.
Don’t intentionally add or omit information. If your tax preparer tells you to add something in that could improve your return, but it either doesn’t apply to you or seems like a loosely connected idea (such as calling something a charitable deduction even though it wasn’t), then don’t heed that advice. Likewise, don’t omit important information, even if it could result in a lower return or more money owed back to the government. These are risky practices which could benefit you in the short term, but could seriously come back to haunt you if the IRS finds out.
Above all, follow your gut. When you’re talking to your preparer, if he or she makes any suggestions or recommendations that either seem too good to be true or just plain wrong, then consider going to another preparer or ignoring that particular suggestion. While there are certainly things your tax preparer can do to help you save money on your taxes or pay less, these tactics should be backed up by the law. If your preparer can’t give concrete evidence to prove what he or she is saying is true, then listen to your gut and don’t follow that advice.
For more information on how you could be at risk for tax fraud or errors (and what to look out for), read this summary of a study performed by The National Consumer Law Center and the report itself if you’re interested in digging deeper.
Image Credit: Dave Dugdale