Tax Return Preparer Red Flags

The proliferation of e-filing individual tax returns has led to increased tax return preparer and promoter fraud.  

The danger to clients of unscrupulous tax return preparers is they could be susceptible to an audit if their preparer is investigated, which could result in additional taxes, penalties, and interest, as well as possible criminal prosecution.  

While working as a Trial Attorney in the Department of Justice Tax Division, Mark C. Milton sought injunctions and helped pursue criminal prosecutions against fraudulent preparers, including those promoting tax shelters and schemes to “save on taxes” that used tactics designed to disguise their illegal tax tricks to generate large refunds. 

Given his extensive experience dealing with tax return preparer fraud, the STLTaxLawyer shares his tips on how to avoid being scammed this tax season.  

Avoid tax return preparer fraud: Know the qualifications and background of your preparer 

It is important to ask your tax return preparer questions about their tax experience.  

Do they have a background in tax accounting or have they merely attended a tax prep training course? Do they have a Certified Public Accountant (CPA) or Attorney designation? If so, is their CPA and/or law license still active and valid? Has it been suspended or revoked in the past?  

The Missouri Division of Professional Registration has a search tool available where the public can find a CPA’s license status.  

Understand the details on your tax return  

Many individuals do not truly understand – or care to understand – what is on their tax returns and only care about the bottom line: “what do I owe or how big of a refund will I receive?”  

A reputable tax return preparer should explain to you the “why” behind why you might be receiving a refund, why you might not owe taxes when you think you might, or why you do owe taxes when you think you did not. Make sure you receive a complete copy of your return along with an e-filing confirmation showing the full return was filed and accepted.  

Learn how the tax refund process is handled 

Be wary of banking products that many franchise tax return offices offer promising an advanced refund. These outfits can charge high interest rates and fees can be exorbitant, if not illegal.  

First, you want to determine what is the full amount of refund you are entitled to receive before accepting the offer to receive your refund through a banking product like a check or debit card.  

Then, if you were to accept the bank product instead of waiting for the IRS to issue the refund to you, ask what the net amount of refund is to determine the true financial benefit of using their banking product. 

The IRS offers direct deposit refunds with no additional fees and refunds are typically issued within 7-10 files of filing, so it is often more beneficial to exercise caution and wait for a refund directly from the IRS. 

Milton Law Group Tax Planning & Preparation 

Milton Law Group’s licensed tax attorneys and professionals abide by the highest ethical standards. Please contact us for comprehensive year-round tax planning advice and tax return preparation services.  

Click the link to listen to the full tax preparer fraud podcast with STLTaxLawyer Mark Milton.