So you've put together all your receipts and W-2 forms and you know you need to file your taxes early to avoid any fraudulent returns being filed under your name, but now what? Do you file your taxes on your own or do you find a tax preparer to do it for you?
The IRS reported that about 55 percent of individual returns were filed by paid preparers, suggesting that many of you will seek a tax expert to help you file this year.
Choosing the right tax preparer is crucial.
The person you choose as your tax preparer is trusted with some of your most personal information. They are privy to your marital status, your income, the number of children you have, your Social Security Number—all of the sensitive details of your personal and financial life.
Be cautious of anyone offering you free tax advice or free help filing your taxes as these could be fraudsters looking to take advantage of people. Depending on how much your yearly household income is you may qualify for free tax preparation with one of the IRS's partner tax preparation software companies like H&R Block or Turbo Tax, but make sure you get the brand name online software in the Free File program by going through the IRS portal. The IRS also runs both the Volunteer Income Tax Assistance program (VITA) and Tax Counseling for the Elderly program (TCE), which offer free tax help for eligible taxpayers. There are legitimate services out there that provide free tax help, but there are also many individuals looking to defraud people, so do your homework.
You'll also want to avoid tax preparers who promise to give you bigger returns than last year. Claims like this can be scams, but they can also be statements made by individuals who don't fully understand tax laws and/or mislead people into taking credits and deductions that don't really apply to them in order to increase their fee. Remember that even if you don't prepare your own taxes, you are still legally responsible for what's on it.
Here are some tips to help you make an informed decision when it comes to choosing a tax preparer:
- Be sure that your tax preparer has an IRS Preparer Tax Identification Number (PTIN). A valid 2015 PTIN means that a tax preparer is authorized to prepare federal tax returns.
- Ask if the tax preparer has a professional credential, belongs to a professional organization or attends continuing education classes on tax law. Tax laws changes can be complicated, so you want to make sure that your tax preparer is up to date on these changes.
- Inquire about the service fees upfront. You want to avoid preparers who base their fee on a percentage of your refund.
- Make sure that your tax preparer offers IRS e-file, because any tax preparer who gets paid to prepare and file a 100 or more returns generally has to file the returns electronically. You should consider asking your tax preparer to file electronically too as this is the fastest and most accurate way to file a return.
- Provide records, forms and receipts. A good tax preparer will ask to see your records and receipts for the year and ask you questions. E-filing using only your last pay stub instead of W-2 form is against IRS e-file rules, so don't rely on anyone willing to do that.
- Never sign a blank return. Do not sign your return until it has been completed and you have reviewed all of the information.
- Always make sure that your tax refund is sent to you or deposited in your bank account. Do not use a tax preparer that requires you to deposit tax refunds into their bank accounts—this is a scam.
- Review your tax return before signing. Ask questions if something isn't clear, look for incorrect information, and check that the preparer has included their PTIN on the return. Don't sign off if you're not comfortable with the information on the return.
- Ask for a copy of the return for your own records.
If you choose the right tax preparer, filing can be a smooth process. The key is to do some investigating and asking questions up-front. If you're unsure about where to start to look for a tax preparer consider asking friends or an advisor (say your attorney) to make a referral. The IRS also offers a directory of preparers that allows you to search according to the qualifications you're looking for—this is especially helpful for business owners.
Identity Guard is committed to helping you not only protect yourself from identity theft, but also understand how it can happen. Count on us to get tips and advice to help guard against all sorts of identity related fraud, including tax fraud.