Beware of Tax Scams When Preparing Your Tax Return

Tax season is upon us, and Better Business Bureau of Upstate New York advises people to be aware of important changes. This filing year includes tax changes with new health coverage reporting requirements.

Be extra cautious of poorly prepared tax advisers or possible scams aiming to take advantage of potential confusion over the new tax filing requirements.

Forbes magazine reports about 150 million taxpayers will use a tax preparation service this year. With so many choices out there, it is important to make the right decision when choosing a tax preparer.

“People should do thorough research before choosing a tax preparer, since they have to give them personal tax information (including your Social Security number) to file a return. We encourage everyone to start with trust to find a preparer at bbb.org, first,” said Warren Clark of the BBB.

Here's some good advice to help you find a trustworthy tax preparer:

Ask around. Get referrals from friends and family on who they use. You can research free BBB Business Reviews on tax preparers and tax preparation services at bbb.org.

Consider accessibility. Some tax preparation services wind down their operations shortly after the April 15 tax deadline. In case the IRS finds errors or in case of an audit, you need to be sure you know how to contact your tax preparer throughout the year.

Bigger isn't always better. Be wary of tax preparation services that promise larger refunds than the competition, and avoid tax preparers who base their fee on a percentage of your refund.

Say no to refund advances. Getting your refund quicker is often tied to high-interest rates and it doesn’t necessarily deliver your refund faster (perhaps a week or two). Be leery of "pre-paid" lines of credit, too. If you go for either, you're giving away some of your refund to a money lender. To keep your hard-earned money and tax credits, BBB advises taxpayers to stay clear of up-front tax refund and loan offers.

Look for credentials. Ideally, your tax preparer should either be a certified public accountant, a tax attorney, an enrolled agent or a certified e-file provider.

Make sure they have a preparer tax identification number (PTIN). A PTIN must be obtained by all tax return preparers who are compensated for preparing or assisting in the preparation of, all or substantially all of any U.S. federal tax return, claim for refund, or other tax form submitted to the IRS.

Investigate the preparer. Check to see if they have any questionable history with New York State’s Board of Accountancy (for CPAs), the NYS Bar Association (for attorneys) or the IRS Office of Professional Responsibility (OPR) for enrolled agents.

Paid tax preparers are required by law to sign your return and fill in the preparer areas of the form. They should also include their appropriate identifying number on the return. In addition, the preparer must give you a copy of your tax return.

Read the contract carefully. Read contracts closely to ensure you understand issues such as how much it will cost for the service, how that cost will be affected if your tax preparation is more complicated and time consuming than expected, and whether the tax preparer will represent you in case of an audit.

Don't forget about Free File. If your adjusted gross income is $60,000 or less, Free File offers free Federal tax preparation and e-filing. Click here to learn more. The IRS says taxpayers will receive their tax refunds quicker by using e-file or Free File with the direct deposit option.

It’s also Tax Identity Theft Awareness week. The Federal Trade Commission (FTC) says tax identity theft happens when someone uses your Social Security number to get a tax refund or a job. Taxpayers also need to be on the lookout for scams that happen not only during tax season, but all year long.
Common tax scams to avoid:

Phone calls. Beware of calls from “IRS representatives” who claim they owe taxes and must pay or a warrant will be issued for their arrest. Or, they claim the IRS is pursuing a lawsuit against you and that you must make a payment immediately. The IRS never uses phone calls for collection purposes; the IRS only contacts taxpayers via U.S. mail.

Email phishing. Watch out for emails that look like they could be from the IRS, with a website intended to mirror the official IRS web site. These emails contain the direction “you are to update your IRS e-file immediately.” The emails mention USA.gov and IRSgov (without a dot between "IRS" and "gov"), though notably, not IRS.gov (with a dot). Don’t get scammed. These emails are not from the IRS. Taxpayers who get these messages should not respond to the email or click on the links. Instead, they should forward the scam emails to the IRS at phishing@irs.gov.

Remember, the IRS will NEVER call you or send you an email.