TAXPAYERS SHOULD CHOOSE TAX PREPARERS CAREFULLY
By Robert Hirshon
President, American Bar Association
When Lisa, a law student, went to a tax return preparer, she thought it would save her time and money. It did neither. The IRS disallowed one of her dependents and sent her a bill for over $7,000 because her preparer used an incorrect Social Security number for one of her children. When she called the IRS, she learned that her preparer had failed to take the lifetime learning credit for which she qualified. She asked the preparer to amend her return – and they made yet another mistake.
Lisa found the new errors and corrected her own return – a good thing, because the taxpayer, not the preparer, is responsible for any error. If you use a tax preparer, it is important to understand your responsibilities, and to choose your preparer wisely. The American Bar Association Section of Taxation has advice to help you do just that.
Start by picking a tax preparer who is honest and reliable. Before you let someone prepare your return, ask how long they have been in business, how many returns they have prepared, and what training they have received. You might also want to check with the Better Business Bureau about complaints.
Make sure, too, that you reach an agreement on fees. Generally, fees are based on the complexity of the return – more complicated returns cost more. If the preparer suggests that the fee be a percentage of the refund, alarm bells should go off. The fee should never be based on the refund amount.
If the government owes you a refund, you may be offered immediate cash in the form of a "refund anticipation loan." Understand, however, that this is a loan and not your tax refund. If the IRS reduces your refund because they find errors in the return, you will owe all the money you "borrowed" plus the interest and fees. And even if you get the full amount you anticipated, you will owe interest and fees on the loan.
When you sign your return, you are doing so under penalty of perjury. Do not assume your return is accurate just because you paid a "professional." Carefully review the entire return, including schedules and attachments, and if you have questions, ask the preparer to explain. Remember – if there are mistakes, you, not the preparer, will be liable for taxes owed, interest and penalties.
If your preparer makes a claim that sounds too good to be true, it probably is. Promising a refund or guaranteeing a larger refund than anyone else, asking you to sign a blank return, or wanting the refund mailed directly to the preparer are all red flags that should alert you to potential problems.
Finally, there are reliable places to go for free tax preparation. For more information on these programs, call the IRS at 800/TAX-1040, or contact the IRS Taxpayer Education Coordinator at your local IRS office. The ABA has more helpful tax tips on line, as well. You can check them at www.abanet.org/tax/taxtips4u.
Editors note: For questions or verification, please contact Ross Brown, American Bar Association Media Relations, at 202/662-1094, e-mail [email protected].