Many Taxpayers Get Burned by Inept or Crooked Preparers

In the spirit of posts like Bad Advice from a "Financial Planner", Make Sure Your Financial Advisor is Not a Loser, Help! I Need a Money Adviser, not a Salesperson, Hiring the Wrong Financial Advisor is Bad for Your Net Worth, and FMF Speaks: My Thoughts on Using Financial Planners (Or "Why I Don't Go to a Fat Doctor") where I rant about "financial advisors" who are more interested in taking your money than growing it, here's an article from USA Today that says many taxpayers this year got taken by inept or crooked preparers. Their key thoughts:

Today, as paid preparers complete more than 60% of the individual tax returns filed by Americans, questions are increasingly being raised about the reliability of those preparers, as well as about the federal government's limited oversight of the tax-preparation field.

A USA TODAY review of scores of federal court proceedings against alleged problem preparers found that thousands of taxpayers have been hit with repayment demands and penalties since 2001 as the IRS moved to recover millions of dollars in tax losses.

Many of the preparers have been accused of using improper deductions and credits to inflate the size of tax refunds in apparent efforts to attract new clients and increase profits, the court records show. Others charged a percentage of the inflated refunds as their fees.

Alternately, some preparers overlook or neglect to claim legitimate deductions or credits that would boost refunds. "Taxpayers can be victimized at either end of the scale," says Kevin Brown, who heads the IRS Small Business/Self-Employed Division.

Yes, just another instance of people pretending to know what they're doing when it comes to your finances. That's another reason I use a CPA -- one from a reputable firm.

USA Today also lists some tips to finding a trusted preparer:

• Obtain recommendations from people you trust.
• Thoroughly check out the preparer's qualifications.
• Be careful with preparers who claim they can obtain larger refunds than other preparers.
• Avoid preparers who base their fee on a percentage of the amount of the refund.
• Consider whether the individual or firm will be around to answer questions about your tax return long after the return has been filed.
• Make sure you understand the services you'll get, how much they will cost and how they will benefit you.
• Make sure your preparer understands your personal circumstances and reviews all your tax records.
• Check your completed tax return and ask questions about entries you don't understand before signing it.

I found my CPA from a friend in business -- a guy who used to work for an accounting firm. As such, he knew the good firms and preparers in our city and made a great recommendation. I've been with my CPA for five years now!

Comments

[Ken]

This topic really gets me miffed! I think the media and the people ought to be all over this more than they are.
1. We have a tax system by our government that is so complicated that we need to have "Professionals" do them.

2. Then our government doesn't oversee the "Professionals" who do our complicated taxes.

3. Then we can get severly penalized by our government for handing our taxes over to "Professionals" who either can't figure it out right because the tax code is so obfiscated or the preparer is crooked.

I am sure there are no politicians lobbying out there for us or they would see what a major problem this tax code is.

ken@themurrayfamily.org