02/04/2022
PSA:
With it being tax season and having huge tax breaks this year, there are things to keep in mind when seeing a "recommended preparer" for the first time - or even your current one...
FRAUD.
Hearing about all the money that comes from these returns must have tax prep thieves licking their lips right now.
I’ve heard more and more about it as sadly, a lot of my business comes from fixing mistakes from other preparers. Honestly, the shock factor has dissipated. I am actually no longer surprised to hear these extravagant stories...
And as I’ve heard so many of these stories, I thought it was important to list a few common fraud indicators so that YOU - WHEREVER you choose to go, do not wind up with your money, or identity stolen. Or end up with headaches when you owe the IRS some money after an audit.
Here is a list of a few common indicators that you should run.
1. Where is this business or preparer located?
Hotel? (Yes - this is serious. I've been told of one who worked out of a hotel room.) Are they always changing location? Do they answer or return calls? These are common evasion tactics made by "ghost preparers". After they take your money, and you have issues, they may not want to be found.
2. Promises of the biggest refund ever?
If it seems too good to be true - it probably is. Always ask where all this refund money is coming from. A good tax preparer should be able to answer this question. "What credits am I utilizing?", "Are we using standard or an itemized deduction?", "How much was my tax liability and how much did I pay into federal?" These are all great questions if it seems too good to be true. Find out how the numbers add up.
3. Cost of return.
How are is the cost calculated? Many companies charge either a flat fee or by the type and amount of forms being used. If the preparer tells you the cost is calculated by the amount of the return, this is a HUGE red flag!
4. PTIN/Firm name
By law, every preparer must have a PTIN (Preparer Tax Identification Number). What is a PTIN? GREAT question! A PTIN is a number similar to a Social Security Number in the sense that it identifies the individual who is registered with the IRS to prepare tax returns for compensation. IF the person DOES NOT have a PTIN then they are not authorized by the IRS to be preparing Tax Returns for compensation. This means, at the bottom of the second page of the 1040, you should see the individuals name of whom which is preparing your return. In other words, if your preparers name is "John", you should see "John" listed on the bottom of your 1040. If it says, "Jasmine" instead, then you know what you need to do. "Thank you, Jasmine! I mean -John. Sorry, it says Jasmine on the bottom of this 1040." FURTHERMORE, if the firm name does not match the name of the company...what do you do? You got it! RUN! Individuals are not the only ones in danger of identity theft! So are tax preparation companies and the last thing you want is to be caught in the middle of fraudulent activity because chances are, they are beefing up that return to keep you enticed and take your money. Which that alone could result in an audit. Besides that, the actual owner of the Firm may file a claim for fraudulent activity where your name will come up in returns THEY actually did not file and THAT can also result in an audit.
5. 8888.
What the heck is an 8888? Well, it's not only a numerical Palindrome. It's also the form used to allocate your tax returns into seperate bank accounts. If you are only direct depositing to ONE account, then make sure the box in line 35a on your 1040 is NOT checked. If it is checked, ask to see form 8888 if it isn't included in with your documents. If you are depositing into 2-3 accounts ask to see form 8888 and verify that the account and routing numbers are correct. Same for the 35b/d. Verify the bank routing and account number ALWAYS.
6. Schedule 1
Taxes can be confusing - I know. I wasn't born knowing what I know now, and it's not always common sense. In addition, I know sometimes when you look at your tax forms it looks like a bunch of tax jargon. But if you slow down and read it line per line, it JUST. MIGHT. MAKE. SENSE. Your 1040 is a summary of many forms and worksheets that combine to calculate your tax liability/over payment. Your Sch1 calculation summary can be found on line 10 of your 1040. If you have a number there, be sure you are getting a copy of the actual Sch1 form. Then review the form to ensure that it is as accurate to your knowledge as possible. Ask questions if you are unsure on the amounts. (NOTE: If you do NOT own a business, self report self employment income, or receive a 1099-NEC/MISC then you SHOULD NOT have a SCH C! Neither should you have form 2106 - Employee Business Expenses.
"Use Form 2106 if you were an Armed Forces reservist, qualified performing artist, fee-basis state or local government official, or employee with impairment-related work expenses." ("Instructions for Form 2106 (2021) | Internal Revenue Service", 2022)
7. Standard/Itemized Deduction
You will have either a Standard or Itemized deduction depending on your tax situation. What is the difference? A standard deduction is just what it sounds like - its standard. This means that everyone with the same filing status has the same deduction. An Itemized deduction utilizes Schedule A (SchA for short). SchA includes various expenses that can increase your standard deduction. These expenses may include Out-of-Pocket Medical expenses, property taxes of your homestead, Mortgage insurance, Mortgage interest...etc) If you're not sure what deduction you are using take a look on line 12a of your 1040. To the left will be a legend that will guide you to see what your standard deduction is depending on your filing status. If the number on line 12a is greater than your standard deduction, ask for your SchA form to ensure that your tax return isn't being beefed up for a bigger fraudulent return!
8. REVIEW YOUR DOCUMENTS!
If you haven't realized already, this is an important thing to do. DO NOT WAIT to get home to look! Review your documents while still in the office. In front of your preparer BEFORE they submit your return. AND BEFORE THEY TAKE COPIES OF YOUR DOCUMENTS! If you are not filing with them, there is NO REASON they need to have a copy of your ID or Social Security Card!
I know this was a long read, but hopefully this read will save you some headaches and money.
HappyTaxing!
-Clive Income Tax Service
www.cliveincometax.com
