With tax season officially underway, plenty of taxpayers will decide to outsource the job to paid professionals.
But just because they walk like a tax professional, sound like a tax professional, and look like a tax professional, doesn't mean he or she is the right person for the job.
Apart from just plain predatory tax scams, sometimes even 'experts' with the best intentions are too incompetent to handle the job.
Here's how to tell:
They ask you to over-inflate your charitable donations.
If they're asking you to fudge your charitable donations, chances are you're working with someone who charges a percentage of your final return.
Steer clear of these types.
So long as their pay is tied to your refund size, they'll do whatever it takes to maximize it –– even if it could land you in trouble with the IRS.
They're working out of a sign-less, empty storefront.
Not that you should always judge a book by its cover, but if the person you plan on trusting with all of your most personal financial records can't generate enough business to invest in a coat of paint, maybe you should take a hint.
They don't bother asking for thorough financial records.
"If anyone promises a refund without looking at all your info, they're probably running a scam," said Kay Bell, a tax professional and principal tax reporter for Bankrate.com.
"When they don't want a lot of documentation, that's a big red flag they're not on the up and up."
Never use a preparer who's willing to e-file your return with your last pay stub before you receive your Form W-2, the IRS warns.
Here's what they should ask for:
Children's Social Security numbers
Annual reports from all of your investments
Pay stubs other employment info
Child custody proof in order to claim dependents, and so on.
They're spinning tales about ethnic tax breaks.
If your tax preparer is selling you on the idea that you're entitled to a special tax break based on your religion or ethnicity, run for the hills.
Some African-American consumers have been duped into scams that promise slavery era reparations. This scam has been running rampant for at least a decade, and even though the IRS and Dept. of Justice have both helped put culprits behind bars, vulnerable taxpayers are still being targeted.
They're have a history of bad business practices.
For a quick way to check out your preparer before committing, run their business name through the Better Business Bureaus' database. Any red flags will likely turn up there.
If you're working with a Certified Public Accountant, your state's board of accountancy will have their record. Check out your state bar association for attorney complaints.
They don't want to share their credentials.
True tax preparers should have a P reparer Tax Identification Number, which is issued by the IRS. Don't be shy about asking for it. When your final return is completed, it should have their PTIN included, and you should get a copy as well.
Also, ask if they belong to a professional tax organization, or are enrolled continuing education classes.
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