Lack of professional standards and oversight of tax preparers has led to an industry rife with fraud or mistakes, and consumers must be careful when choosing someone to prepare their tax returns, according to experts and government officials.
Experts say consumers should carefully vet a tax preparer before hiring them and check references. Check the Better Business Bureau for complaints and ratings, and be skeptical of a preparer who won't offer a clear fee structure upfront before preparing your returns. As with any important investment, price shop as fees vary.
Some organizations offer programs with free tax advice for low income or eligible taxpayers. Some preparers will tie fees to the size of the refund they can generate for the taxpayer. That's a red flag because it can lead to excessive fees or incentivize the preparer to cut corners to jack up the refund, experts say.
“Be careful of a tax preparer promising you a large refund that sounds too good to be true — because it probably is,” said Liz Coyle, executive director of Georgia Watch, a consumer advocacy group.
Also, don't just accept the return without understanding or questioning the work. If a return is filed with deductions or refunds that the taxpayer didn't deserve, they can face back taxes and penalties. That's what we found when reported a story about a Hapeville tax preparer whose clients suddenly found themselves owing back taxes and penalties.
These expenses can cost taxpayers even more in the long run than a properly prepared return.
“Look at your returns and if you see something on there that doesn’t belong, question it — get a second opinion,” said Josh Waits, chief investigator with the Georgia Department of Revenue.
Like most states, anyone in Georgia — including convicted felons — can open a tax preparer’s business. There’s no training, education or licensing requirements to enter the field and almost no oversight when things go wrong for consumers.
Preparers tend to focus on low income communities where education levels tend to be lower and the potential for significant refunds are higher due to the Earned Income Tax Credit.
“These preparers aren’t subject to any minimum standards,” said Chi Chi Wu, an attorney with the National Consumer Law Center. “It’s a huge problem. It leads to this phenomena when you have tax preparers engaged in massive fraud. It ultimately hurts the taxpayer.”
The Internal Revenue Service has an enrolled agent program that is voluntary for preparers. To become an enrolled agent they must meet minimum requirements and undergo regular education courses. Here's more info about the enrolled agent program and more information about the IRS tips on selecting a preparer.
For advice or information about selecting a tax preparer contact Georgia Watch at 866-339-2824.
