IRS Tax Tips

Like many on earth I hate paying taxes.  When I get my paycheck each month, and see the $1400 tax deduction I want to scream and shout and rip something up.  Most likely my tax return.  Unfortunately, the only thing in life we are certain of besides death, is that sometime in our life we are going to be required to pay taxes.  Cora Parks has written a handy guide on how to prepare your tax returns so that you get a refund.  Yeah, you heard me right, a refund.  That is when you get the IRS to pay you for a change.  As part of her book promotion, Cora has written a great post for my blog to help all of you in the US who have a close relationship with the IRS.

Tax Preparer Ills and Solutions

If you are a tax payer, like many of us in the US, you want to make sure that your return is complete and correct.  As you know, before you sign any legal document, a tax return being a very important one, make sure that you examine it from top to bottom today, so you want get a nasty letter from the IRS tomorrow. 

Ill number 1: This situation is applicable to individuals who are eligible to claim Earned Income Credit, dependents and whose income fall within low income thresholds:  A common scheme is for tax preparers to redo the tax return incorporation phony Schedule C self employment income. This will increase your income, your tax, and Earned Income Credit such that it more than fully offsets the increase in tax, resulting in income to both parties. The tax preparer is paid by skimming money from the refund off the top before you are issued the check. The individual usually becomes wise to the scheme when the refund is not issued as expected, and the Internal Revenue Service is contacted. By then, you find that the refund that was issued was much higher, with the tax preparer pocketing the difference.

Remedy: Before allowing the preparer to send or transmit the return to the IRS, look at each entry carefully and check It against the documents you gave to the preparer.  At bare minimum, you should make sure that your name, address, and social security number are correct.  Check the names and social security numbers for your dependents and spouse as well.  Don’t forget to check your routing and account number if you are expecting a refund.  If you see an entry that you don’t understand, do not be afraid to ask the preparer for clarification.  After all, this is your tax return where you will be held responsible for any later discrepancy found on it. 

Ill number 2: Tax preparers that fail to provide copies of the completed tax return to their clients. This opens the door for potential problems in the future, especially if the preparer "inflated" figures to maximize the client's refund. If an Internal Revenue Service examination or audit took place, the customer is hard pressed　to dispute anything on the return they never received a copy of. The assumption is that the customer saw it, checked it, and finding no fault, signed off on the information submitted.

Remedy: Before you commence tax return preparation, ask and confirm that you will receive a copy of your return before you leave.  If after preparation, the preparer does not offer a copy, remind him or her that you would like to get a copy of your return now, since the work is done.  Unless you know the preparer and trust him that you will be able to get a copy later, it is not a good idea to leave without obtaining a copy of your return.  The return has information on it that will prove to be beneficial in the future, or even more so, may lack information or have incorrect information that you may not know about until it is too late.

Ill number 3: Tax preparers that advise their clients repeatedly that their federal tax returns have been prepared and transmitted electronically or mailed when in fact, when they contact the Internal Revenue Service, no such record of the tax return being filed exists, either electronically or via mail.

Remedy: Unless your tax preparer produces a printout or sends an email message to you that lets you know that your return has been filed, and contacts you later to regarding your filing status, you can generally contact the IRS at 1-800-829-1040 between the hours of 7am to 7pm Monday through Friday to request confirmation of filing within 48 hours of your filing.   This way, should the IRS find no record of your return, you may confront the preparer with your findings.

Ill number 4: Tax statements such as W-2 forms that are given to the tax preparer by the customer that are not returned, as though they are being held in lieu of payment.   In some cases, customers possess 3 or 4 copies of their W2 forms and give all of the copies to the preparer, leaving themselves without a copy.

Remedy: Do not give the tax preparer all of your copies of your W2 or 1099 forms. They only need one to get the job done. 　 In addition, never give your only copy of any tax related document that you possess.  Make a copy first, then give them the copy while you keep the original.

Ill number 5: There are some preparers that urge customers to sign documents without reading them. In some instances, this can extend to signing a blank income tax return.

Remedy: Do not sign a blank return, period.  For a completed return, read it over and ask questions before you sign anything, especially when someone tells you that you do not have to read it.　 In addition, unless you understand the document that the preparer places in front of you requesting your signature, do not sign other preparer paperwork.  

Ill number 6:  There are preparers that charge excessive fees and lie about them, often employing bait and switch tactics to get unsuspecting clients. 

Remedy: Have the preparer look over your documents and get an estimate of what it will cost to do your tax return up front.  This way, you don’t waste your time or the preparer’s time.  In addition, you decrease the incidence of identity theft and other adverse actions from giving your personal information and that of others unnecessarily to unknown individuals.   

Finally, make sure that you use someone that you can trust with your personal information and that of your loved ones.  Remember, even if you use them for one year, this person possesses your information for year s to come.  You may change banks, but you will not change your social security number.  Keep this is mind if you are searching for a preparer.