Before You File: Is Your Tax Preparer a Crook?

Before You File: Is Your Tax Preparer a Crook?

By Tricia O'Connor

With about a month left to file your taxes, scammers are pulling out all the stops to swindle you. 

But this year, it’s not just hackers and hustlers trying to steal your identity. 

Fraudulent tax preparers are getting in on the action. 

Here are some tips to keep you away from crooks, including how to find out if they’ve been background checked. 

“Extraordinary Year for Fraud.”

When the Treasury Department and the Internal Revenue Service extended the 2020 tax filing deadline from April 15 to May 17, many people sighed with relief. 

From COVID-19 concerns and unemployment issues to missing stimulus checks, this year has been tough on people financially for myriad reasons. The extra month of breathing room is giving folks more time to prepare documents, but it’s also providing fraudsters more time to deceive unwitting victims. 

“This is an extraordinary year for fraud,” Eva Velasquez, president and CEO of the Identity Theft Resource Center, told AARP

While financial scams have been around as early as 300 BC, tax preparer scams have grown in popularity over the past two decades. 

Access to PII

The main advantage tax scam artists have is access to your Personally Identifiable Information (PII). This privileged information can include your Social Security number, driver’s license number, financial account numbers, credit card numbers, passport number, and your addresses, both street and email. Once ID thieves have these breadcrumbs, they can steal your whole loaf of bread. 

Adding insult to injury, you often willingly provide these pieces of PII to your tax preparer so they can file your taxes. 

This year, the sharing of information is even more complicated because many tax offices are closed owing to COVID-19 restrictions. More people are meeting virtually with tax preparers and not getting that face-to-face interaction that can set off internal alarm bells. 

Sound the Alarm

Here are some classic warning signs you’re dealing with a fraudulent tax preparer:

  • They want to get paid based on a percentage of your refund – These so-called tax professionals will try to inflate your return and cheat the system.
  • They claim to be “endorsed” by the IRS – The IRS doesn’t endorse anyone. 
  • They say your refund will be deposited in their account first and then they’ll transfer it to you – Big red flag here. Your refund should never go into your preparer’s account. 
  • They operate out of a pop-up shop – If there is a problem with your return, they may be unavailable after tax season is over.
  • They ask you to sign an incomplete return – These are called “ghost preparers.” Only sign your return when it’s complete and the preparer has signed it, too. 

Calling Out the Crooks

Taxpayers are ultimately responsible for the accuracy of their tax filing, regardless of who prepares it. Meaning, it’s on you to verify who you hire. 

Anyone can be an unpaid tax preparer, but a tax preparer who is being compensated must have a valid Preparer Tax Identification Number (PTIN). There are certain credentials a PTIN applicant must provide for approval by the IRS. They must also undergo a “suitability check” by the IRS. This can include a credit check, tax compliance check, and a criminal background check. Finally, if a preparer wishes to electronically submit returns, they also need an Electronic Filing Identification Number (EFIN).

However, Certified Public Accountants, tax preparers, and tax professionals can be convicted felons, but certain crimes, especially financial crimes, may eliminate them from earning a license to practice. The IRS determines whether a felony conviction is a PTIN disqualification on a case-by-case basis. 

Screen Your Tax Preparer

Considering the sensitivity of PII, it’s always a good idea to do your own homework before agreeing to work with a tax preparer. Recommendations from family and friends is a start, but you may want to take it a step further. You can verify a tax preparer’s credentials by using the IRS’ directory of federal tax return preparers, where you can look up tax professionals in your area who have a PTIN and find out what special credentials they hold. You can check the Better Business Bureau and find out if the preparer has any disciplinary actions or licensing gaps.  

You may also want to ask a potential preparer these questions before agreeing to work with them:

  • Do you have a PTIN?
  • What are your credentials?
  • What kinds of clients do you usually work with?
  • Will you file my returns electronically?
  • Can you give me a price quote?
  • Do you provide audit help?
  • Have you ever been background checked before?

If you do have problems with a tax preparer, you can file a complaint with the IRS and through your state or local consumer protection agency. 

We take data security seriously at EBI, and it’s part of our mission to inform people of the potential dangers of compromised PII. If you have any questions, EBI’s team of experts is here to help. Staying ahead of scammers is one small way we can help people avoid fraudulent tax preparers. 

Background Checks

About the Author

Tricia O'Connor

Tricia O'Connor

Writer. Digital marketer. Storyteller. An award-winning writer and editor, Tricia O'Connor is the Marketing Content Manager at EBI. Tricia worked as a broadcast and print journalist for nearly two decades writing and producing programming for high-profile networks like ESPN Radio, History Channel, and Hallmark Channel, as well as contributing editorial work to publications nationwide. Tricia joined the EBI marketing team in 2019 and is responsible for content strategy, development, and engagement. Tricia earned a master's degree in journalism from the Medill School of Journalism at Northwestern University and is a proud undergraduate alumna of Wheaton College in Massachusetts.

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