While some taxpayers who met the April 15 filing deadline are now waiting for refunds, an ominous letter from the Internal Revenue Service (IRS) may be the first to arrive in their mail. This letter may result from hiring the wrong tax preparer or falling for an online refund scam.
The IRS is warning taxpayers who fall for scams centered around the Fuel Tax Credit, Sick and Family Leave Credit and Household Employment taxes they may not be eligible for, that they are setting themselves up for an audit or fines. The common denominator in these scams could be unscrupulous tax preparers or accountants.
In a written statement, Justice Department Tax Division Deputy Assistant Attorney General David Hubbert said: “Taxpayers must look out for unscrupulous preparers, who often will promise refunds that are too good to be true. If your tax preparer asks you to sign a blank return, refuses to sign your return as your preparer or fails to give you a copy of your return, consult the IRS’s website to make sure that you are not exposing yourself to trouble. Taxpayers are responsible for the information on their tax return, so it is important to choose a tax professional that you trust to prepare your returns correctly.”
Those taxpayers who fall for refund promises or online scams will quickly discover that no matter what tax preparer helped them with their return, they are solely responsible for the numbers included in the filing.
Tax Preparers: What to Look For
Rick David, a licensed CPA and the former Chairman of UHY International told The Epoch Times that anyone who promises specific refund returns is the wrong person to handle your taxes.
There are other evident warnings that you may have hired the wrong tax preparer.
“What’s happening is there are posts on social media that talk about how to screw the IRS and some are associated with refund guarantees. No one can guarantee a refund,” he said.
“Some of these preparers are not even signing the return, and that’s a red flag. If they go after a refund for you and the money goes to the (tax preparer) perpetrator, that’s another red flag. When you have someone do your return, you need to look at it before you file it and ask questions.”
Since the April filing date, the IRS has already reviewed thousands of dubious deduction claims, where taxpayers claim credits they’re not eligible for. That review has led to delayed refunds and written requests for further documentation to support the claims made in the tax filing.
Tom O’Saben has been preparing taxes for over 30 years and serves as the director of Tax Content and Government Relations for the 24,000-member National Association of Tax Preparers. He says that at this point in his career, he’s seen just about every type of tax scam.
“This stuff has always been around and the biggest one came out of COVID as the ERC (Employment Retention Credit), where unethical marketers said you could get his money if you had supply chain disruptions, etc.,” he told The Epoch Times.
“Think about that piece of paper or email you just got that said you qualify for these deductions, knowing they don’t know one thing about you. It’s not just free money.”
- Fuel Tax Credit: This credit is designed for off-highway business and farming use. To be eligible, taxpayers need a specific business purpose and a qualifying business activity, such as running a farm or purchasing aviation gasoline.
- Credits for Sick Leave and Family Leave: This credit is available for self-employed taxpayers for 2020 and 2021 during the pandemic. This credit is not available for 2023 tax returns. The IRS is cracking down on repeated instances where taxpayers incorrectly use Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, to incorrectly claim credits based on income earned as an employee, not a self-employed individual.
- Household employment taxes: Taxpayers invent fictional household employees and then file Schedule H (Form 1040), Household Employment Taxes, to claim a refund based on false sick and family medical leave wages they never paid.
“What’s happening with the software out there now is you can do some of these by yourself. There’s a lot of resources out there for income tax assistance, from software and HR Block. The government also has online services at no cost they’ve been rolling out. But if you have a company, you need to look at CPAs as the doctors for business.”
However, according to Mr. O’Saben, the keys to finding the right tax preparer or CPA include asking for referrals and not being afraid to ask questions.
“I’ve often said if I’ve done a good job and you’re telling your friends about it, that’s worth more to me than any billboard or ad I could buy. The referral clients have an expectation that you know what you’re doing. But you have to ask questions. If you go to a car repair place and they say you need $2,500 in repairs, most people would say, what is wrong and what needs to be fixed? If they can’t tell you, take it off the lift and go.”
As for when the best time is to shop for a tax preparer, he said the answer is simple—avoid the months early in the year before the April deadline. “If you’re looking for a tax preparer in January or February, good luck. The tax laws are complicated and if you want to make a change, start interviewing now.”
