Sense & Centsibility Blog

Tips for Avoiding Scams and Successful Income Tax Preparation

It's tax preparation time of year! And for those Americans who expect a refund, the tax season is heating up. But before you hurry out to get your taxes done, do your homework to make sure your tax “professional” is not out to scam you. Both the IRS and Better Business Bureau warn taxpayers against using preparers who claim they can get you a bigger refund than anyone else. Fraudulent preparers may boost refunds by manipulating income to qualify for tax credits, or by claiming inflated expenses, false deductions or exemptions. Under these circumstances, a bigger refund is never good!

Even if you fall victim to a fraudulent tax preparer, it is you who is ultimately responsible for the accuracy of all the information contained in your tax returns. The importance of this cannot be stressed enough! When someone else prepares your returns, if the returns are wrong, you will be liable for back taxes, interest, and perhaps monetary penalties. Even worse, some folks may be facing jail time for filing false tax returns.

Although most tax preparers are honest and do excellent work, it's crucial to carefully select who you entrust your tax work. It’s worth repeating that if your preparer messes up, whether by mistake or intentionally, you will be held accountable.

How to choose a tax preparerTax time

1. Beware of anyone who promises they can get you a bigger refund than other preparers.

2. Stay away from a preparer who bases the fee on a percentage of your refund.

3. Use a reputable preparer who signs your return (required by law) and provides its IRS-issued tax identification number (also required by law).

4. Be sure to get copies of your returns.

5. Look over your returns before signing them, and ask about any entries you do not understand.

6. NEVER sign a blank tax return. Remember, you are ultimately responsible for the information on your tax forms.

7. Think about whether your tax preparer will be around to answer questions about your returns if you are audited. Keep in mind that an audit can happen years after filing.

8. Find out about the tax preparer’s experience and credentials.

9. Ask friends and family for referrals to trustworthy tax preparers. Or, ask if anyone has experience with the preparer you are thinking about, and if they were satisfied with the service.

Free tax preparation resources

Keep in mind that you may qualify for free preparation of your tax returns. Even moderate income levels may be eligible - so don’t assume you make too much money for this service. 

If you live in Minnesota, you can find more information at the Prepare and Prosper website, including who qualifies (for example, a single filer earning $30,000 a year is eligible), what you need to bring to a tax appointment, and local tax prep sites near you.

Prefer to do your taxes yourself? Use a free online tax tool called “MyFreeTaxes."

VITAIf you live elsewhere and want more information about free tax clinics, call the IRS at 1-800-906-9887, or visit the IRS website and search for “VITA”. Or, here is the VITA Locator Tool link.

Getting your tax returns prepared correctly is important. Don’t let your enthusiasm for a quick refund lead to choosing someone who lures you in with empty promises. Or worse yet, steals from you by charging excessive fees or gets you in trouble by cheating on your tax returns. If it seems too good to be true, it usually is!

If you have questions about any of this, other financial topics, or just want to create a personalized spending plan, call LSS Financial Counseling at 888-577-2227. To get started on a budget quickly and easily, you can BEGIN ONLINE COUNSELING now. It's efficient and just as effective as in-person or phone financial counseling. Our Certified Financial Counselors are always here to help!

By Barbara Miller