August 24, 2023

Why Choose Us: The Perils of Not Vetting Your Tax Preparer

While many of us assume that every tax preparer has credentials to validate their expertise, the reality is that the IRS doesn’t necessitate such certifications. It’s a bit startling, isn’t it? Renowned professionals like CPAs, tax attorneys, and Enrolled Agents endure intensive exams and ongoing education to uphold their credentials. By ensuring that you work with a certified and esteemed tax professional, you can sidestep the menace of “tax preparer fraud.”


What is Tax Preparer Fraud?

Tax preparer fraud refers to unethical practices where a tax preparer might deliberately miscalculate a taxpayer’s return to promise a bigger refund, divert parts of a client’s refund to their account, or claim false deductions and credits. This can place taxpayers at risk for significant IRS penalties, interest, and, at times, legal prosecution.


The Unraveling of Jessica’s Tax Nightmare

Take, for example, the harrowing experience of Jessica, a dedicated hairdresser. In her cozy home, she operated a one-chair studio, diligently complying with every IRS guideline. Jessica’s financial life was straightforward: a separate bank account for her business, a W2-earning husband, and two beautiful children. Trusting family recommendations, she hired a tax preparer year after year, never delving too deeply into the returns he provided. But then, an unexpected knock on her door changed everything. An IRS agent stood there, unfolding a tale of exaggerated expenses spanning three years. Not only had the preparer claimed Jessica’s small salon space, but also a considerable part of her home and some irrelevant storage sheds. Alarmingly, many of these inflated business expenses didn’t align with Jessica’s bank records.

Further complicating matters was the IRS’s note that these returns were marked as “self-prepared.” Thankfully, Jessica’s meticulous record-keeping, specifically her check payments to the preparer, became her saving grace. The agent, discerning Jessica’s genuine ignorance, refrained from levying additional penalties. As the investigation unfolded, the so-called “professional” was a police officer moonlighting as a tax preparer, who had illicitly partnered with an Electronic Return Originator (ERO) to electronically file these returns.


The Role of an ERO and the Risks They Pose

An Electronic Return Originator (ERO) is an entity authorized by the IRS to e-file tax returns on behalf of taxpayers. While EROs can be a legitimate and efficient way to file taxes, if they are in cahoots with dishonest tax preparers, the implications can be dire, as Jessica found out.


Verifying Your Tax Professional’s Credentials: The IRS Preparer Directory

To avoid such pitfalls, taxpayers are urged to use the IRS Preparer Directory. This comprehensive tool allows you to verify the standing of tax professionals and ensure they hold valid credentials.


The Prestige of Enrolled Agents: America’s Tax Experts

As the pinnacle of tax expertise, Enrolled Agents undergo stringent IRS testing and mandatory continuing education. Recognized for their vast knowledge on taxation, they are adept in handling diverse tax situations, ensuring your returns are accurate, optimized, and compliant.


In Conclusion: Protect Yourself, Choose Wisely

Jessica’s ordeal underscores the imperative of meticulous vetting. By opting for credentialed professionals like us, you not only ensure peace of mind but also safeguard your financial future. Always remember: When it comes to taxes, it’s better to be safe than sorry.