You might be surprised to learn that even with the proliferation of DIY tax preparation software the IRS estimates that nearly 50% of individual filers still utilize a tax preparation service. If you are in this group, then there are some things that you need to know when you choose your next tax preparer to ensure that you are utilizing a legal tax service.
Here are some red flags that should alert you that the tax preparer you are interviewing might not be legal:
Red Flag #1: Tax Preparer Uses the IRS's name or Logo on Website or Printed Materials
Tax preparers in the US are not permitted to use the name or logo of the IRS in any print or online materials. Many unscrupulous people use this tactic to convince potential clients that they are somehow approved or connected to the IRS in some way. In order to legally prepare tax forms, your agent needs to be an "enrolled agent" with the IRS. To verify if your potential preparer is enrolled, you can check the IRS website here.
Red Flag #2: Tax Preparer Doesn't Have a PTIN
Each enrolled agent with the IRS is given a Preparer Tax Identification Number (PTIN) that they are required to include on your tax form next to their signature. If you are interviewing a tax service, they should happily give you their PTIN so that you can verify their legitimacy. If they refuse, then take your business elsewhere.
Red Flag #3: Tax Preparer Claims They Can Get You a Very High Refund
Unless you have had a major change in income, your tax liability from year to year should remain about the same amount. Any tax preparer who claims they can change this is suspect. Some illegal tax preparers will add erroneous deductions to your tax return in order to get you a higher refund. This is especially true for preparers who charge a percentage of your return for their fee, making this another red flag to watch for.
The IRS doesn't have any sympathy for you if you use an illegal tax preparation service to file your returns. As a citizen, it is your responsibility to perform your own due diligence when choosing a tax service. By verifying a service is an enrolled agent, verifying their PTIN with the IRS, and avoiding services which offer unusually high refunds, you can avoid many of the illegal tax services doing business today. Contact a local company, like Jack Landis and Company, if you have questions.