Most of use tax professionals to help get through tax season.
Thankfully, most paid tax preparers are honest. They want to help their clients meet their tax responsibilities by legally paying the least amount of tax possible under the Internal Revenue Code.
But most is not all.
Some tax preparers run fly-by-night operations where they simply look to make a quick buck off of honest individuals seeking tax assistance.
These pros, and I use the description advisedly, often get paid based on a percentage of taxpayers' refunds, which they inflate by advising clients to take credits or deductions for which they don't qualify.
Disreputable tax preparers are, alas, so common that tax pro fraud again made the Internal Revenue Service's annual Dirty Dozen list of tax scams.
Dealing with a tax pro who breaks bad: Sometimes a taxpayer catches on quickly and gets out of the questionable relationship with minimal or no damage.
Other times, though, taxpayers are sucked in and end up with not only a bad experience, but a bad tax return that costs them even more to set straight with the IRS.
In these instances, the IRS offers wronged taxpayers some recourse.
The tax agency says you can report a tax return preparer for misconduct, such as:
- Embezzling your refund.
- Altering your tax return documents.
- Filing a return without your consent.
- Creating or omitting income to generate a larger refund.
- Creating false exemptions or dependents to generate a larger refund.
- Creating false expenses, deductions or credits to generate a larger refund.
- Using an incorrect filing status to generate a larger refund.
How you report a tax return preparer for misconduct, however, depends on whether or not you received a notice or letter.
Turning in a pro after getting an IRS notice: Sometimes a filer's first realization that his or her tax pro was, uh, not up to standards come when the filer gets an IRS notice or letter.
In such cases where the problem with the return is attributable to a bad preparer's advice, report that tax pro for improper tax preparation practices by completing IRS Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit and Form 14157, Complaint: Tax Return Preparer.
Mail both forms along with all supporting documentation and a copy of the notice or letter to the address contained in that notice or letter.
No IRS notification, but reporting a tax pro: Your tax return didn't prompt the IRS to reach out to you yet, but you know the preparer didn't do the job properly.
In these cases, get ahead of the IRS notification by again filling out Forms 14157 and 14157-A.
This time, though, mail them with all supporting documentation to the address where you would normally mail your Form 1040.
No tax problems, but problems with the tax pro: In some instances, taxpayers find that while their return filings aren't impacted by dubious actions by their tax professionals, they still are uneasy with the services provided … or not.
Questionable tax preparer tax preparation practices that raise client suspicions include such things as:
- Failing to enter a Preparer Tax Identification Number (PTIN) on a tax return or improperly using a PTIN belonging to another individual.
- Refusing to provide clients with a copy of their tax return.
- Failing to sign tax returns they prepare and file. (Note: If electronically filed, your copy may not contain a signature.)
- Neglecting to return a client's records or holding the records until the preparation fee is paid.
- Preparing client returns using off-the-shelf tax software or IRS Free File, both of which are intended for use by individuals.
- Falsely claiming to be an attorney, certified public accountant, enrolled agent, enrolled retirement plan agent, or enrolled actuary.
To report a tax return preparer for the above or other improper tax preparation practices, complete and send, you got it, Form 14157 along with all supporting documentation to the IRS.
You can fax the form and substantiating material to the IRS at (855) 899-7957 or you can mail it to:
Internal Revenue Service
Attn: Return Preparer Office
401 W. Peachtree Street NW
Mail Stop 421-D
Atlanta, GA 30308
The IRS asks, however, that you don't do both. Either fax or mail. Doubling up on the reporting, says the tax agency, may delay the processing of your complaint.
Also, such complaints are not limited to affected taxpayers. If you are a tax return preparer and discover that one of your colleagues is committing questionable practices in connection with his or her clients, you can file a Form 14157 complaint.
When Form 14157 won't work: There are, however, some cases when you shouldn't file a tax preparer complaint form even though the tax pro is involved in what you believe is improper activity.
If, for example, you suspect your identity was stolen, possibly by a tax preparer's action or inaction, you should instead file IRS Form 14039. Follow the instructions for submitting this document are found on page 2 of the form.
And if you want to report alleged tax law violations by an individual, a business or both, file Form 3949-A. Submit it to the address on the third page of that form.
Finding a reputable tax pro: I hope you never have to report a tax pro for questionable or suspected illegal activities. But the world, including the tax world, is full of bad actors.
If you run across one, I hope the damage is minimal and that your reporting of him or her gets them out of the system quickly.
To help ensure that you do find an honest tax pro who meets your filing needs, check out my earlier blog posts and stories on:
- Picking a tax pro
- Where to find your perfect tax preparer
- Tax pro or tax software? (NerdWallet)
- Types of tax preparers from which to choose (Bankrate slideshow)
- Add EAs to the tax preparation — and privacy — mix
- Checking out your tax professional
- 5 things to check when hiring a tax preparer
- Free tax help for many filers at VITA, TCE sites
The IRS also issued a fact sheet in connection with its Dirty Dozen tax scams on how to choose a paid tax preparer.
And be sure to check out the tax agency's online searchable, sortable directory of tax preparers who hold professional credentials recognized by the IRS or who hold an Annual Filing Season Program Record of Completion.