Stay Scam-Free

Don’t let fraudulent tax preparers get the best of you.

By Carol Tice | edited by Dan Bova | Nov 01, 2006

Opinions expressed by Entrepreneur contributors are their own.

Everybody wants to save money on their taxes. But in your quest for the biggest refund, don’t fall prey to tax preparers’ scams.

In February, the IRS warned taxpayers to beware of shady preparers. In a recent Los Angeles case, tax preparer James Earl Wynn was sentenced to 11 years in federal prison after cheating the IRS out of more than $75 million. Wynn created phony business partnership losses on the returns of more than 2,000 clients.

In another case, five individuals were indicted in September for orchestrating a $14 million tax fraud scheme. The fraud included preparing thousands of fraudulent income tax returns as well as creating false documentation.

The IRS may well seek those clients’ back taxes owed, as well as penalties and interest. Keith Palmer, director of tax services for Moss Adams LLP in Seattle, notes that the responsibility for filing an accurate tax return remains yours, even if you hire a professional.

How can you tell if your preparer is legit? Follow these steps, Palmer says, to avoid bogus tax-filers.

Beware of big promises.
If a tax preparer says he or she can get you a bigger refund than other preparers, warning bells should clang. There are no legal secret tax breaks.

Don’t pay a percentage.
It is illegal for any tax preparer to be paid on commission.

Watch the paperwork.
Don’t ever sign a blank tax form. Avoid using tax preparers who won’t co-sign your form.

Choose a CPA, attorney or IRS enrolled agent.
Anyone can prepare tax returns, but only these three types of professionals can represent you if the IRS spots a problem with your return. So, be sure to check with your state board of accountancy to make sure your preparer has a current license.

Report suspected fraud.
If you suspect a fraudulent filer, fill out Form 3949A available at www.irs.gov/pub/irs-pdf/f3949a.pdf and submit it to the IRS.

Seattle writer Carol Tice reports on business and finance for The Seattle Times, Seattle Magazine and other leading publications.

Everybody wants to save money on their taxes. But in your quest for the biggest refund, don’t fall prey to tax preparers’ scams.

In February, the IRS warned taxpayers to beware of shady preparers. In a recent Los Angeles case, tax preparer James Earl Wynn was sentenced to 11 years in federal prison after cheating the IRS out of more than $75 million. Wynn created phony business partnership losses on the returns of more than 2,000 clients.

In another case, five individuals were indicted in September for orchestrating a $14 million tax fraud scheme. The fraud included preparing thousands of fraudulent income tax returns as well as creating false documentation.

Carol Tice

Owner of Make a Living Writing
Longtime Seattle business writer Carol Tice has written for Entrepreneur, Forbes, Delta Sky and many more. She writes the award-winning Make a Living Writing blog. Her new ebook for Oberlo is Crowdfunding for Entrepreneurs.

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