Can a tax preparer take your refund?
Can you trust your tax preparer?
While many legitimate professionals prepare taxes, the IRS has been warning consumers to be careful when it comes to dealing with unethical preparers and fly-by-night outfits.
Sometimes a con artist will keep repeating the same old tricks and won’t be easily caught — such as the ongoing story of the door-to-door tax preparer.
Taxpayers are warned to choose their tax preparers carefully. Don’t just trust someone who is making big promises — or is the friend of a friend. Don’t get taken by outlandish promises on social media where some preparers claim to get you the biggest tax refund possible.
Millions of Americans are looking forward to a tax refund this year.
To receive yours as soon as possible, the IRS recommends filing your tax return electronically and choosing direct deposit. About 90% of taxpayers who use this method and are owed a refund get theirs within 21 days of submitting their return.
Many Americans are eligible for free federal tax filing, but if you earn freelance income or have an otherwise complicated tax situation, you will likely need to pay tax filing fees to prepare your federal and state returns.
If you use an online service, you can start preparing your return for free. Most tax preparers don’t require money up front; you’ll typically pay the fees once you’re ready to sign and submit your return.
The IRS estimates it takes the average person about four hours to complete and file their return. By the time you reach the screen asking for payment, you’re probably looking for the quickest exit route. Online preparers will give you the option to pay for their services via credit or debit card or through your refund.
If you check the box to pay through your refund, you don’t have to do anything on your end but simply wait for your share of the refund to be deposited in your bank account. Sure, that may sound easy, but be careful: Most preparers tack on an extra fee for this method of payment, and it’s not insignificant.
Paying your online tax preparer through your refund could cost you up to $40 extra
Online service each charge an additional processing fee of $40 if you agree to pay through your refund. That’s $40 on top of the fee you’re paying for the package you selected, meaning you could easily double what you expected to pay.
Efile.com and 1040.com, two of the best budget tax software options, charge an additional fee of $25 to deduct their fee from your refund. TaxAct charges its own fee plus bank fees.
That’s not to say these online tax preparers aren’t worth your time. In fact, they’re among the best options on the market. But if you want to make the most of your refund, don’t settle for the easiest option — take an extra minute to pull out your credit card and avoid the unnecessary processing fee.
If you can, use a rewards credit card to pay for online tax prep and filing instead of deducting the amount from your refund. There’s usually no service charge to pay via credit card; you’ll be able to earn rewards points or cash back, depending on the card you have; and you’ll get your tax refund in full.
Tax Return Preparer Fraud
Even if you hire a tax return preparer who you believe is professional and honest, tax return preparer fraud (also referred to as return preparer fraud and preparer fraud) or misconduct is something that can happen to anyone. For example: A tax return preparer (also referred to as a return preparer) might change your tax return after you’ve approved and signed it, altering income or credits to obtain a bigger refund and then keeping some or all of it.
In some cases, the return preparer might steal your whole refund by changing direct deposit information. Another common fraud situation is when the preparer files a tax return without your authorization. They might have your information from a prior year and use it to file a tax return for the current year. Or perhaps you met with a return preparer and then chose not to hire them, but the return preparer filed a tax return using your information anyway.
To avoid problems:
- Be careful when choosing a tax return preparer;
- Know what steps to take to protect yourself; and
- Know what to do if you’re the victim of return preparer fraud or misconduct.
How will this affect me?
If you’re the victim of return preparer fraud or misconduct, you’ll need to show it to the IRS. If the IRS rejects your claim, you may face additional issues, including liability arising from the fraud or misconduct.
It’s important to get a copy of the tax return at the time you authorize the return preparer to file it on your behalf (see above on how to authorize) because later you may have to show the IRS that the return preparer altered your tax return after you signed it.
Following the steps in the “What Should I Do?” section will help you establish your case, especially providing the IRS with the signed copy of the tax return your preparer gave you, showing your correct bank account number and address.
If you’ve given the IRS the signed copy of the original tax return, the Taxpayer Advocate Service believes the IRS has sufficient guidance to take corrective actions, including issuing any refund still due to you. If the IRS doesn’t agree with this position, you should contact the Taxpayer Advocate Service and ask for help.