The Rundown 3/13/14
Filing Fraud: Unregulated tax preparers pose risks to customers
When your mom cuts your hair at home, you don’t expect the same quality you’d get from a professional stylist.
But many people might not realize that when they go to an independent tax preparation office, the quality of service might not be any better than if Mom crunched the numbers at the kitchen table.
Only four states require testing and continuing education for hundreds of thousands of independent tax preparers who work with the public. And Indiana isn’t one of them.
After a federal appeals court threw out proposed IRS rules regulating tax preparers last month, the tax preparation industry will continue to be largely unregulated for another tax season.
The Institute for Justice, which successfully fought the proposed IRS regulations in court, estimates that more than 350,000 small independent tax preparers would have been affected by the regulations.
All told, up to 1.2 million tax preparers make a living deciphering the U.S. tax code for clients. The IRS reported that 63 percent of all returns were done by tax preparers in 2013 and estimates are that about half of those were filed by unregulated preparers.
In its Feb. 11 ruling, the U.S. Court of Appeals for the District of Columbia said the IRS isn’t authorized to write the proposed regulations. That power, the court said, is reserved for Congress and the president.
Julie Wood, a certified public accountant, said that just because the IRS doesn’t have the authority to require a competency test, that doesn’t mean it’s not a good idea.
“Personally, I liked the idea. I really did,” she said.
No one is protecting the public from incompetent tax preparers, said Wood, an owner of Witmer Wood Tax Consultants LLC in Leo.
Wood had to pass extensive, detailed tests on various aspects of accounting to earn her CPA designation. She specializes in taxes – though not all CPAs do. Jim Rolleston, the only other person in the firm who prepares and signs tax returns, is an enrolled agent, someone who has passed stringent tests specifically on tax preparation.
CPAs, enrolled agents and lawyers are required to meet relatively high professional standards.
In contrast, the proposed test was to ensure only a minimum competency level for independent tax preparers, who must decipher the nearly 74,000-page U.S. tax code.
As I’m Googling around this morning, I’m seeing stories like this one nationwide. Beware of tax preparer ads that guarantee refunds for a small tax preparation fee.
BBB Tips for Choosing a Trustworthy Tax Preparer
Tips on choosing a tax preparer
How to Avoid Tax Preparer Fraud
Talk to any reputable tax preparer to localize.
“The problem is widespread this time of year,” warns Houston CPA and IRS expert Joe Mastriano. “Do your homework before you let someone do your taxes. Those guaranteed refund signs are a real warning sign. No one can guarantee a refund until they’ve met you and seen your paperwork. Period.”
Joe is a client who can talk about the most common tax season scams and can introduce you to victims:
Joe Mastriano, CPA
CPA and IRS Problem specialist
Joe is also available for Skype interviews.
I know what you’re going through. For 25 years, I was you. It doesn’t matter how great your story was yesterday, the boss wants to know “What have you done for me lately?” It’s not easy to constantly “feed the beast” and come up with fresh story ideas.
And who has time to read all of those papers and watch all of those major market newscasts to find new leads?
That’s what The Rundown is about. I get up early and scan dozens of news sites from all over the globe for stories that can be easily localized. My promise to you is that when one of these stories involves a client, I’ll tell you. There are no hidden agendas here.
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