Tax filers who use a tax preparer to file their returns usually take for granted that the preparer will deposit the refund into the filer's bank account. But this is always the case. Tax preparers sometimes arrange to have the refunds deposited into their business accounts in order to keep a portion of the refund for payment.
Sometimes, this process can be helpful to cash-strapped filers since it allows you to pay your tax preparation fee once your refund arrives, as opposed to upfront. Other times, such arrangements leave you open to theft by unscrupulous tax preparers.
Rules for Tax Preparers
In January 2010, the IRS proposed a new set of rules for tax preparers. Tax preparers would be subject to rules that promote better education and compliance for tax preparers. The measures instituted by the IRS were partly a response to tax preparer misconduct by tax preparers.
Included in the requirements for paid tax preparers who are not attorneys, certified public accountants or enrolled agents included mandatory registration, competency testing, continuing education and increased ethical standards. In addition, the IRS increased the staff for its Office of Professional Responsibility to ensure that accusations of tax fraud were thoroughly investigated and those suspected of tax fraud were prosecuted.
Consider also: Tax Return Preparation: Tax Services, Tax Help & More
Examples of Tax Preparer Misconduct
If your tax preparer has committed any type of misconduct, you can submit a complaint form to the Treasury Inspector General for Tax Administration. Examples of misconduct include:
- Filing a Form 1040 without your consent
- Using the wrong filing status to reduce the tax liability
- Knowingly including false information, such as false expenses
- Stealing your refund
When having your return completed by a tax preparer, be sure that the preparer signs and dates the return. Tax preparers are required by law to sign the return, and if your preparer seems reluctant to do so, this should serve as a red flag for you.
Also, since you are ultimately responsible for the return, make sure the items listed are accurate before signing. Never sign a blank return. This will reduce the risk of you becoming a victim of tax preparer misconduct.
Consider also: What if I Made a Mistake on my Taxes?
How to Report a Tax Preparer
To report a tax return preparer for misconduct, fill out and send Form 14157, Complaint: Tax Return Preparer to the IRS. The form must be accompanied by a sworn Tax Return Preparer Fraud or Misconduct Affidavit. This is the form you use to explain what happened, and what the tax preparer did that constitutes improper conduct.
You can also submit a written complaint to the IRS Office of Professional Responsibility. The letter should include the name and address of your tax preparer as well as a detailed account of the preparer's misconduct.
However, keep in mind that complaints to the Office of Professional Responsibility are only for enrolled agents. If your tax preparer is not an enrolled agent, then you should complete IRS form contact the tax inspector and complete Form 3949-A to make your complaint.
Getting Your Money Back
The Office of Professional Responsibility cannot force a tax preparer to give you your money back. However, the inspector can take additional law enforcement action. If your tax preparer has taken your refund, it is best to contact the tax inspector first, then the professional responsibility agency.