Tax preparers that promise large refunds are to be approached warily. With tax season upon us, there is going to be a strong push by preparers from coast to coast to attract consumers needing their tax forms prepared. One of the tactics used is making promises that cannot be kept.
Every year, thousands of people let a particular preparer do their taxes based on the promise they will either get a large refund or some other magical result like not owing any taxes. There is no way a tax preparer can know before completing tax forms whether the tax filer will get a refund. But the lure of a tax refund when money is tight is enough for some filers.
The Internal Revenue Service (IRS) is planning on regulating tax preparers by the start of the next tax season. Currently each state determines the rules and regulations for tax preparers in terms of licensing and training requirements. That is going to change soon.
In some states like Alabama there are virtually no rules as to who is allowed to prepare tax forms for consumers. That means anyone can offer to complete them whether or not he or she has had any training. Beginning with the next tax season in 2011, tax preparers must be registered with the government and pass competency tests.
The purpose of the regulations is control the tax preparation industry to reduce the number of errors and cases of fraud. Requiring preparers to take competency tests will help insure consumers are getting ethical and knowledgeable service. The US tax code is made up of thousands of pages and is so complex that even IRS agents have trouble answering questions consistently.
The goal is to have all the tax preparers registered before the January 1, 2012 tax filing season starts. Almost 80% of consumers use a paid tax preparer or they use tax software that fills out forms automatically based on the information entered into the program. The current estimate is that up to 1.4 million people are charging fees to provide tax preparation services.
The attorneys, accountants, and tax preparers already enrolled with the government will not see any new requirements. They are already regulated by the professions to which they belong meaning there is currently oversight of their activities. The tax preparers that will be affected are the people who simply decide to prepare returns to earn some money.
Consumers need to be careful who they turn to for tax form preparation. The taxpayer is ultimately responsible for the information on the tax return. The IRS charges interest and penalties on tax amounts due resulting from fraud or errors so mistakes can be quite costly. And there are plenty of errors made on returns. The IRS plans on sending out 10,000 notices to tax preparers that make frequent mistakes.
It is important to use people who have tax preparation training when it’s time to do your tax return. Tax preparers that will sign your return as the preparer take responsibility for the accuracy of the information. The last thing a consumer needs who are struggling financially to survive is a letter from the IRS informing him or her there has been an error and more tax is due, interest and penalty is due.
Tags: Tax refund, Tax preparation, Tax compliance solutions, tax, Refund anticipation loan, Internal Revenue Service
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