During tax season, Maryland residents and others throughout the country seek help with filing their income tax returns. Many businesses can help people prepare and file their taxes, but some of these businesses aren’t as reliable as they want you to believe. And a few might even be out to steal your refund.
With a bit of knowledge and preparation, you can spot the difference between a tax preparer you can trust and one you can’t.
First, a tax preparer should be a certified public accountant, an enrolled agent, an attorney or registered with the Maryland State Board of Individual Tax Preparers. You can check whether a preparer is a CPA on the Maryland Department of Labor’s Certified Public Accountants Public Query website. The IRS maintains a searchable list of every enrolled agent in the country on its website. And the State Board of Individual Tax Preparers has its own searchable database as well — at the Individual Tax Preparer Public Query website. So you can verify online whether a tax preparer has the credentials as claimed.
Where possible, avoid tax preparers who charge a percentage of your refund instead of a flat rate or fee. Not only can these percentage fees be unreasonably high, they also can incentivize bad behavior from the tax preparer.
When a preparer is paid based on the size of your refund, they can charge more by applying for credits and tax breaks you really aren’t entitled to. You may think this means a bigger payout for both you and the preparer. But when the IRS or state tax agency notices the fraudulent return and opens an audit, you — not the preparer — are responsible for paying them back.
When filing, steer clear of refund anticipation loans. These loans are notorious for charging outrageous interest or fees. The IRS reports that most returns filed online have refunds issued within 21 days. All tax preparers should be filing returns electronically unless there’s a specific reason not to. With a 21-day turnaround time, these anticipation loans are just not worth it.
Always try to use tax preparers whose services are available more than just a few months out of the year. Some fraudulent tax preparers will open for a few months during tax season, then quickly close shop and move somewhere new once the season is over — leaving their clients with nowhere to turn if they find serious mistakes on their returns or discover that the tax preparer has stolen from them.
Finally, if you aren’t proficient in English and use a tax preparer who speaks your first language, be sure to have a trusted source double-check that any forms the preparer gives you in English actually say what the preparer claims they do. Some fraudulent preparers who target non-English speakers take advantage of the fact that their clients have trouble reading tax forms in English by only providing English forms, and then not being honest about the form’s contents. Consider asking a friend who is proficient in English to help. Some forms, such as the IRS 1040 — the Individual Income Tax Return — are also available in Spanish.
Before paying for a commercial tax preparer, you also should check to see if you are eligible for free tax preparation services. Maryland residents who earned less than $60,000 last year may be eligible for completely free tax preparation from CASH (Creating Assets, Savings and Hope) Campaign of Maryland, which offers an IRS-certified tax preparation service and can give in-person assistance at its Baltimore sites.
To make an appointment in Baltimore City, go to bmorefreetaxes.org or call 410-234-8008. To find a site outside Baltimore, visit the CASH website or call 1-800-492-0618. If you are over 50, AARP offers free tax preparation though its Volunteer Tax Aide Program. These volunteers operate virtually or in person nationwide and you don’t need to be an AARP member to qualify.
Following these tips and guidelines will help you avoid fraudulent tax preparers and find reputable ones that will help you have peace of mind when dealing with your tax affairs this season.
John Hardt is director of the Low Income Tax Clinic at the Maryland Volunteer Lawyers Service.