The good news is that you can call me “Coach Solomon” because I’m going to prepare you for the upcoming tax season. “Coach Solomon” sounds like a good movie title; I think I’m going to pitch my idea to Tyler Perry. Life is too short to fear the IRS. I’m not writing to confuse or scare you about taxes. It is my goal to take the fear out of taxes through education, straight-talk, and a touch of humor. If you learn the basics about taxes, I guarantee you will find numerous ways to cut your tax liabilities and preserve wealth.
Want to know a name that will absolutely ruin your day? You probably don’t want to hear the name but I will still tell you. Have you heard of Bernard Madoff? Mr. Madoff was a legend on Wall Street. Some of the richest and “so-called” smartest people in the world wanted to invest money with him. Today, he is accused of running a scam aka “Scam of the Century” that will cost investors billions of dollars (yes, billions)! Let’s be clear, I’m not talking about only one billion. Madoff’s scam is estimated to have lost about 50 billion dollars of investors’ money.
I brought up Mr. Madoff to illustrate that you should be very careful who you trust. Mr. Madoff is not a tax preparer but greed exists everywhere. Most return preparers like me (shameless plug) are professional, honest and provide excellent service to our clients. However, don’t think for a minute that all tax return preparers are honest individuals. Unfortunately, unscrupulous tax return preparers do exist and can cause considerable financial and legal problems for their clients. Examples of improper actions by unscrupulous preparers include the preparation and filing of false paper or electronic income tax returns that claim inflated personal or business expenses, false deductions, unallowable credits or excessive exemptions.
Here are 10 tips from our friends at the IRS to keep in mind when hiring a tax return preparer:
- A Paid Preparer is required by law to sign the return and fill in the preparer areas of the form. The preparer should also include their appropriate identifying number on the return. Although the Preparer signs the return, you are responsible for the accuracy of every item on your return. In addition, the preparer must give you a copy of the return.
- Review the completed return to ensure all tax information, your name, address and Social Security number(s) are correct. Make sure that none of these spaces is left blank.
- Review and ensure you understand the entries and are comfortable with the accuracy of the return before you sign.
- Never sign a blank return, and never sign in pencil.
- A Third Party Authorization Check Box on Form 1040 allows you to designate your Paid Preparer to speak to the IRS concerning how your return was prepared, payment and refund issues and mathematical errors.
- Avoid preparers who claim they can obtain larger refunds than other preparers. If your returns are prepared correctly, every preparer should derive substantially similar numbers.
- Beware of a preparer who guarantees results or who bases fees on a percentage of the amount of the refund. A practitioner may not charge a contingent fee (percentage of your refund) for preparing an original tax return.
- Understand that the most reputable preparers will request to see your receipts and will ask you multiple questions to determine your qualifications for expenses, deductions and other items. By doing so they have your best interest in mind and are trying to help you avoid penalties, interest or additional taxes that could result from an IRS examination.
- Choose a preparer you will be able to contact and one who will be responsive to your needs.
- Investigate whether the preparer has any questionable history with the Better Business Bureau, the state’s board of accountancy for CPAs, the state’s bar association for attorneys or the IRS Office of Professional Responsibility (OPR) for enrolled agents or the oversight agency in states that license or register tax preparers.
Bonus tips just because you mean so much to me:
Check IRS.gov for information regarding abusive shelters and other tax schemes and scams. Remember, if it sounds too good to be true, chances are it is.
The IRS can help many taxpayers prepare their own returns without the assistance of a paid preparer. Before seeking a paid preparer, you might want to consider how much information is available directly from the IRS through the IRS Web site.
Tax evasion is both risky and a crime, punishable by up to five years imprisonment and a $250,000 fine.
Remember, no matter who prepares a tax return, the taxpayer is legally responsible for all of the information on that tax return. Ask yourself if filing a fraudulent tax return is worth losing your freedom.
“Income tax returns are the most imaginative fiction being written today.”
Happy Tax Season… stay tune for more tax information!