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How to avoid getting ripped off by your tax preparer

2023 tax season begins
Tips for taxpayers as filing season begins 05:25

With tax season in full swing, a U.S. government watchdog is warning Americans to be vigilant. The tax professional you pay to fill out your return may do more harm than good, the Government Accountability Office said

While millions of taxpayers every year use a paid tax preparer to file their return, many of those so-called pros won't do a better job than you could yourself. Worse, others are out-and-out scammers, according to the agency.

Read on for some tips to avoid falling prey to what the GAO called "unqualified and unscrupulous" tax preparers.

Get their number

By law, anyone who's paid to help file tax returns must have a preparer tax ID number or PTIN. They must also sign your return and include that number. If they don't have a PTIN or don't sign the return, there could be something fishy, the IRS says.

"Not signing a return is a red flag that the paid preparer may be looking to make a fast buck by promising a big refund or charging fees based on the size of the refund," the IRS warns taxpayers.

The agency calls these under-the-radar tax pros "ghost" preparers because they try to stay hidden and make it look like the taxpayer did the return themselves. These scammers can be prolific — some have made hundreds of thousands of dollars in fees by charging unwitting customers for their fraudulent returns, according to a running list of indictments by the Department of Justice.

MoneyWatch: How to prepare for tax return changes 02:59

Check your bank account number

The IRS warns taxpayers to verify your bank account information, and "watch out for preparers putting their bank account information onto the returns."

Some tax preparers offer your refund immediately in what's called a refund advance loan. This typically involves setting up a temporary bank account for the refund, and paying additional fees or interest to get the money upfront. The Consumer Financial Protection Bureau has an explanation of this process and warns taxpayers to be careful: Getting a loan doesn't mean the IRS will process your return faster, but you'll still be on the hook for any fees from the lender.

Beware of "biggest refund" promises

Many self-styled tax pros lure people in by promising them a massive tax refund. It doesn't mean that the refund is legal.

"There are a whole batch of preparers out there that, all they know is, they've got a software program and they plug in information to the software program. They don't know the law," Taxpayer Rights Center founder Nina Olson previously told CBS MoneyWatch.

"If somebody is saying, 'I can get you the biggest refund compared to so-and-so,' that's not a measure of whether they're qualified or not," she said. 

An investigation by the GAO found that, in 19 undercover visits to tax-prep centers, only two filled out a customer's taxes correctly, with the refund sometimes being off by as much as $3,000.

But what's so bad about getting thousands of extra dollars? More money might be nice, but lying on your return is a crime. And legally, even if a tax pro filed your taxes, you — the taxpayer — are responsible for the information on that return.

The IRS warned taxpayers this week that filing a false return could lead to criminal prosecution, along with a $5,000 fine for a "frivolous return."

Taxpayers could see smaller refund checks this year 03:45

Get a paper copy

When you conclude your visit with a tax preparer, make sure to get a copy of your return, signed by you and the person who prepared it.

You're legally entitled to a copy of your return, and it's important to have one for your records in case you're ever in contact with the IRS and need to refer to what you filed that year.

The copy could also protect you if your tax filer turns out to be a fraudster. Scammers have been known to give one return copy to the taxpayer but file a different version of the return, with made-up deductions or fake income to get a big refund — which the scammer later diverts into his own account. 

To be safe, always keep the receipt.

Said Olson: "You don't have to be a tax expert to protect yourself. It's just consumer protection steps."

Look them up

Before hiring someone to help with your tax return, look them up on the IRS' website to make sure they have the credentials they claim. The tool lets you search for preparers by name and location; you can also use it to find qualified tax helpers in your area.

There are several different types of qualifications for tax pros that come with different levels of responsibility (and, usually, different costs.) Think about what you might need in the future and choose accordingly. For instance, a tax preparer who has only a PTIN can file your return, but she can't legally represent you before the IRS in the case of an audit. 

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