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6 Signs Your Tax Preparer Is Incompetent

6 Signs Your Tax Preparer Is IncompetentBy Mandi Woodruff

With tax season officially under way, plenty of taxpayers will decide to outsource the job of filling out their returns to paid tax preparation professionals.

But just because someone walks like a tax professional and talks like a tax professional, that doesn't always mean he or she really is a tax professional.

Even excluding your garden variety predatory tax scammers, there are far too many "experts" out there with the best of intentions who are too incompetent to handle the job.

Here's how to tell you've picked the wrong person to do your taxes:

1. They ask you to inflate your claimed charitable donations. If they're asking you to fudge your charitable donations, chances are you're working with someone who charges you a percentage of your refund. Steer clear of these types. So long as their pay is tied to the size of your refund, they'll do whatever it takes to maximize it -- even if it could land you in trouble with the IRS.

2. They're working out of a sign-less, empty storefront. Not that you should always judge a book by its cover, but if the tax preparer you plan on trusting with all of your most personal financial records can't generate enough business to invest in a coat of paint and a sign, maybe you should take the hint.

3. They don't ask you for thorough financial records. "If anyone promises a refund without looking at all your info, they're probably running a scam," said Kay Bell, a tax professional and principal tax reporter for Bankrate.com. "When they don't want a lot of documentation, that's a big red flag they're not on the up and up."

Never use a tax preparer who's willing to e-file your return with your last pay stub before you receive your Form W-2, the IRS warns.

Here's what a legitimate tax preparer will ask for, at a minimum:
  • W2
  • Children's Social Security numbers
  • Annual reports from all of your investments
  • Pay stubs other employment info
  • Child custody proof in order to claim dependents, and so on.

4. They're spinning tales about ethnic tax breaks. If your tax preparer is selling you on the idea that you're entitled to a special tax break based on your religion or ethnicity, run for the hills. Some African-American consumers have been duped into scams that promise slavery era reparations. This scam has been running rampant for at least a decade, and even though the IRS and the Justice Department have both helped put culprits behind bars, vulnerable taxpayers are still being targeted.

5. They have a history of bad business practices. To quickly and easily check out a tax preparer before committing your tax return to his care, run the business name through the Better Business Bureaus' database. Any red flags will likely turn up there. If you're working with a Certified Public Accountant, your state's board of accountancy will have his records. Check out your state bar association for attorney complaints.

6. They don't want to share their credentials. Genuine tax preparers should have a Preparer Tax Identification Number, which is issued by the IRS. Don't be shy about asking for it. When your final return is completed, it should have their PTIN included, and you should get a copy as well. Also, ask if they belong to a professional tax organization, or are enrolled continuing education classes.

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Cities with the Lowest Tax Rates

The total amount of tax you pay reaches far beyond what you owe the federal government. Depending on where you live, most likely you're required to pay additional taxes, including property and sales tax. The disparity between the amount of tax you pay in a low-tax city and that in a high-tax city can be dramatic. Living in any of these 10 cities could save you a bundle, although the exact amount may fluctuate based on your income and lifestyle choices.

Cities with the Highest Tax Rates

Much ado is made in the press about federal tax brackets, but cities can carry a tax bite of their own. Even if you live in a state that has no income tax, your city may levy a variety of taxes that could eat away the entire benefit of living in an income tax-free state, including property taxes, sales taxes and auto taxes. Consider all the costs before you move to one of these cities, and understand that rates may change based on your family's income level.

Great Ways to Get Charitable Tax Deductions

Generally, when you give money to a charity, you can use the amount of that donation as a deduction on your tax return. However, not all charities qualify as tax-deductible organizations. While there are many types of charities, they must all meet certain criteria to be classified by the IRS as tax-deductible organizations. There are legitimate tax-deductible organizations in many popular categories, such as those listed below.

A Freelancer's Guide to Taxes

Freelancing certainly has its benefits, but it can result in a few complications come tax time. The Internal Revenue Service considers freelancers to be self-employed, so if you earn income as a freelancer you must file your taxes as a business owner. While you can take additional deductions if you are self-employed, you'll also face additional taxes in the form of the self-employment tax. Here are things to consider as a freelancer when filing your taxes.

Tax Deductions for Voluntary Interest Payments on Student Loans

Most taxpayers who pay interest on student loans can take a tax deduction for the expense ? and you can do this regardless of whether you itemize tax deductions on your return. The rules for claiming the deduction are the same whether the interest payments were required or voluntary.

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why is tax preparation and compliance a major job sector?
can't we just have a small national sales tax and no IRS???

February 12 2013 at 6:44 PM Report abuse rate up rate down Reply

we bought a house last year my daughter my self and her boy friend do we all clam the house or can one only do that we don't no how this works can someone help me please

February 08 2013 at 11:22 PM Report abuse rate up rate down Reply

Even if tax forms/rules seem like calculus math to you, CLOSELY re-check EVERY box the preparer has entered something into when you get home.

I couldn't understand why I owed $8,000 when I expected maybe $900-$1,000 max.

At first, I was SO focused on the MATH boxes that I skipped over the others.

On my THIRD runthrough, I caught >>>> The preparer had flipped my AGE from 63 to 36.

That flagged a 10% Penalty for early withdrawal on a pension lump sum, which only happens if you withdraw UNDER the age of 59 1/2 !

To be honest, if that Extra $7,000 could have made me 36 again, I would have gladly paid it !

February 08 2013 at 10:17 PM Report abuse rate up rate down Reply

"Preparer Tax Identification Number"

If you ask for the info, do so "before" having them prepare it. At the worst, do so before paying for it.

February 08 2013 at 8:19 PM Report abuse rate up rate down Reply

Well you can always fill out your own if it is wrong they will let you no

February 08 2013 at 7:59 PM Report abuse rate up rate down Reply

why does tax preparation and tax compliance have to be a major job sector? just wondering?

February 08 2013 at 6:28 PM Report abuse rate up rate down Reply

At the bottom of the 1040 "Self prepared" is whited out and the name of the preparer is written in.

February 08 2013 at 8:30 AM Report abuse rate up rate down Reply

Lol....they must be talking about H&R Block.

February 07 2013 at 8:53 PM Report abuse +3 rate up rate down Reply
1 reply to Rhianon's comment

Eh, I use H & R Block because of lengthy tax filings that I have to do. I prep it, take the detailed prep-work with supporting documents in, takes less the 30min to go through it, file it and pay little over $200.00 and get back well over 5k. Also had a recent audit, and passed with a 100% A+. That's a a piece of mind that comes with a guarantee. Had problems in the past with other Tax Services and never got the refunds i should have. Tried these folks and life has been Great at Tax time ever since. 5k makes for a Nice 10 day Tropical Vacation with money left-over.

February 07 2013 at 11:26 PM Report abuse rate up rate down Reply
1 reply to jjhd98's comment

good commercial

February 08 2013 at 4:42 PM Report abuse rate up rate down

Most likely a bad Tax Preparer would be a Left Leaning Obama supporter.

February 07 2013 at 6:05 PM Report abuse +2 rate up rate down Reply
2 replies to progressivehoax's comment

Or someone helping the rich to avoid paying their fair share by sheltering their income in the Caymans.

February 07 2013 at 8:31 PM Report abuse +2 rate up rate down Reply
1 reply to napajack's comment

False Comparative...

That would actually require a GOOD Tax Preparer.

February 07 2013 at 11:19 PM Report abuse +1 rate up rate down


February 07 2013 at 9:19 PM Report abuse rate up rate down Reply

Most states don't have any particular requirements for who can prepare tax returns. Put a flyer on a bulletin board, advertise on Craigslit - instant tax preparer. So, beyond incompetence, think identity theft.

February 07 2013 at 5:14 PM Report abuse +2 rate up rate down Reply