IRS Dirty Dozen – Inflated Refunds

Every year, the IRS compiles a list of tax-related scams called the Dirty Dozen. I’ll highlight the scams over the next couple of weeks. One of the Dirty Dozen this year is falsely inflated refunds. While this sounds like something a taxpayer might do by claiming unwarranted exemptions, deductions, or credits, the scam is actually related to unscrupulous preparers. The IRS Commissioner reports:

Exercise caution when a return preparer promises an extremely large refund or one based on credits or benefits you’ve never been able to claim before. If it sounds too good to be true, it probably is.

The best way to protect yourself is to make sure that you use a legitimate tax preparer. You can check out my blog post for an IRS video about how to choose a tax preparer.

Another thing that you can do is to be sure that the preparer that you use has the proper licensing or credentials. These credentials include:

  • Attorneys
  • CPAs
  • Enrolled Agents
  • Enrolled Retirement Plan Agents
  • Enrolled Actuaries
  • Annual Filing Season Program participants

The IRS maintains a page with guidance for choosing a tax professional. https://www.irs.gov/tax-professionals/choosing-a-tax-professional

Keep in mind that whether you prepare your tax filings yourself or use a professional, you are still responsible for the return. Always review your return, and avoid these potential problems:

  • Under reported or unreported income
  • Questionable tax positions
  • Claiming excess exemptions
  • Deductions or credits without proper documentation

Remember the statement by the IRS Commissioner, “If it sounds too good to be true . . .”

 

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