Tag: PTIN

Posted on by Jan Roberg

Tax Preparer Fraud—How to Avoid Being Taken

Tax Day

Photo by chuck holton at Flickr.com

 

I’ve seen a lot of stories in the news lately about tax preparer fraud.  The IRS is catching these folks and they’re going to jail.  That’s a good thing in my opinion.  Those of us with licenses and who play by the rules really hate the crooks; they’re bad for business.

 

The IRS tried to regulate preparers by setting up the Registered Tax Return Preparer (RTRP) designation.  I made all my employees take (and pass) the test as a condition of employment, but the RTRP requirement was thrown out in court so anybody can hang up a shingle saying they’re a professional tax preparer and they don’t need to do didly squat to prove they’re competent.

 

So how do you tell if the person you’re hiring to do your taxes is legit or not?  I was recently asked that question at a panel discussion about Enrolled Agents on the web the other day.  The feedback I was getting from the non-tax preparers is that they don’t know what questions to ask, or what to look for when hiring a preparer.

 

Enrolled Agents are licensed by the Department of the Treasury to represent taxpayers before the IRS.  That means we are hired by and work for citizens to help them with their IRS issues.  We do not work for the IRS.  CPAs and attorneys are also allowed to represent citizens before the IRS; they are licensed by their respective states.  EAs are federally licensed. 

 

So, being an EA, I’m going to recommend you hire an EA.  My buddy the CPA will say to hire a CPA.  And I’ve got a couple of tax preparer friends who don’t have any initials after their names that, to be perfectly honest, are really good tax preparers.  But the biggest issue I think a regular person has to be aware of is—how do you know the person you hired isn’t a fraud?

 

Face it, I can tell you I’m an EA until I’m blue in the face, but how do you know?  Ask to see my license!  Oh sure, I’ve got a nice little document hanging on my wall.  I got that back when I first became an EA.  But EAs need to renew their licenses every three years.  You want to take a look at the license I keep in my wallet.  (I’m not going to post it online to prevent some fraud monster from copying it.)

 

Another way to check out a preparer is to go online and look them up.  You can check on an EA by going to the National Association of Enrolled Agents website:  https://portal.naeacentral.org/webportal/buyersguide/professionalsearch.aspx

 

If you want to check out a CPA, you can find out their status at CPA verify:  http://www.cpaverify.org/

 

One thing that everyone who prepares returns professionally must have is a PTIN number, that’s a Preparer’s Tax Identification Number.  Anyone who gets paid to prepare tax returns must use one of these numbers when preparing your return.  You can check on a PTIN number by checking out this directory:  http://www.ptindirectory.com/ the big problem with that directory is that if the preparer hasn’t enrolled in it, she won’t be listed.  Now, the IRS is supposed to have their own directory, but they charge you $35 and they send you a CD, so that’s really not a user-friendly option.

 

It’s important to know that non-paid preparers, like the volunteers at VITA or AARP, do not have to use a PTIN on your tax return.  So if you’re using one of those services and there’s no PTIN number on your tax return, that’s okay.  VITA does have a pretty decent training program for its volunteers.

 

This is important:  If you pay someone money to prepare your taxes and there’s no PTIN number for the preparer down by the signature line—Walk away and do not pay for the return.  That’s the number one sign of tax fraud.  The PTIN is the IRS’s way of keeping track of tax preparers.  Anyone not using a PTIN is hiding something.

 

Here’s another thing to watch out for:  If your preparer promises you a big refund before she even sees your paperwork.  How can they know how much you’ll get back if they haven’t even looked?  That’s another deadly warning.

 

Another big fraud scam is when they say they can get you money for something you haven’t done:  for example—college tax credits.  That’s the most recent scam that tax preparers went to jail for in my city.

 

What’s scary is, I think I spoke to one of their clients on the phone last year.  I received a call from a fellow asking me what I’d charge to do a tax return with a college tax credit.  I asked the man a few questions about his return and I realized that he didn’t qualify for a college tax credit—and I told him so.  He didn’t seem to care he just wanted me to prepare the return, claiming the illegal credit, and charge less than the other guy who told him about the scheme.  I told him I wouldn’t do that return for him.  I’m not sure who he had gone to, but at least one group of preparers is now going to jail for illegally preparing returns claiming credits.  http://www.stltoday.com/news/local/crime-and-courts/owner-of-st-louis-mo-money-tax-prep-franchise-pleads/article_804ad59d-d455-5865-a2f8-28b15a49d6fd.html

 

So, here’s my best piece of advice:  if a tax preparer tells you that you can get money back for something you know isn’t true, DON’T DO IT!  You could wind up in big trouble, and your preparer could wind up in jail.

Posted on by Jan Roberg

Is Your Tax Preparer a Dinosaur?

Perry the guinea pig in his stegosaurus costume. Photo by Kelsey Witzling.

 

A big part of my business is helping people who are getting audited by the IRS.  What you might find surprising is how many people I wind up helping  that paid a “professional” to prepare their tax returns.  I use the term professional loosely here because right now, basically anybody with a computer can hang out a sign and say they are a tax professional.

 

Now the IRS tried to put a stop to that, they set up rules requiring testing and training for anyone getting paid to prepare tax returns.  But they lost a court case so now you’re stuck trying to guess if your preparer has even minimal competency.

 

One of the questions I ask when reviewing an audit return is, “How old is your tax person?”  Full disclosure here, I’m also “over a certain age”—let’s just leave it at that.    Lots of tax professionals are older.  (At the IRS convention in Chicago this summer, we made a game of looking for people who were under 40—not many to be found.)  But the dinosaurs are the ones who don’t keep up with the new tax laws.

 

True story:  a woman came into my office because she was being audited and the IRS wanted a few thousand dollars from her.  She had had her return done by a “professional” but he didn’t do audits so she found me on the internet.  Red Flag 1:  if your “professional” won’t represent you on a tax return that he’s prepared then he’s probably not credentialed.

 

Anyway, I took a look at the return and asked her a few questions.  By the time I got to, “How old is your tax preparer?”  I already knew the answer.  He was a retired CPA.  He just did tax returns during the season to keep busy.

 

I handed back the tax return and told her to pay the money.  The tax return had been prepared using 2004 tax rules.  Had the return been done in 2004—fine, but since it was her 2010 taxes, everything was different.  Here’s the real kicker—had she done her own taxes using Turbo Tax or some other home style software—she wouldn’t have made that mistake.  The software questions would have guided her to the right answers and she never would have claimed a deduction that she wasn’t allowed.

 

There are lots of mature tax preparers (I’m one of them) who keep up their licenses, take update classes and keep up with what’s new in tax law.  The tax dinosaurs, on the other hand, are living in the past and can cause more harm than good for their clients.  Here are some warning signs that you’ve got a dinosaur:

 

1.  Your preparer won’t e-file your tax return.  Any professional tax preparer that prepares over 10 tax returns a year is required to e-file the returns.  If you have a “normal” tax return and you still have to mail it—that’s a warning sign that your person is behind the times.

2.  Your preparer doesn’t use tax software.  I don’t care how brilliant the person is—software is necessary for today’s tax returns.  Software isn’t perfect, but it eliminates many mistakes.

 

You should also beware of preparers who won’t sign your return and don’t have PTIN numbers.  That’s not necessarily a dinosaur, that’s more likely fraud—you should run from those guys.

 

Dinosaurs are extinct.   The one time the IRS tried to do the right thing and protect people from the tax dinosaurs, they lost the court case.  So you have to protect yourself.   Tax dinosaurs should be extinct too.

Posted on by Jan Roberg

Should You Hire a Tax Professional that Wears a Funny Costume?

Taxes are complicated.  Although, some returns are fairly easy to do, with Congress changing the rules all the time, it really helps to hire someone who knows what they’re doing.

 

Okay, I’m going to toot my own horn here, but Enrolled Agents are licensed by the Department of the Treasury to represent people before the IRS in all tax matters.  We have to pass a test.  Actually, it’s nine hours worth of tests divided into three parts.  You have to pass all three before you can call yourself an EA.

 

EA’s are also required to take 72 hours of tax training every three years to keep their certification.  And we also have to pass a tax compliance check—meaning, the IRS takes a closer look at my tax return.

 

Most of those people at your big box chain tax stores are not EA’s.

 

There’s also a new preparer designation called a Registered Tax Return Preparer, or RTRP for short.  They also have to pass a test, take continuing education, and they have the ability to represent taxpayers before the IRS but it‘s limited.  At Roberg Tax Solutions, everyone who prepares returns is either an EA or an RTRP, meaning that we’ve all got the licenses to do our jobs.  The most basic tax preparer designation is a provisional PTIN holder-but even they must do the continuing education credits.

 

It’s important to know that because most tax preparers out there don’t have any credentials.   None.  Every day I hear stories about people who used a so-called “professional” and got in trouble with the IRS because the “professional” didn’t know the tax law, or perhaps chose to ignore it.

 

Okay, the IRS requires that I say this:  ‘The IRS does not endorse any particular individual tax return preparer. For more information on tax return preparers go to IRS.gov.’   Just wanted to make sure I got that in there.

 

Now I was going to write about how you don’t want to hire the guy in the crazy costume to do your taxes.  But I’m not in a position to say that.  You see, every Halloween, Roberg Tax Solutions dresses up and helps with the Maryland Heights Halloween parade.  We used to dress up for the Pujol’s Foundation Winter Carnival too until they discontinued that.

 

So, go ahead and hire the tax person in a crazy costume.  Just make sure that you check his or her credentials for doing taxes first.  (By the way, the guy in the Shark costume is Mike, our new guy.  He’s in the shark costume because, well–he’s the new guy.  And the shark dance?  Well, the little kids at the parade kept begging him to “Do it again!”  For what it’s worth, he’s better at taxes than he is at dancing.)

Posted on by Jan Roberg

Is Your Tax Preparer a Phony?

Headache

Photo by Brandon Koger at Flickr.com

One of my biggest complaints is about fake tax preparers.  They’re all over the place.  They magically appear during tax season and then disappear on or before April 15th.  When the IRS letters start showing up, they’re nowhere to be found and their victims wind up paying me (and people like me) lots of money to get them out of the jam they’re in.

 

For example:  One year I had to assist five different people who received audit letters and all of them had had their returns prepared by the same woman.  Besides the fact that all the tax returns were wrong—the thing they had in common was that all of them said they had been “self-prepared,” even though all five of the people who came to me stated that this woman had prepared their returns and that they each had paid her $200 for the service.  I’ll never know how many bad returns that person did—but if five of them walked through my door, I‘m guessing that there were a whole lot more.

 

So how do you know you’ve got a lemon preparer?  The best way to know is to see if he or she has something called a PTIN number.  (PTIN stands for Preparer Tax Identification Number.)  A real preparer signs her name on your tax return and puts her PTIN number on it.  A fake preparer does not sign your return and your return will say “self-prepared.”

 

Most folks don’t know that professionals are required to have PTINs.   Unless you were burned by a bad preparer in the past, it’s not something that would ever be on your radar.  It’s on my radar because I have to tell people they’ve been burned on a regular basis.  It’s never a fun conversation.

 

So how do you know if you’ve got a real tax professional instead of a fake?  Well now there’s a directory and you can look your tax preparer up.  All you have to do is go to:  http://www.ptindirectory.com/

 

You can type in your preparer’s name and if they’ve got a PTIN, you can find them there.  For example:  my last name is Roberg and I work in Missouri.  If you wanted to check my credentials, you’d go to the site and type those in and I’d be there.

 

Or say you don’t have a tax preparer and you’re looking for someone.  You can go to the website and type in your zip code and it will give you a whole list of preparers in your area.  For example, I work in the 63146 zip code area.  If you type that in, well of course I’m on that list, but so are a whole bunch of other tax folks who work in my area as well.

 

Click on a name and it will give you the person’s credentials and business address.  EA means enrolled agent (that’s what I am.)  EAs are licensed by the Department of Treasury to represent clients before the IRS.  CPAs are Certified Public Accountants and RTRPs are Registered Tax Return Preparers.  RTRP is the new tax professional designation, it means the person has passed a test demonstrating competency is basic tax return preparation.  Persons with PTINs but no credentials will just have their names listed.

 

Will hiring a professional with a PTIN prevent you from ever getting audited?  No, I can’t promise that.  But it does show that you’ve hired a professional who’s serious about obeying the law, and that’s something you want in your tax preparer.

Posted on by Jan Roberg

I Got My PTIN Number!

PTIN number

Despite the 5 identification numbers that the IRS already has for me, I still got lost in the system! Glad I'm found.

If you don’t prepare taxes for a living, you probably don’t know and don’t care what a PTIN is.  But if you’ve ever had to deal with a government agency, then you might understand my complaint.

A PTIN is a Professional Tax-preparer Identification Number.  I’ve already got one, but the IRS decided to change the rules and make me pay for it.  I don’t really like paying for something that I got for free and have already had for nine years, but I can live with it.   It’s supposed to make the tax preparation industry safer for consumers.  I’d feel better though if I thought it would actually do that. 

It’s now against the law to get paid for filing tax returns without having a PTIN.   It’s not a bad law really, any reputable tax preparer already has a PTIN anyway.    The IRS claims that it’s going to use the PTINs to monitor our tax preparation work.  If we’re crooked, we’ll get caught.  (They’ve been doing that for years already but if it makes them feel better to say so that’s fine with me.)   The fee I pay for getting my PTIN back is supposed to cover the cost of monitoring the system.  The problem is, it’s only monitoring those of us who get PTINs — the cheaters – the crooked tax preparers that are scamming the system don’t pay the fee and they’re not monitored.

If you’ve ever done any audit work, you know what I’m talking about.  A taxpayer comes to you because they received an IRS letter about a problem with their return.  They come to you because they can’t find the person that they paid to do the return in the first place.  “What do you mean?”  You ask, “Your return says self-prepared.”  But of course, that’s not the case.  They paid some fly-by-night tax preparer who doesn’t have enough confidence in his work to actually sign the return and will disappear right after April 15th if not sooner.  Those guys never get caught because the bad returns were all supposedly prepared by the taxpayers.  These are the people who need to be caught and prosecuted.  The new PTIN registration does nothing to address this problem

I’m late getting my PTIN because quite frankly, I was sort of  lost in the system for awhile.  That wasn’t very comforting, but I think the IRS could find me if they really wanted to.  I currently have  five IRS identification numbers in addition to my social security number.  I have to sign  returns using my PTIN, but I also have to put my company name and Employer Identification Number on each return.  That’s two numbers right there on every tax return I prepare.  In order to electronically file a return I have to have my Electronic Return Originator (ERO) number(3).  Most people have to be fingerprinted my a local law enforcement office to get that number.  The Sheriff didn’t have to fingerprint me to get my ERO number because I already had my Enrolled Agent number (4).  Enrolled agents already go through a bunch of other stuff including having the IRS review your prior year’s returns before they’re allowed to practice.  Because I do audit work, I also have a CAF (Centralized Authorization File) number(5) that I must use every time I represent on of those sorry folks who went to a fly-by-night preparer. 

So it seems like the IRS has plenty of information on those of us who are reputable tax preparers already, but there’s still no protection against the bad guys who fly under the radar with no type of registration whatsoever.  They cut into our businesses, make the profession look bad, and cause problems for honest taxpayers who really need help.  If the IRS would address that problem, I wouldn’t complain about the PTIN fee so much.