Why a Licensed CPA Matters

2 Minutes Read

Take it from a licensed CPA, there are a lot of tax preparers out there who are on the straight and narrow. However, there are also many that are not.

Below are just a few of the hundreds of fraud-related news stories from the past few years about unlicensed tax preparers committing fraud. From all over the country and all walks of life, these “tax preparers” knew what they were doing. Unfortunately, their clients did not.

If you need any more reason to hire a licensed CPA, consider this; when these people make mistakes, you are the one who will pay for it—in fines, back taxes, and possibly an audit. In the majority of cases, they do not sign your tax return, you do. So, unfortunately, there is no recourse for you.

Tax Preparers Committed Fraud

  1. Women Sentenced to Prison for Preparing False Tax Returns for Clients
  2. Prince George’s County Unlicensed Tax Preparer Pleads Guilty to Filing Fraudulent Tax Returns
  3. “Ghost” Tax Preparer Gets 5-Year Sentence After Filing False Returns
  4. “Don’t Pay – Walk Away.” Secretary of State Cisco Aguilar warns against fake tax preparers as the deadline for tax season gets closer
  5. IRS Form 14157: What It Is and Why You May Need It
  6. Beaumont tax return preparer could lose business, accused of fabricating claims, charging unauthorized fees
  7. Former Financial Advisor and Tax Preparer Admits Multiple Counts of Preparing False Tax Return
  8. Atlantic County Tax Preparer Admits Tax Fraud
  9. Wildwood Mayor Admits To Tax Fraud: Federal Officials
  10. Galloway tax preparer gets one year and a day in fraud case
  11. Tax preparer from Placentia pleads guilty to tax fraud
  12. Jason Williams' tax preparer admits illegally manipulating returns for clients
  13. Jacksonville tax preparer pleads to fraud, faces 3 years

“It’s not hard to fall for a fraudster when you’re looking to get your taxes done on the cheap,” says Chase Insogna, CPA and founder of Austin-based Insogna CPA. “Fraudsters say they are registered tax preparers, but the common person may not know the signs to look for.”

Warning Signs

Below is a list of warning signs to help you spot a fraudster quickly.

  • If you do not see a current registration certificate and proof of business license, walk away.
  • Tax preparers should provide clear information about how much they will charge and provide a receipt.
  • They should also provide you with a required written disclosure and contract.
  • A ghost preparer is a person who prepares your taxes and doesn’t sign the form. This is against Nevada law and the Internal Revenue Service. A ghost preparer is likely unregistered and you won’t see them again. If they don’t sign the form, don’t pay.
  • Claims they are endorsed by the IRS. The IRS does not endorse tax preparers.
  • Doesn’t have a PTIN. Anyone who prepares federal tax returns for a fee is required by the IRS to have an individual Preparer Tax Identification Number (PTIN) and include it on federal returns.
  • Paid tax preparers are required to sign your returns. Beware it they sign it "self-prepared" or use a business label.
  • Beware of tax preparers who base their fee on a percentage of your refund or claim they can obtain larger refunds than competitors. The fee should be based on the complexity of your return, not your refund.
  • Suggests you direct deposit your refund to an outside account

If you think you’ve been the victim of tax filing fraud in Texas, you can file a complaint here. Or, individuals, sole proprietors, and single-member LLCs can report a tax preparer’s misconduct using Form 14157 and Form 14157-A, which are tax preparer complaint forms.