Before turning your tax return over to someone else to handle, make sure you find an honest and competent preparer.
There are plenty, of course. But there are also tax preparers who submit returns chock-full of errors or exaggerated deductions and credits. Or, as one Elkridge woman recently discovered: a tax preparer who filed her return without her knowledge. Even worse, there were the Baltimore tax preparers who secretly signed up clients for refund anticipation loans to generate more fees.
About 60 percent of taxpayers hire preparers to file their returns. If you're among them, make sure you do your homework to find a qualified and trustworthy preparer. Because ultimately, even if you hire a professional, you are responsible for what's submitted to the Internal Revenue Service.
Pretty much any adult can put up a shingle and prepare tax returns for a fee. Some practitioners, such as lawyers and certified public accountants, must meet certain professional standards. But other paid preparers have been subjected to little, if any, oversight.
And often, there has been no assurance that they know what they are doing. Government officials conducting undercover surveys have frequently uncovered errors by preparers.
Consumer advocates have argued for years for more regulation of tax preparers. That is finally starting to happen — in Maryland and nationally.
As of January, preparers who are paid for their services must get a Preparer Tax Identification Number from the IRS before they can file a return. So far, about 700,000 preparers have signed up for a PTIN, says David Williams, director of the IRS return preparer office. He estimates that as many as 200,000 others still need to get a number.
This summer, the IRS also plans to begin examining preparers to make sure they are competent enough to fill out a Form 1040. The IRS later will require preparers to undergo annual continuing education. (Attorneys, CPAs and agents who represent taxpayers before the IRS will be exempt from testing and continuing education because they already have similar requirements.)
The ultimate goal, Williams says, is to create a database where consumers can look up preparers by their number and get information about them, such as their credentials and disciplinary record.
Maryland, too, is in the process of licensing preparers — though behind schedule. The state was supposed to have preparers licensed by mid-2010, but the effort was stymied by a lack of funds.
Money for the program is now available, but regulations must be approved first, says Harry Loleas, state deputy commissioner of occupational and professional licensing.
The proposed regulations would charge $100 for a two-year license. If the regulations get the thumbs up, which could happen this week, Maryland could start licensing preparers by the end of April, Loleas says.
Maryland would become the third state to license preparers.
The regulation of tax preparers comes too late for Marylanders who were clients of Tyrone R. Campbell and his wife, Twanna D. Campbell. The pair owned a tax preparation business in Baltimore from about 2006 to 2009, according to the U.S. attorney's office.
During that time, the couple prepared more than 600 fraudulent federal returns on behalf of clients, according to prosecutors. The couple asked clients to fill out a questionnaire with personal financial information. Once clients left the office, the Campbells filed returns with false claims to boost refunds and their fees, authorities say.
Many clients also were unknowingly enrolled in refund anticipation loans, allowing the Campbells to collect another tax preparation fee that wasn't disclosed to customers, prosecutors say.
Tyrone Campbell pleaded guilty last week; Twanna Campbell did so in December. Each could receve several years of prison time.
Sheron Wells of Elkridge recently had her own dispute with a tax service, which acknowledges that it filed her return without her say-so.
Wells says she went to Instant Tax Service's West Patapsco Avenue office in Baltimore late last year after hearing the company's radio ad pitching refund advances. She provided her information to the preparer, but says she decided not to go through with it once she realized they were offering only a $50 advance on a debit card.
That evening, Wells says, she received text messages that the card had been issued and almost all the money spent. Alarmed, she says she called Instant Tax the next day and was told a mistake had been made.
A month later, Wells went to her usual tax preparer, Jackson Hewitt, to file her return. Wells, who is self-employed, says she was counting on a refund anticipation loan to keep up with bills. But Jackson Hewitt told her that the IRS rejected her return because it had already been filed.