According to the IRS, more than 64 million returns were submitted through tax preparers last year. BBB | Greater Maryland received 3146 inquiries and 20 complaints about tax related services in the last 12 months and with three months until the next deadline, taxpayers should gather documentation, research options and avoid high interest loans that bank on the projected return.
There is good news for individuals filing the 2011 1040EZ federal return with a special free offer from TurboTax. The company still charges for its more robust packages needed to complete other IRS forms. If you're not comfortable with the do-it-yourself approach and opt to use a tax preparation company, it's important to understand that no matter who does your taxes, the taxpayer is ultimately responsible for filing an accurate return on time. To avoid fines and fees, choose a tax preparer wisely.
BBB and the IRS offer the following suggestions:
- Verify that a paid preparer has signed the return and included his Preparer Tax Identification Numbers (PTIN). The preparer must also provide you with a copy of your return.
- Avoid preparers who claim they can obtain larger refunds than others. Every preparer should derive substantially similar numbers.
- Beware of someone who guarantees results or who bases fees on a percentage of the amount of the refund. A practitioner may not charge a contingent fee (percentage of your refund) for preparing an original tax return.
- Understand that reputable preparers will request your receipts and will ask you questions to determine your qualifications for expenses, deductions and other items. By doing so, they have your best interest in mind and are trying to help you avoid penalties, interest or additional taxes that could result from an IRS examination.
- Choose a preparer who will be responsive to your needs. Ask who will actually process the return before engaging services. Avoid firms that delegate your return to someone with less training. You need to have access to the person completing your return during the process.
- Steer away from preparers that export your return to a foreign country for preparation. Foreign countries do not have the same security and privacy laws as the United States. You may not have recourse if your information or identity is compromised.
- Investigate firms with BBB, the MD's Board of Public Accountancy, and the IRS Office of Professional Responsibility (OPR) .
- Research individual tax preparers to make certain they are registered with the State Board of Individual Tax Preparers.
- Find out if the preparer is affiliated with a professional organization that provides or requires its members to pursue continuing education and holds them accountable to a code of ethics.
- For low-income and elderly taxpayers, there are options such as the IRS approved Volunteer Income Tax Assistance and Tax Counseling for the Elderly, as well as, AARP Tax-Aide.
- Use E-File and direct deposit to ensure the most rapid receipt of your refund, often 8-15 days (or less). Use your bank account and avoid sacrificing unnecessary fees to check cashers.
Due to Emancipation Day, the IRS has extended the deadline to file 2011 taxes until Tuesday, April 17. Despite gaining a weekend to crunch the numbers, BBB suggests you start early and don't wait until the last minute to file.
Wait For Your Return and Save
When anxious for cash, taxpayers each year turn to options such as Refund Anticipation Loans or Refund Anticipation Checks to get their money fast. RALs are short term loans borrowed from a lender based upon the taxpayer’s anticipated income tax refund.
According to the National Consumer Law Center (NCLC) and Consumer Federation of America (CFA), in 2009, consumers paid an estimated $606 million in RAL fees. Due to the excessive interest rates assessed, the Federal Deposit Insurance Corporation (FDIC) called RAL lending “unsafe and unsound.” Only three lenders, including Republic Bank still offer RALs. Pending government litigation may close the door on the existence of RALs after this tax season.