Final Tax Filing Tips Before April 17 Deadline
Every taxpayer is responsible for the accuracy of his or her own tax returns — even if they used a paid preparer. The Internal Revenue Service says most tax preparation professionals are good actors, but scammers deceive taxpayers every year.
A 2017 Census Bureau paper showed low-income taxpayers, who often rely on paid preparers to get the most out of their refund, can be particularly affected.
Here are some steps for low-income filers to protect themselves, but they include tips that may help San Diegans in all income brackets.
Find A VITA Site
If you meet certain requirements, such as earning less than $54,000 a year, you may be eligible for free tax preparation at what's called a VITA site. That stands for Volunteer Income Tax Assistance, which is a national IRS-sponsored program that trains people how to complete returns. There are dozens around San Diego County.
Not only can it save lower-earners the stress of completing a return themselves, but Mark Schumacher, a VITA site coordinator at the nonprofit Home Start, said it can save lots of money too.
“I’ve heard some people tell me $150 to $300 and here we are doing it for free," Schumacher said.
Additionally, Schumacher's colleague Frankee Hernandez said VITA preparers look for key credits that benefit low to moderate income filers, including those for filers earning up to a certain amount each year or for people supporting a child.
When he reviewed a client’s return that was done by a paid preparer, he noticed a credit was overlooked.
"It was actually for the school credit and (the preparer) didn’t even put it in there, so that actually helped them out, like get more from the refund," Hernandez said, referring to the American Opportunity Tax Credit, which can be claimed by people paying for higher education.
Be Armed With Questions (And Expect To Be Asked Them, Too)
Hernandez said even if you don’t qualify for the VITA services or if you choose a paid preparer, there are steps you can take to ensure you receive quality service, such as making sure you speak up.
"Any missed questions are missed opportunities for them to even get their full refund," Hernandez said.
Additionally, IRS Spokesman Eric Smith said when it comes to certain tax credits, paid preparers are required to exercise due diligence before claiming certain benefits on your return, including the Earned Income Tax Credit for persons who earn up to about $54,000 a year.
"If you're filling out a return where the person is claiming or potentially claiming the Earned Income Tax Credit, you need to ask some additional questions and look at some additional documents to make sure you have confidence that this person actually is entitled to this credit and that you're figuring the credit correctly," Smith said.
Those who fail to do so may be penalized, as exhibited in the IRS training video, "The Case of the Anxious Preparer."
But Smith said some bad actors may only be interested in inflating your refund so they can get a bigger bang for their scam. For example, when the taxpayer opts to have his or her refund directly deposited into a bank account, he or she must provide routing and account information on the return, but a fraudster may instead insert their own information or even convince the filer that funneling the refund through the preparer is a better idea.
Don't Ignore The Red Flags
VITA site coordinator Schumacher said clients should make note of the obvious warning signs, like when a friend of his was asked by a paid preparer to provide a specific number for something but couldn’t remember it, so the paid preparer improvised.
"The guy literally reaches over and grabs a stapler...looks at the back for a model number and wrote that down for the number," Schumacher said. "So if that’s the way your taxes are being done, that is really, really bad. Because in an audit, how do you defend yourself?”
Smith also warns that preparers shouldn’t charge clients based on their refund amount.
"If they're going to tell you that that's the way they get compensated, is by a portion of the refund that you're getting, that's a good reason to shut the door and go somewhere else," he said.
Smith also said anyone accepting compensation for doing your taxes should always sign the return and provide an ID number. If they refuse, that’s a red flag.