Can a Tax Preparer Steal Your Refund?
Concerned about your tax refund? Learn how to choose a trustworthy tax preparer and secure your money.
Tax season brings mixed feelings, especially for those expecting a refund. While many tax preparers are professional, some may steal refunds. Understanding how this fraud occurs and how to protect yourself is vital for financial security.
How a Refund Can Be Misdirected
Unethical tax preparers use several methods to misdirect client refunds. A common tactic is directing the refund to an account they control, rather than the taxpayer’s personal bank account.
Preparers may also use refund anticipation loans (RALs). These short-term loans, secured by the expected refund, come with significant fees. The preparer might route the refund through a controlled third-party lender or charge excessive fees, reducing the actual refund.
Some preparers inflate deductions or credits without client knowledge to generate a larger refund. They might then pocket the difference or charge excessive, undisclosed fees. Filing a fraudulent return in the client’s name without consent is another form of misconduct.
Unscrupulous preparers may charge exorbitant, undisclosed fees. These fees might be based on a percentage of the refund, incentivizing illicit inflation. Refusing to sign the return or provide a copy also indicates an attempt to avoid accountability.
Safeguarding Your Refund
Protecting your refund starts with selecting a reputable tax preparer. Check their credentials, including their IRS Preparer Tax Identification Number (PTIN), which is legally required. The IRS provides an online directory of qualified preparers.
Always review your completed tax return thoroughly before signing it; never sign a blank or incomplete form. You are responsible for the return’s accuracy, even if prepared by someone else. Ensure all income, deductions, credits, and direct deposit information are correct.
Arrange for your refund to be directly deposited into your own bank account. Refunds should only go into accounts in your name, your spouse’s name, or a joint account. Avoid preparers suggesting deposits into their accounts or third-party accounts.
Always obtain a complete, signed copy of your tax return and related forms for your records. This copy proves what was filed and is vital if discrepancies arise. Be wary of red flags like promises of unusually large refunds, percentage-based fees, or refusal to sign the return.
Reporting Suspected Fraud
If you suspect your tax refund has been stolen or identify preparer fraud, take immediate action. Contact the Internal Revenue Service (IRS) to report misconduct. File IRS Form 14157, “Complaint: Tax Return Preparer.”
Form 14157 allows you to detail the preparer’s identity, business, and complaint. If your return was filed or altered without consent, also submit IRS Form 14157-A, “Tax Return Preparer Fraud or Misconduct Affidavit,” with Form 14157. These forms help the IRS investigate unethical preparers.
If your Social Security Number (SSN) was used for a fraudulent return, indicating identity theft, file IRS Form 14039, “Identity Theft Affidavit.” This alerts the IRS to a potential compromise and prompts an investigation. Also, report the incident to your state tax agency, as preparers are often state-regulated.
If you suspect a crime like theft, contact local law enforcement. They can investigate criminal aspects and provide a police report, which may help your IRS case. Keep documentation like tax return copies and preparer communications for complaints.