ALBUQUERQUE, N.M. (KRQE) – The folks at New Mexico Legal Aid are kicking off the new year by releasing informational videos to help New Mexicans protect themselves against predatory tax preparers. Throughout the month of January, the nonprofit will release videos educating the public about what questions to ask and what red flags to look out for in potentially unregulated tax preparers.
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Grace Allison, a staff attorney with New Mexico Legal Aid, said there is no regulation at the federal, state, or local level of tax preparers. For people wondering where to start, she said free tax preparation is a good option. “Free is not always bad,” Allison said.
Two options she suggested are Tax Help New Mexico and Tax Aide through AARP. “These organizations have trained volunteers so you really are getting a wonderful bargain. I rarely see mistakes on returns prepared by these organizations,” Allison said.
The IRS has a directory on its website of certified tax preparers. “You want to have your taxes prepared not by a friend, not by a family member, but either by a Certified Public Accountant or an enrolled agent,” Allison said. “That’s because CPAs are regulated by the CPA association in the state. That board, enrolled agents have to pass a test administered by the IRS and have a certain amount of training in order to prepare returns.”
Allison says that once a tax preparer has been found, people should always ask the tax preparer about the qualifications and experience, and the cost of their service. “The big chains, because they’re well-known, people have a lot of trust in them. It all depends on who prepares your return. Most of the people who prepare returns at the chains are not enrolled agents,” Allison said.
Red flags to watch out for
Preparers who won’t sign a tax return
“By federal law, preparers are required not only to sign a return but to put something known as a PTIN, a Preparer Tax Identification Number on that return,” Allison said.
Preparers who promised big returns
“Beware, they may be either inflating your income or inflating your deductions and credits. Those inflated amounts will come back to haunt you because the IRS will catch them, no doubt about it,” Allison said.
Preparers who promise payment in cash/direct money to their account
“Look on the return and see that the numbers of your account are your numbers, not the preparer’s number. In other words, you have to be alert, and it doesn’t hurt to take a look at the ’22 For 1040 income tax form and see what’s on there so that when you are asked to sign the return and you review it, you know what you’re reviewing. You’re reviewing wages, you’re reviewing any other income that you’ve received, you’re making sure that everything is correct,” Allison said.
Preparers who want to charge a percentage of your return/require you to purchase furniture, a car, or take out a loan to have taxes prepared
“The fee should be based on the amount of work that went into the return,” Allison said. “Get out of that situation immediately.”
What to do if you had your taxes prepared by someone unqualified
It can be reported to the IRS on form 140157, Tax Return Preparer Fraud or Misconduct Affidavit.
Reasons to file
“File, even if you can’t pay. Because if you don’t file and you do owe money, there is a penalty for failure to file. Don’t miss that, it can be as big as $435,” Allison said.
- Child tax credit
- Economic Impact payment
- Earned Income tax credit
- Working Families tax credit
- Over withholding
What to expect this tax season
According to Allison, as of Dec. 18, 2021, there were 6.3 million returns from previous years that had not yet been processed. “It’s anyone’s guess as to how long it’s going to take for you to get your refund from 2021,” Allison said.
Allison warns against getting a tax anticipation loan. “The interest rate on those loans can be as high as 100% and this tax season in particular, with all the delays in the IRS, that interest may be accumulating for much longer than you think because you may not be getting your refund right away,” Allison said.