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February 14, 2007 |
Avoid Identity Theft: Choosing a Tax Preparer, 'Instant Refunds'
February 14, 2007
Consumer Protection Tips from Attorney General Rob McKenna
Tax-Time Tips:
Consumer: I’m thinking about filing my taxes online, but worry about identity theft. What tips can you recommend to help protect my personal information from landing in the wrong hands?
Attorney General Rob McKenna: Filing your taxes electronically is convenient and can help you get your refund more quickly than sending your paperwork by mail. But whether you prepare your taxes yourself or hire a professional, you should take precautions to make sure your personal information is not compromised. Here are some tips to help you avoid identity theft, as well as advice on choosing a reputable tax preparer and important information about so-called “instant refunds.”
Technology is creating choices for taxpayers. Electronic filing is growing in popularity. More than 73 million tax returns were electronically filed last year. Of those, 20 million were filed from home computers. The IRS predicts 136 million e-filers in 2007.
At the same time, cons are trying to take advantage of this trend, hatching ploys to trick recipients into disclosing personal and financial information. Each year, the Internal Revenue Service warns workers about various forms of fraud including phony e-mails which claim to come from the IRS.
Be picky about who you share personal information with, such as your Social Security number, income, assets and bank account number. Never respond to e-mails asking you to provide tax-return information or click on links contained in such emails. And hang up on unsolicited phone calls from anyone claiming to be with the IRS, your bank, or an accounting firm who asks for personal information.
· Preparing and filing your taxes online: Many consumers choose to prepare and file their taxes themselves using software. You can prepare your return offline or online. Either way, choose a company you are familiar with. The IRS doesn’t offer software or direct filing, but it provides a list of approved companies at www.irs.gov/efile.
Go directly to the company’s Web site. Conducting random searches for software providers can be dangerous, since cons frequently set up copycat Web sites to fool you info providing personal information.
When preparing or filing your return online, be sure that the Web site is encrypted to protect your personal information when it’s transmitted. The address should begin with “https:” instead of “http:” and a yellow “lock” icon should be visible on the bottom-right in the scroll bar.
If your adjusted gross income is $52,000 or less, you can file for free. Check the IRS’ site for a list of companies offering free filing and preparation services. Washington WorkSource offers a link to I-CAN! on its Web site at https://www.go2worksource.com; the software is available in English and Spanish and can also be accessed at www.icanefile.org.
· Mailing your tax return. If you decide to file your return by mail, send it from a locked mailbox or take it to the post office. Don’t leave outgoing mail in an unsecured mail box, where it can be stolen. Be sure to check your mailbox every day for W-2 forms and other documents that arrive by mail during the tax season; these also contain sensitive information coveted by identity thieves.
· Hiring a reputable tax preparer. The more complex your tax situation, the more you may want the advice of someone with specialized experience. If you choose to hire a professional to prepare your taxes, do some research to ensure the person is reputable and able to meet your needs.
Ask your friends and coworkers to recommend a preparer they know and trust and choose someone local, so that you can easily find the person later. Ask questions related to the person’s credentials and experience.
Choose a preparer who will assist you if the IRS audits your return. Only attorneys, Certified Public Accountants and IRS enrolled agents can represent taxpayers before the IRS in all matters including audits, collection and appeals. Also, know how the preparer checks returns for accuracy.
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.
Investigate whether the preparer has any questionable history. Search the Washington State Board of Accountancy’s Web site at http://www.cpaboard.wa.gov/consumer to determine whether a CPA is licensed and call to inquire if a CPA has a history of violations. You can check out attorneys through the Washington Bar Association and enrolled agents through the IRS Office of Professional Responsibility (OPR). The Better Business Bureau is also a good resource for determining whether a tax preparer has a history of complaints.
Inquire about who will prepare your return. Avoid firms where your work may be delegated down to someone with less training or an unknown worker.
Ask about costs. Be skeptical of preparers who claim they can obtain larger refunds than other preparers, or who guarantee results or base fees on a percentage of the amount of the refund.
Once you’ve hired a preparer, be sure to review the return carefully before you sign it in ink; never sign a blank or partially completed form. The preparer must also sign the return and include an identifying number. Retain copies of all documents.
· Free tax assistance. Seniors and taxpayers who qualify for the Earned Income Tax Credit can receive free help filing their taxes at Volunteer Income Tax Assistance sites. IRS-trained volunteers will help complete and electronically file returns at no cost, for a rapid refund. Services are available in a variety of languages.
Working families with low and moderate incomes in King County can contact United Way of King County at www.uwkc.org/eitc or 1-800-621-4636 for site locations. For locations outside King County, call the IRS at 1-800-TAX-1040 or visit the National Community Tax Coalition’s Web site at www.tax-coalition.org.
Seniors can turn to help from AARP Tax-Aide sites, which help low- to middle-income taxpayers with special attention to those 60 and older. Find locations at www.aarp.org/taxaide or call 1-888-AARP-NOW.
· Instant refunds can be costly. Some tax preparers try to tempt workers with the promise of instant cash in lieu of waiting for payment from the Internal Revenue Service. These instant refunds are actually loans. You are, in fact, paying fees to borrow against your own tax refund money. The loans have to be paid back whether or not you receive the expected refund; failure to do so could result in debt collection or a bad mark on your credit report.
Taxpayers who receive these loans are charged fees that seem small but, in fact, equate to very high interest rates.
If you file your tax return electronically and request the IRS deposit your refund directly into your bank account, you will receive your refund in about 10 days.
***
Attorney General Rob McKenna offers this public service to help consumers avoid fraud and to promote a fair and informed marketplace. If you have a consumer complaint or inquiry, contact the Consumer Protection Division at www.atg.wa.gov or 800-551-4636. To suggest a future topic for this column, send an e-mail to asktheag@atg.wa.gov or write to “Ask the AG”, Attorney General’s Office, 800 5th Ave. Suite 2000, Seattle, WA 98104-3188. Previous columns are online at www.atg.wa.gov/AskAG.
Tax-Time Tips:
Consumer: I’m thinking about filing my taxes online, but worry about identity theft. What tips can you recommend to help protect my personal information from landing in the wrong hands?
Attorney General Rob McKenna: Filing your taxes electronically is convenient and can help you get your refund more quickly than sending your paperwork by mail. But whether you prepare your taxes yourself or hire a professional, you should take precautions to make sure your personal information is not compromised. Here are some tips to help you avoid identity theft, as well as advice on choosing a reputable tax preparer and important information about so-called “instant refunds.”
Technology is creating choices for taxpayers. Electronic filing is growing in popularity. More than 73 million tax returns were electronically filed last year. Of those, 20 million were filed from home computers. The IRS predicts 136 million e-filers in 2007.
At the same time, cons are trying to take advantage of this trend, hatching ploys to trick recipients into disclosing personal and financial information. Each year, the Internal Revenue Service warns workers about various forms of fraud including phony e-mails which claim to come from the IRS.
Be picky about who you share personal information with, such as your Social Security number, income, assets and bank account number. Never respond to e-mails asking you to provide tax-return information or click on links contained in such emails. And hang up on unsolicited phone calls from anyone claiming to be with the IRS, your bank, or an accounting firm who asks for personal information.
· Preparing and filing your taxes online: Many consumers choose to prepare and file their taxes themselves using software. You can prepare your return offline or online. Either way, choose a company you are familiar with. The IRS doesn’t offer software or direct filing, but it provides a list of approved companies at www.irs.gov/efile.
Go directly to the company’s Web site. Conducting random searches for software providers can be dangerous, since cons frequently set up copycat Web sites to fool you info providing personal information.
When preparing or filing your return online, be sure that the Web site is encrypted to protect your personal information when it’s transmitted. The address should begin with “https:” instead of “http:” and a yellow “lock” icon should be visible on the bottom-right in the scroll bar.
If your adjusted gross income is $52,000 or less, you can file for free. Check the IRS’ site for a list of companies offering free filing and preparation services. Washington WorkSource offers a link to I-CAN! on its Web site at https://www.go2worksource.com; the software is available in English and Spanish and can also be accessed at www.icanefile.org.
· Mailing your tax return. If you decide to file your return by mail, send it from a locked mailbox or take it to the post office. Don’t leave outgoing mail in an unsecured mail box, where it can be stolen. Be sure to check your mailbox every day for W-2 forms and other documents that arrive by mail during the tax season; these also contain sensitive information coveted by identity thieves.
· Hiring a reputable tax preparer. The more complex your tax situation, the more you may want the advice of someone with specialized experience. If you choose to hire a professional to prepare your taxes, do some research to ensure the person is reputable and able to meet your needs.
Ask your friends and coworkers to recommend a preparer they know and trust and choose someone local, so that you can easily find the person later. Ask questions related to the person’s credentials and experience.
Choose a preparer who will assist you if the IRS audits your return. Only attorneys, Certified Public Accountants and IRS enrolled agents can represent taxpayers before the IRS in all matters including audits, collection and appeals. Also, know how the preparer checks returns for accuracy.
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.
Investigate whether the preparer has any questionable history. Search the Washington State Board of Accountancy’s Web site at http://www.cpaboard.wa.gov/consumer to determine whether a CPA is licensed and call to inquire if a CPA has a history of violations. You can check out attorneys through the Washington Bar Association and enrolled agents through the IRS Office of Professional Responsibility (OPR). The Better Business Bureau is also a good resource for determining whether a tax preparer has a history of complaints.
Inquire about who will prepare your return. Avoid firms where your work may be delegated down to someone with less training or an unknown worker.
Ask about costs. Be skeptical of preparers who claim they can obtain larger refunds than other preparers, or who guarantee results or base fees on a percentage of the amount of the refund.
Once you’ve hired a preparer, be sure to review the return carefully before you sign it in ink; never sign a blank or partially completed form. The preparer must also sign the return and include an identifying number. Retain copies of all documents.
· Free tax assistance. Seniors and taxpayers who qualify for the Earned Income Tax Credit can receive free help filing their taxes at Volunteer Income Tax Assistance sites. IRS-trained volunteers will help complete and electronically file returns at no cost, for a rapid refund. Services are available in a variety of languages.
Working families with low and moderate incomes in King County can contact United Way of King County at www.uwkc.org/eitc or 1-800-621-4636 for site locations. For locations outside King County, call the IRS at 1-800-TAX-1040 or visit the National Community Tax Coalition’s Web site at www.tax-coalition.org.
Seniors can turn to help from AARP Tax-Aide sites, which help low- to middle-income taxpayers with special attention to those 60 and older. Find locations at www.aarp.org/taxaide or call 1-888-AARP-NOW.
· Instant refunds can be costly. Some tax preparers try to tempt workers with the promise of instant cash in lieu of waiting for payment from the Internal Revenue Service. These instant refunds are actually loans. You are, in fact, paying fees to borrow against your own tax refund money. The loans have to be paid back whether or not you receive the expected refund; failure to do so could result in debt collection or a bad mark on your credit report.
Taxpayers who receive these loans are charged fees that seem small but, in fact, equate to very high interest rates.
If you file your tax return electronically and request the IRS deposit your refund directly into your bank account, you will receive your refund in about 10 days.
***
Attorney General Rob McKenna offers this public service to help consumers avoid fraud and to promote a fair and informed marketplace. If you have a consumer complaint or inquiry, contact the Consumer Protection Division at www.atg.wa.gov or 800-551-4636. To suggest a future topic for this column, send an e-mail to asktheag@atg.wa.gov or write to “Ask the AG”, Attorney General’s Office, 800 5th Ave. Suite 2000, Seattle, WA 98104-3188. Previous columns are online at www.atg.wa.gov/AskAG.