The IRS recently highlighted that taxpayers should choose tax professionals wisely; I agree. I’ve had this as a Bozo Tax Tip in the past, but a new client highlighted this issue for me. In the previous iteration of this “tip,” I noted:
Here’s another Bozo Tax Tip that keeps coming around. The problem is, the Bozos don’t change their stripes. In any case, here are some signs your accountant might be a Bozo:
– He’s never met a deduction that doesn’t fit everyone. There’s no reason why a renter can’t take a mortgage interest deduction, right? And everyone’s entitled to $20,000 of employee business expenses…even if their salary is just $40,000 a year. Ask the proprietors of Western Tax Service about that.
– He believes that the income tax is voluntary. After all, we live in a democracy, so we don’t have to pay taxes, right?
– Besides preparing tax returns, he sells courses on why the Income Tax is Unconstitutional or how by filing the magical $2,295 papers he sells you will be able to avoid the income tax.
– He wants you to sign over that tax refund to him. After all, he’ll make sure you get your share of it after he takes out his 50% of the refund.
– He believes every return needs at least three dependents, no matter whether you have any children or not.
If your tax professional exhibits any of these behaviors, it’s time to get a new tax professional.
Well, it’s apparent there are some new strategies in this area (well, at least new to me). Julie (not her name) came to me this year because something struck her wrong about her former tax professional. She was in the waiting room and overheard the following:
“Yes, we guarantee that every client will get a refund of at least $2,000.”
Bluntly, that’s impossible. Our job as tax professionals is to make sure your return is complete and accurate, and that your tax is the least that’s legally possible. For most, a refund means your withholding and/or estimated payments exceeded your tax. (Various tax credits–the Earned Income Credit and certain energy efficiency credits among them–can also cause tax refunds.) A refund might not be a great thing; most of the time, it means you’ve given an interest-free loan to the government. But Julie’s former tax professional wasn’t done.
“My clients never get audited–it’s a near guarantee.”
Julie knew that was wrong because her parents were randomly selected for an IRS research examination (audit). The IRS conducts 5,000 to 10,000 of these each year; everyone has a chance of being selected. (Over my 25-year career as a tax professional, I’ve had four clients selected for these kinds of audits.) The IRS also conducts research audits into various professions; for example, they recently looked at employees in Las Vegas who worked at the clubs located in the major casinos. (And given that tax professional’s guarantees, I suspect many of his clients will be audited in the future not on a random basis.)
Julie had enough and left–but there was one other thing she didn’t know (until I showed her this on her return from last year): She had used a “ghost” tax professional. At the bottom of page two of Form 1040 is a place for a tax professional’s information (his or her firm name, address, phone number, Employer Identification Number (EIN), and the tax professional’s PTIN–the Preparer Tax Identification Number); on her return, that information was blank.
Don’t be a bozo. If you use a tax professional, use an ethical preparer. You may pay more and get a lesser refund, but you will rest a lot easier.
That’s it for the Bozo Tax Tips for the 2024 Tax Season. We’ll be back with normal posting soon.
Tags: BozoTaxPreparer, BozoTaxTips