By Dave Lieber
watchdog@star-telegram.com
Tax season is here. Blah. That means refunds (maybe), checks to the IRS (more likely), frustration and, for some unlucky taxpayers, high prices paid for poorly done tax work.
Last year, The Watchdog told the story of an Arlington man who saw a sign advertising a $69 tax special. He ended up getting charged $469. When I tried to find the storefront business he used, the place was shut down.
And there was the Dallas single mom who saw an ad offering $38 tax returns. She ended up paying $289, yet her adjusted gross income was only $1,031.
Here's good news for taxpayers worried about such shenanigans. New rules have gone into effect for Texas' 87,000 tax preparers. Most preparers who are paid by customers must now have a nine-digit Preparer Tax Identification Number. That is designed to help eventually bring integrity and oversight to the industry.
The numbers will be used by the Internal Revenue Service, which is requiring tax preparers to pass a background check and a competency test by the end of 2013. Some community colleges and businesses are offering 15-hour continuing education courses to help preparers pass the tests. Those who go through the program and pass the test will get a new designation that will help consumers choose wisely: registered tax return preparer.
Some have earned the certificate, and they're the best bet to hire right now.
To keep that certificate, the preparer must take 15 hours of continuing education a year.
Eventually, consumers will have access to a searchable database of preparers who have registered, taken classes and passed competency exams.
But this doesn't apply to volunteers who do taxes for free, such as people at organizations like AARP, Catholic Charities and some senior centers and churches. But that's OK. It's unlikely that these groups allow tax preparation rip-off artists to volunteer for them.
These new requirements also don't apply to attorneys, certified public accountants and enrolled agents who are active and in good standing with their licensing agency, the IRS says. And employees who work for companies owned and operated by these professionals also do not have to fulfill these requirements because the IRS assumes that their work is supervised.
In North Texas, Richland College is one of the first to offer the tax preparation classes. The college offers an online version for $500. I did an Internet search for "IRS tax preparation classes" and found other groups offering classes, too. Prices vary.
The motivation behind this new federal effort is to clean up the industry and protect good tax preparers from bad ones -- and to protect consumers who could find themselves in bad situations.
IRS Commissioner Doug Shulman has said, "The few bad apples cause great harm to taxpayers and the industry."
One bad apple is Iris Yolanda Smith, who was sentenced 10 days ago in U.S. District Court in Fort Worth to four years in prison and ordered to pay $103,000 in restitution. She pleaded guilty to one count of making false claims.
Smith owned All Money Tax Services on Loop 820 South in Fort Worth, and before that she prepared returns at Towne Center Mall under the name Yolanda's Tax Service, prosecutors said.
In 2007, she filed a fraudulent tax return for a customer. Her customer received an improper $7,000 refund.
So if you are trying to hire someone to do your taxes, especially if you are entering a storefront tax prep business because of an advertised special, the questions to ask are: "What's your Preparer Tax ID number? Did you take the class yet? Let me see your certificate."
If the answers are negative, that's a warning sign that the person is not up to date on the new law. Sure, he or she has until next year, but why take a chance?
Don't forget that if the IRS detects a fraudulent or mistaken tax return, the preparer is rarely blamed. The taxpayer pays the extra taxes, interest and penalties.
Coming Sunday: Homeowners are getting letters offering waterline and sewer line warranties. Are they legitimate?
The Watchdog column appears Fridays and Sundays.Dave Lieber, 817-390-7043Twitter: @davelieber
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