IRS TARGETS ‘UNSCRUPULOUS’ TAX PREPARERS
Tax season is a stressful time for many small business owners and individuals alike. While most taxpayers rely on tax professionals to help them navigate the complexities of the U.S. tax code, not all tax preparers are created equal. In an effort to protect taxpayers and maintain the integrity of the tax system, the Internal Revenue Service (IRS) has announced plans to target 'unscrupulous' tax preparers, particularly in light of the ongoing crackdown on small business tax credit abuse. In this blog post, we'll explore the reasons behind the IRS's decision and what it means for both taxpayers and tax preparers.
The Small Business Tax Credit
Before delving into the IRS's latest move, it's essential to understand the small business tax credit. Small businesses are the backbone of the U.S. economy, and various tax incentives and credits have been designed to support their growth. One such credit is the employee retention credit , which aims to support businesses that maintained employees on their payroll while suffering lost revenue as a result of the pandemic. “This great program to help small businesses has been overtaken by aggressive promoters,” says Danny Werfel, IRS Commissioner.
An additional problem arises when some unscrupulous tax preparers exploit these various credits for personal gain. They may exaggerate business expenses, underreport income, or provide false information to claim these credits fraudulently. This not only costs the government billions in lost revenue but also negatively impacts honest taxpayers and small businesses.
For honest taxpayers and small business owners, the IRS's crackdown on unscrupulous tax preparers should be seen as a positive development. It means greater protection from fraud and a fairer playing field in the tax preparation industry. However, it's crucial for taxpayers to exercise due diligence when selecting a tax professional. Here are some tips:
Ask for References: Don't hesitate to ask for references or reviews from previous clients.
Avoid Promises of Large Refunds: Be cautious of preparers who promise unusually large refunds, as this is a red flag. A legitimate preparer will not make promises of anything without actually looking at your numbers. Promises prior to that indicates the preparer will have to falsely claim details that are untrue of your situation in an effort to secure the refund they promised.
Review Your Return: Always review your tax return before it's filed to ensure accuracy. If you see anything on the return that does not make sense or you don’t understand, do not file the return.
The IRS's decision to target 'unscrupulous' tax preparers is a significant step toward maintaining the integrity of the tax system and protecting taxpayers from fraudulent practices. Small business owners, in particular, should take note of these developments and exercise caution when selecting a tax preparer. By working together, the IRS and taxpayers can ensure that the tax code is applied fairly and that tax credits are used for their intended purpose – supporting small businesses and stimulating economic growth.