(Editor’s note: This story has been updated to correct the comptroller’s name.)
Though many are taking a breath after tax season, Maryland officials advise to look out for red flags if you worked with an accountant or tax preparer.
Maryland State Comptroller Brooke Lierman told WTOP’s Mike Murillo that her department is on the lookout for tax preparers who file fraudulent returns, often targeting those who are more vulnerable.
“We see that there are tax preparers who are taking advantage of people with lower incomes, sometimes people who … English is not their first language, and overcharging them or submitting filings that are fraudulent,” she said.
“We do not regulate the tax preparers in the state of Maryland, but we are able to flag those [fraudulent] preparers for taxpayers to know … And then we’re able to block access to electronic filing for those preparers as well,” she said.
For example, Lierman said, when clients agree to pay for their filing using their expected refund, fraudulent preparers will sometimes manipulate their tax return so the person is owed a higher refund. Then, the tax preparer will take a cut of that exaggerated refund, unbeknown to their client.
While Maryland is trying to identify culprits and warn people about this unethical and illegal practice, Lierman says there are a few “red flags” taxpayers should be on the lookout for. In some cases, it’s literally a matter of watching the numbers.
“So, some of the signs are the same numbers being used on multiple filings. Lots of zeros and fives, rather than exact numbers,” she said. “When we see those kinds of patterns, that pulls up a red flag.”
At times, she said fraudulent preparers will place fake high dollar donations to charity into a client’s tax return, resulting in a reduced tax or a higher refund. The preparer will then pocket the difference for themselves.
Here’s a list of warning signs from the Maryland Comptroller’s Office:
- The person doesn’t have a Preparer Tax Identification Number, or PTIN. All paid preparers are required to register with the IRS and get a PTIN, which should be included on your tax return.
- To check that your preparer is legitimate, go to the IRS to search the “Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.”
- A list of licensed Maryland tax preparers can be found here.
- You are asked to sign a blank or partially filled-out tax return, or it is filled out in pencil. Do not sign it, as you are liable for the final tax return that is submitted, even if the information is changed after you have signed.
- Verify that all of the information included on the form is correct before signing. This includes deductions, dependents, income, Social Security number, name, address, etc.
- You aren’t asked to provide a W-2 or other proof of your earnings, deductions or credits. And certainly, you shouldn’t agree to any false documentation, no matter how desperate you are for a refund.
- Your preparation fee is based on a percentage of your refund. This can lead to a preparer inflating deductions or credits.
- A preparer asks you to pay them any taxes or penalties owed. You should always (only) make payments directly to the IRS or Comptroller of Maryland (Agency).
Lierman says it’s a good idea to check up on the people preparing your taxes and make sure they are who they say they are.
“Are they CPAs? If they’re not CPAs, are they certified tax preparers? Do they have that certification from the Department of Labor?”
She also said if a preparer is “asking for an undue amount of money,” or isn’t working with the W-2s or 1099-S the person is submitting, those are also huge red flags.
Lierman said tax preparers have the chance to contest and exonerate their work if they feel they have been wrongly flagged by her office. But, if they can’t, their case may go to the Maryland’s Department of Labor to determine if they should have their certification revoked.
In cases of outright fraud, or other illegal activity, she says it goes to the state’s attorney general to consider criminal charges.
“We want tax preparers out there who are taking advantage of their clients to know that we’re looking for them,” Lierman said. “And we’re not going to stand for that bad behavior, because it’s not right to take advantage of people in that way.”
For more information about tax preparer fraud and ways to identify it, visit the Maryland Comptroller’s website.
WTOP’s Mike Murillo contributed to this story.
