Hired a Shady Tax Preparer? Here's What to Do

You're not stuck working with someone you really don't trust.

The purpose of hiring a tax preparer is to make the process of getting your taxes done more seamless and less stressful. But if you choose the wrong tax preparer, you may not have that experience.

Some tax preparers are extremely professional and are great at what they do, to the point where the fees they charge can more than make up for themselves in the form of higher tax refunds. But what if your tax preparer ends up coming off as dishonest and downright shady?

You should know that in that case, your best bet is to fire that person immediately and seek help from a more trustworthy tax professional. But you should also report that shady tax preparer to the IRS to help other filers avoid falling victim to their unscrupulous practices.

Signs your tax preparer isn't following the rules

There are different red flags that might arise that lead you to believe your tax preparer is a shady character best avoided. For one thing, if your tax preparer tries to claim bogus deductions on your tax return, that's a huge problem.

Maybe you spent $2,000 on electronics for personal use last year but also earned $2,000 via your side hustle of caring for animals. If your tax preparer tells you to lie and pretend that the $2,000 you spent on a TV and gaming system was for your side hustle, that's a big problem.

Even if you have the $2,000 credit card tab to back up that purchase, the IRS might ask questions. And in that situation, you're the one who's likely to end up in hot water.

Another red flag to keep in mind is if your tax preparer says they'll base their fee as a percentage of your total refund amount. In that situation, you can bank on your tax preparer trying to squeeze out a higher refund so they can get more money out of you.

Finally, if your tax preparer refuses to sign your tax return, that's a problem. As the IRS says on its website, "By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a valid Preparer Tax Identification Number, or PTIN. Paid preparers must sign and include their PTIN on the return." So if your tax preparer won't sign your return even though you're paying them to do your taxes, they're breaking the law.

How to report an unethical tax preparer

The IRS wants to know about tax preparers who break the rules. If your tax preparer falls into this category, you can file a report so the IRS can investigate the matter. If the IRS is able to shut that person's business down, you'll end up sparing other innocent people from the stress you experienced.

The good news is that most tax preparers are honest, trustworthy people who stand behind their work and provide excellent customer service. But in any given industry, there are generally a few bad eggs, and tax preparation is no exception. The best you can do if you come across a shady tax preparer is take steps to make sure that they're not able to continue doing what they do.