How can I make sure I'm getting good tax advice and not being "taken in" by an unscrupulous tax preparer?

Since the tax code is so complex, small-business owners and self-employed individuals typically seek professional advice to make sure that their tax filings are correct and that proper deductions have not been left unclaimed. While it can be very tempting to hire tax preparers who claim to know "secrets" for minimizing your tax burden, it is important to remember that the IRS ultimately holds the taxpayer—not the preparer—responsible for a proper tax filing. That responsibility can mean penalties, interest, and potentially prosecution.

There is no licensing that is required to be a tax preparer; that fact, combined with the overwhelming complexity of the tax code, has led to the existence of some unsavory individuals looking to exploit the situation to their advantage. Often, these individuals will claim some special, insider knowledge of the tax code that is overlooked by others in order to win your business. Some will even propose to work for “contingency fees” where they get paid based upon the size of your refund, creating an obvious conflict.

Since there are many fine tax preparers who are not licensed or otherwise certified, the warning signs that you should look for are somewhat subjective, but here are a few you should consider:

• The preparer suggest deductions, credits, or other allowances that other tax professionals do not seem to know about. Ask for a second opinion. The tax code is not a secret; the preparer should be able to cite the provision of the tax code or IRS regulation that allows those deductions so that its validity can be checked by others.
• They either guarantee a refund or guarantee a bigger refund than the competition. Since the tax laws are fixed, such a guarantee should be very hard to make. Be very skeptical.
• You are asked to sign a blank return. Never do this. The preparer could then either make false claims on the return, or even divert your potential refund into his or her own pocket.
• The preparer either doesn't sign your return or doesn’t provide accurate contact information. A qualified preparer should never have a problem doing either of these things.
• Their fee is based on the size of your refund. Such a scenario clearly creates incentives to misrepresent your return. While they may say it creates an incentive to "work hard on finding every last deduction on your behalf," most ethical and qualified preparers will not work on that basis, so be extremely cautious about one who does.
• They encourage or even ask you to include information you know not to be true. While this may seem obvious, it happens all the time. Avoid these individuals.

Essentially, staying skeptical and remembering the old adage—if it sounds too good to be true, it probably is—will help make sure you are on the proper tax footing.

Disclaimer: The National Small Business Association is in no way providing tax advice. The organization only is providing information. Before filing your tax return or proceeding with any official action, please consult a tax professional.