Episode•January 11, 2024•21 min

Tax Prep Red Flags: Don't Get Audited! | Ep. 293

Are you ready to pick the perfect tax professional and avoid the pitfalls of problematic preparers? Tune in to this enlightening episode of Money Talk With Tiff as Tiffany Grant welcomes back the knowledgeable Camari Ellis for a deep dive into the red flags of tax preparation. Camari, an Enrolled Agent, shares invaluable insights on distinguishing between various tax preparers, such as CPAs, EAs, attorneys, and the unenrolled. He emphasizes the significance of never surrendering your original tax documents and the importance of ensuring your tax preparer includes their PTIN on your return to avoid becoming ensnared in their potential audits. Discover why bigger refunds aren't always better and how choosing a tax preparer who can't answer your questions can lead to trouble. Camari and Tiffany discuss why an informed client is the best client and how to foster a proactive relationship with your tax professional for strategic planning all year round. Don't let the allure of a large refund or the convenience of a back-of-the-gas-station tax service lead you astray. Listen to this episode and arm yourself with the knowledge to select a tax preparer who is above board, knowledgeable, and invested in your financial well-being. Share this episode to spread the word and help others stay on the right side of the IRS! About Our Guest Camari Ellis is a Tax Advisor, with over 30 years of experience in the Financial Services & Tax Industry. He is a Black Wealth Advocate. He graduated from Temple University, majoring in Finance, and loves everything related to business, the stock market, and social media. Connect with Camari Email: [email protected] Book a meeting: https://bookme.name/CamariEllis/consultation Twitter (X): @thefinancerebel Instagram: @thefinancerebel YouTube: https://www.youtube.com/@TheFinanceRebel Connect with Tiffany Website: https://moneytalkwitht.com Facebook: Money Talk With Tiff Twitter: @moneytalkwitht Instagram: @moneytalkwitht LinkedIn: Tiffany Grant YouTube: Money Talk With Tiff Channel Pinterest: Money Talk With Tiff Additional Links & Resources Internal Revenue Service | An official website of the United States government Support this Podcast Copyright 2023 Money Talk With Tiff This podcast uses the following third-party services for analysis: Podcorn - https://podcorn.com/privacy OP3 - https://op3.dev/privacy

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Key Takeaways

1
Never surrender original tax documents to your preparer
Always provide copies or upload scans to a secure portal
If the preparer goes out of business or passes away, retrieving originals can be extremely difficult
Create an IRS online account to access transcripts as a backup
2
Ensure your tax preparer includes their PTIN on your return
PTIN stands for Preparer Tax Identification Number
Ghost preparers may file under your name only, leaving you solely responsible
A legitimate preparer with a PTIN is held to higher professional standards and can be held accountable
3
Bigger refunds aren't always better and can signal trouble
Preparers promising unusually large refunds may be making improper deductions
If the preparer is audited, their clients often face audits too
Interest and penalties from fraudulent returns can exceed any initial refund gained
4
Choose a preparer who can answer your questions and explain deductions
Avoid "tax data entry" people who simply key in numbers without understanding tax law
A good preparer guides you on legitimate deductions (e.g., portion of cell phone use)
Informed clients who ask questions and keep good records become the best clients
5
Work year-round with your tax professional for proactive planning
Don't wait until tax season to strategize
Maintain accurate books throughout the year
An informed client who communicates regularly avoids last-minute problems

Intro

Tiffany Grant welcomes back Enrolled Agent Camari Ellis to discuss red flags when choosing a tax preparer and how to avoid IRS trouble.
Camari Ellis is a Tax Advisor and Enrolled Agent with over 30 years in financial services and tax. He is a Black Wealth Advocate and Temple University Finance graduate.

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– Types of Tax Preparers Explained

Camari breaks down the main designations: CPAs (gold standard via state boards), Enrolled Agents (licensed by the IRS to represent taxpayers), attorneys who prepare taxes, and unenrolled preparers (regular individuals without IRS representation rights).

Only EAs, CPAs, and attorneys can represent clients before the IRS for negotiations and problem resolution.

– Red Flag #1: Promises of Big Refunds

Commercials and back-of-the-gas-station preparers often lure clients with promises of large refunds. Camari warns this can indicate illegal or improper filing practices.

Come get your big refund and you see a guy jumping out of an airplane with a parachute.

– Red Flag #2: Demanding Original Documents

Never hand over original tax documents. If the preparer closes shop or passes away, retrieval becomes nearly impossible. Always provide copies or upload scans.

Create an IRS online account for access to transcripts as a backup record source.

– Red Flag #3: No PTIN or Ghost Preparers

Ensure your preparer has and uses a PTIN (Preparer Tax Identification Number) on your return. Ghost preparers file under your name only, leaving you fully responsible.

There is no statute of limitations on fraudulently prepared tax returns.

– Red Flag #4: Preparer Gets Audited — Clients Follow

When a preparer is flagged for patterns of improper refunds, the IRS often audits their clients too. Interest and penalties can wipe out any short-term gains.

You're not that slick and the IRS is not that dumb.

– Red Flag #5: Can't Answer Questions About Your Return

A competent preparer should explain deductions and answer questions. Avoid those who simply "put in the numbers" without understanding tax code.

Example: You can deduct a portion of cell phone use for business, but not 100% if used personally too.

– Be an Informed, Proactive Client

Camari's best clients stay engaged year-round, maintain good records, and plan strategically instead of reacting at tax time.

My best clients are informed clients because they're proactive.

Resources

Topics

Tax PreparationIRS AuditsEnrolled AgentsTax Red FlagsPTIN RequirementsTax Fraud PreventionChoosing a Tax ProfessionalTax DeductionsFinancial Education Black Wealth