Despite yearly warnings from the Internal Revenue Service, only half (52%) of all Americans are taking steps to
protect themselves from fraudulent tax preparers.
That's the finding of a new survey from lawyers.com, the free online attorney directory for individuals and small businesses, from LexisNexis Martindale-Hubbell.
"This time of year, unscrupulous tax preparers rip off Americans by promising phony tax programs that they claim get big returns, or relieve Americans of their obligation to pay taxes altogether," observed attorney Alan Kopit, lawyers.com's legal editor.
"The IRS has reported that common tax scams include phony tax preparers' promises of special slavery reparations for African Americans, refunds for Social Security taxes paid during one's lifetime, or illegal offshore transactions to hide or underreport earnings. Some fraudulent tax preparers are simply identity thieves, looking for people's personally-identifying information so they can run up bills in other people's names," he continued.
"This survey shows that many Americans need to do a better job checking their tax preparers' track records and professional backgrounds, to avoid becoming victims."
Americans Avoid Doing Tax "Homework"
The survey, conducted for lawyers.com by market researchers Harris Interactive, found that although 42% of Americans rely on recommendations from friends and family to find a tax preparer, just 16% check their tax preparer's standing with the Attorney General's office or Better Business Bureau (BBB), and only 17% say they would check suspicious-sounding tax promises with the IRS. Fewer than one in three (28%) have asked for or will ask for and check their tax preparer's references.
"Checking with the BBB or your state's Attorney General's office is a quick and no-cost way to find out if a tax preparer has had complaints registered against him or her," said Kopit. "And the IRS is happy to go over any tax questions you have before you submit your return. Once you put your signature on that return you are legally responsible for everything in it, so it's up to individuals to do their homework. Working with a reputable tax attorney can be an important way to make sure your tax return is completely legal."
Taxes Continue To Give Americans Jitters
Paying taxes is an aggravation for the majority of Americans. Seventy-one percent say taxes cause them at least some stress, and 15% say they create extreme or a lot of stress. "Taxes cause many Americans sleepless nights, but with the right preparation there's no need for the process to be so difficult," observed Kopit.
Saving enough money thoughout the year can ease the financial burdens that can come on April 15th. The survey revealed that just 35% of Americans pay their taxes with money they have saved or invested. More than one in ten (11%)
try to work out an installment plan with the IRS.
"While working out an IRS installment plan is a viable option if you find yourself unable to afford your tax bill, year-round planning allows individuals to have the money they need for their taxes readily available," observed Kopit.
In addition, 41% of all Americans say they will get or have received a tax refund this year. Among those 35 to 44, that number is 54%. "The high tax refund rates underscore that Americans are not planning for taxes as well as they should be," continued Kopit. "Many Americans think a refund is a 'bonus' from the government. In fact, all it means is you have
given an interest-free loan to Uncle Sam, and he's just repaying you your own money. A much wiser approach is to make appropriate deductions throughout the year, by putting your tax money into savings or investing it, and then paying
your tax bill come April 15th."
Other survey findings include:
- Older Americans may be particularly vulnerable to tax fraud. Just 46% of those over age 65 say they take steps to protect themselves against fraudulent tax preparers, while 63% of their eighteen to twenty-four-year-old counterparts do.
- Older Americans do a better job preparing for tax payments. More than half of Americans age 55 to 64 (51%) have money saved or invested to pay their taxes, while just 27% of those 35 to 44 do. 13% of those between 35 and 54 say they will try to work out an installment payment with the IRS this year, while only 6% of their counterparts over 65 will do the same.
Background and Methodology:
Harris Interactive conducted an omnibus study for lawyers.com. A telephone survey was conducted among a nationally representative sample of 1,006 adults comprising 502 men and 504 women 18 years of age and older, living in private households in the continental United States.
Interviewing for this omnibus survey was completed during the period February 12-15, 2004.