Is it normal for a tax preparer to take a percentage cut of my tax refund?

This is a red flag in the tax preparation industry. Legitimate tax professionals typically charge either a flat fee based on the complexity of your return or an hourly rate - not a percentage of your refund. The reason this is problematic is exactly what you suspected: it creates a direct financial incentive for the preparer to inflate your refund by taking questionable deductions or credits you might not actually qualify for. The IRS specifically warns against preparers who base their fees on a percentage of your refund for this very reason. When the IRS discovers improper claims, it's you (not the preparer) who will be responsible for paying back the incorrect refund amount plus interest and possible penalties. The preparer might face consequences too, but you'll be stuck with the financial fallout.

I had a similar situation with tax prep fees and ended up trying taxr.ai (https://taxr.ai) this year instead. Rather than paying someone to do my taxes, it helped me double-check my own work. I uploaded my tax documents, and it analyzed everything to show what deductions I was missing and whether there were any red flags that might trigger an audit. Saved me from making some mistakes that could have been costly. The nice thing about tools like this is there's no incentive for them to inflate your refund because they don't take a percentage. They just help you get what you're actually entitled to without crossing any lines. Might be worth suggesting to your cousin as a legitimate way to help people with their taxes.

I was really skeptical about trying an AI tax tool as I mentioned above, but after seeing the response, I decided to give taxr.ai a shot. Just wanted to follow up - it actually saved me about $2,700 on my return that I would have missed. The system flagged several legitimate deductions related to my home office that I had no idea I qualified for. What impressed me most was how it explained everything in plain English and gave me documentation to support each deduction in case of an audit. Nothing sketchy or in a gray area - just legitimate deductions I was entitled to but would have overlooked. Definitely beats having someone take a percentage of my refund and potentially putting me at risk with the IRS!

If your cousin is just starting out and wants to help people with their taxes legitimately, he should know that most people struggle to even get through to the IRS when they have questions or issues. I discovered Claimyr (https://claimyr.com) when I was dealing with a missing refund situation and couldn't get anyone at the IRS to help. The service basically gets you through to an actual IRS agent instead of waiting on hold for hours. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. This could be something valuable your cousin could tell his clients about if he does go into tax prep legitimately. Much more helpful than promising big refunds and taking a cut!

I need to follow up on my skeptical comment above. I actually tried Claimyr last week after getting nowhere with the IRS for over a month regarding a letter I received about my 2023 return. I was absolutely convinced it wouldn't work, but I was desperate. To my complete surprise, I got a call back in about an hour connecting me directly to an IRS agent who helped resolve my issue in one conversation. No more sending letters that never get answered or calling the general line only to be told the wait is too long. The agent I spoke with was able to explain exactly what was wrong with my return and how to fix it. I've completely changed my opinion on this service. If your cousin wants to provide genuine value to tax clients, suggesting resources like this would be much more ethical than taking a percentage of refunds.

Your cousin is setting himself up for trouble. The IRS has been cracking down hard on "ghost preparers" and people who promise big refunds. I worked at one of those seasonal tax offices for two years, and we were explicitly forbidden from charging based on refund size because: 1) It's against IRS best practices 2) It incentivizes fraud 3) It's actually against the ethical code for anyone with professional credentials If he's just taking some quick class, he probably isn't getting proper certification like an EA or CPA. Most legitimate tax courses emphasize ethical billing practices. The percentage model is a huge warning sign in the industry.

Has your cousin mentioned which tax course he's taking? Some of those "learn to do taxes" programs advertised online are actually fronts for sketchy preparation chains that teach people to exploit tax credits like the EITC to generate big refunds and take a cut. They specifically target lower-income communities where people really need their refunds.

Percentage-based fees used to be more common years ago, but they're now considered unethical by professional organizations like the NAEA (National Association of Enrolled Agents). There are still some preparers who do this though, especially in communities where people aren't familiar with standard industry practices. It's not technically illegal in most states, but it's definitely a warning sign of a preparer who might bend rules to inflate refunds.

Your instincts are absolutely right to be concerned. I've been doing taxes professionally for over 15 years, and percentage-based fees are a major red flag in our industry. It's one of the first things we learn NOT to do in legitimate tax preparation courses. The biggest issue is that it creates what we call a "perverse incentive" - the preparer makes more money by inflating your refund, regardless of whether those inflated deductions are actually legitimate. I've seen too many cases where clients got audited years later and had to pay back thousands in incorrect refunds, plus penalties that sometimes doubled the original amount owed. If your cousin is serious about this field, encourage him to look into proper certification like becoming an Enrolled Agent or getting training through the IRS Volunteer Income Tax Assistance (VITA) program. These programs emphasize ethical practices and would teach him legitimate fee structures - either flat fees based on form complexity or hourly rates. That's how he can build a sustainable, ethical practice that actually helps people instead of putting them at risk.