Robert J. Fedor, Esq., L.L.C.

Clients may be punished for tax preparer's tax crimes

As tax time approaches, many Ohioans will likely turn to a tax professional when preparing and filing tax-related documents. Small business owners are especially likely to reach out to a professional tax preparer for advice and assistance. Tax preparers are familiar with tax codes and are in the business to ensure clients are able to take advantage of appropriate tax deductions and retain wealth.

Individuals and business owners who rely upon a tax preparer likely trust that professional is knowledgeable and compliant with IRS rules and tax laws. In some cases, however, tax preparers have been found to have taken advantage of their position and relationship with unsuspecting clients.

A woman recently stood before a federal judge after being arrested on charges related to tax fraud. Working as a tax preparer for more than 20 years, the woman helped prepare and file tax documents for thousands of clients. According to IRS investigators, the woman apparently engaged in acts of tax fraud in order to ensure some 3,000 clients received tax credits to which they were not entitled.

The woman is accused of claiming higher education credits for more than 3,000 clients. Her actions resulted in these clients receiving more than $3 million dollars which the IRS is now attempting to recover. While the woman never directly benefitted from the tax credits, her business, IRS investigators contend, thrived as a result of her illegal activities.

The woman currently faces up to 5 years in prison as well as nearly $800,000 in fines. What's more, despite no knowledge of the illegal tax credits, the IRS plans to penalize and potentially go after those clients who benefitted from her actions.

This case serves as a cautionary tale for all individuals or small business owners who enlist the assistance of a professional tax preparer. Regardless of who prepares and files a tax return, the individual tax payer whose name is on the return is ultimately responsible.

Source: WMAQ-TV, "Tax Preparer Convicted of IRS Fraud," Phil Rogers, Jan. 9, 2014

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