Each tax season, millions of Americans rely upon tax professionals to prepare and file tax-related documents. While many tax preparers are employed by reputable and well-known companies, many others are independent and self-employed and, therefore, subject to little to no oversight.
The clients of one such independent tax preparer recently learned that the 49-year-old man pleaded guilty to IRS criminal charges related to preparing and filing false tax returns. The man, Sharif Mahfouz, targeted U.S. clients who were living abroad. IRS investigators determined that from 2007 through 2012, Mahfouz routinely prepared false tax returns on behalf of clients.
Unbeknownst to his clients, Mahfouz routinely inflated foreign income totals and took advantage of additional foreign tax credits for his own personal profit. The tax preparer even admitted to preparing valid tax documents which he would show to clients in order to obtain their authorization, after which he would then file the fraudulent tax documents.
Monies obtained through fraudulent returns were then transferred into what appeared to be a legitimate Exporters Foreign Currency Account from which Mahfouz transferred the funds into his personal account. In total, the IRS contends Mahfouz's illegal actions netted profits in excess of $1.1 million.
In response to the tax fraud charges, Mahfouz has admitted his actions and now faces hefty fines and penalties along with a prison sentence of up to three years. In this case, it isn't clear whether or not the IRS is taking legal action against any of Mahfouz's clients. However, individuals would be wise to note that, regardless of who prepares one's taxes, an individual taxpayer is responsible for ensuring all tax documents are accurate prior to their signing and submission to the IRS.
Source: Accounting Today, "Tax Preparer Admits Preparing False Tax Returns for Expat Clients," Michael Cohn, Sep. 4, 2014
