Tax Fraud and Tax Preparers: ‘Tis (Almost) the Season

As tax season rolls around, the Internal Revenue Service (IRS) is again warning about the problem of tax preparer fraud.

Whether a business or individual, many people use a tax preparer to handle their taxes. While oftentimes a trusted accountant or other individual, many people simply assume the tax preparer working on their taxes is on the up-and-up.

The Taxpayer Advocate Service (TAS) advises you to steer clear of these red flags when choosing or working with a tax preparer:

• You are asked to sign a blank or incomplete tax return with the guarantee that the tax preparer will file it for you.
• The tax preparer operates by collecting your refund from the IRS and then transferring it from their bank account to yours.
• You are asked to pay cash without receiving a receipt, or you are charged based on the size of your refund.
• Ask for the qualifications and experience of anyone you are considering using for your taxes. Be aware that anyone can prepare taxes—no special credential or education is required. The only requirement to prepare taxes is an IRS Preparer Tax Identification number (PTIN), which can be obtained online from the IRS for $19.75 in about 15 minutes.
• Your tax preparer guarantees a refund larger than you normally receive.

Tax preparers who scam their clients are common. To increase the size of your refund (and their fee), they may create false deductions, fake tax credits, and underreport your actual income. When your refund is deposited in their account, they claim their “fee” before they provide your refund.

When the height of the tax season has passed, disreputable tax preparers often pack up and leave town. By the time you receive a notice from the IRS that there is something wrong with your tax return, they are nowhere to be found. Regardless, the tax preparer is responsible for the accuracy of the tax return. You will be financially liable for penalties, interest, and any tax fraud that may have occurred when you signed without reviewing your return first.

The IRS encourages taxpayers to file a complaint regarding their tax preparer if they experience the following:

• Your 1040 was filed without your consent or knowledge, or your status was incorrectly reported to influence the size of your refund.
• The preparer falsified the tax return by creating deductions, exemptions, or inaccurately reporting income.
• You failed to receive your refund.

Being scammed by a tax preparer can be expensive. Speak with trusted friends or associates who use a tax preparer that they trust, check references, and be cautious about using a tax preparer who approaches you on social media. Above all, make sure you review and understand your tax return before signing on the bottom line.

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Robert J. Fedor, Esq., LLC offers strategic legal guidance to clients throughout the U.S. and abroad on IRS audits, criminal tax investigations, payroll tax issues, and more. When you have questions about individual or business tax compliance, call 440-250-9709 or contact us online today. We have offices in Cleveland and Chicago.