Tax preparer fraud is of perennial importance to the Internal Revenue Service (IRS). If you are an accountant or tax preparer who occasionally or usually stretches the legitimacy of tax returns that you prepare, there may be an IRS challenge in your future.
Return preparer fraud takes many forms. Sometimes, taxpayers collude with preparers and split the ill-gotten refund that result. Much of the time, return preparers operate without the knowledge of the taxpayer for whom they are working. According to the IRS, features of preparer fraud can include:
- Redirection of a refund into a bank account set up by the preparer, who may take a large fee from the refund if they have not already been paid by the taxpayer upfront.
- False tax returns often include fraudulent deductions, expenses, losses, and misstatements of income.
- Using stolen identity information, return preparers may create and file tax returns without the knowledge of the taxpayer and abscond with refunds.
To market their services, fraudulent return preparers may advertise that they can obtain large refunds for their clients. They often use pop-up businesses during tax season and usually do not sign the return as required of paid preparers. These operators are known as “ghost preparers.”
Because taxpayers trust preparers to function as an intermediary between the taxpayer and the IRS, taxpayers are often taken in, not bothering to ask about deductions or numbers on their return before they sign or authorize the preparer to file their return.
A recent example of this type of preparer is Erica Early, a Chicago-area tax preparer. Charging $1,000 to file even a basic tax return, Ms. Early claimed inappropriate tax credits for her clients, adjusting their income figures to ensure they qualified. Between 2014 and 2019, she also submitted her own fraudulent tax returns claiming credits for which she knew she was not qualified.
The result? Ms. Early caught the attention of the IRS. She recently pled guilty to preparing false income tax returns that resulted in a loss to the government of approximately $515,900. She faces approximately three years in prison and will be sentenced in October of 2023.
Preparing fraudulent tax returns may bring in easy money at the outset—but the true cost of the fraud includes the likelihood that a preparer will be arrested and convicted. If you are engaged in tax preparer fraud, connect with an experienced criminal tax attorney for advice and representation before the IRS arrives on your doorstep.
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Serving local and international clients from offices in Chicago and Cleveland, the legal team at Robert J. Fedor, Esq., LLC provides experienced legal defense on matters of tax litigation, tax crime, or IRS audits. Call 800-579-0997 or contact us online today.