In the current environment I am finding out that there are more and more people who are out and out dishonest tax preparers out there.
Now, there are several levels of criminals preparing taxes out there. Some aspect are as follows:
- Buy a single copy of Turbo Tax and use it to do everyone’s returns
- The kind that make up fraudulent deductions that can get you put in jail for fraud
- Those that refuse to sign as a paid preparer
I have had to file amended returns in the past for people who’s returns were prepared by these criminals. If nothing else the first rule for a tax preparer should be to do no harm, just like another profession.
One client was looking for a mortgage and the preparer had created a fictitious business that had a loss to reduce the tax liability and create a refund. This preparer had actually signed the return. But to get the client off the legal hook, a letter had to be written to the IRS claiming the client was too stupid to understand what the preparer had done and pray that they didn’t go after them for fraud. It worked, no fraud charges but penalties and interest galore.
I had another case where someone called me as to how to deal with a tax payment that was automatically set to b paid and the money was not there. I informed them to have the paid prepare call the IRS through the practitioner priority service to get them to assist. The person was not a real tax practitioner, just someone who used a single copy of Turbotax for everyone. Since I did not have a Power of Attorney, I was unable to assist. In most instances you get what you pay for.
I just ran across a case of someone that knows of a illegal preparer who has no required PTIN so is not registered with the IRS and does a dozen or so returns. I advised them to have the preparer shut down and turned into the IRS and try to collect a fee from Uncle for any unrecorded tax liability.
The most audacious case I have seen so far is an all cash preparer that works on referral only (to limit getting caught) that utilizes all of these forms. They don’t sign the return, take only cash payments to limit the trail, create fictitious business and deductions. The whole show, I think they were even using a single Turbotax copy to boot.
Now clients that used this preparer or someone like this are looking at tax fraud charges, they signed the returns and accepted total responsibility for them. They signed as self prepared, so there is no one else to blame. Depending on the audaciousness of the claims it is possible that jail time may be involved.
Now when you use an all cash tax preparer the likelihood is that the preparer will not be declaring that money on their tax return. Now, even if they did yours correctly, you are a fool because they are not paying in their fair share. Also small businesses that have losses on a Schedule C are being looked more closely by the IRS, since there is no business and if Uncle asks the individual is in trouble and should be prepared for the consequences.
Now once the IRS finds out about these preparers, they locate all the records available and audit all of the clients. Which is great for us who actually don’t commit fraud and have our livelihoods on the line when we take on clients.