When Will Taxpayers Be Held Responsible for Tax Preparer Fraud?

 Posted on February 08, 2017 in Taxation Law

Many individuals and businesses turn to a tax preparer for the extra assurance a preparer gives that taxes will be filed properly. While most tax preparers provide a valuable service, some preparers use tax season to scam customers as well as state and federal governments.

Different Schemes Used by Tax Preparers

Tax preparers can set up schemes to defraud in a number of ways. For example, a tax preparer could claim credit or deductions for which the individual was not eligible. A tax preparer could also divert tax refund checks to his or her own bank account.

These schemes can be very lucrative. Last year, a California tax preparer was ordered to pay more than $7 million dollars in restitution after she pled guilty to tax fraud.

Penalties for Taxpayers

If the IRS determines that your tax preparer submitted fraudulent returns, you will likely face consequences. The IRS takes the view that the taxpayer is ultimately responsible for the filing. 

If there is no evidence that the taxpayer participated in the fraudulent scheme, the taxpayer will be required to pay the additional taxes and interest. The taxpayer may be subject to penalties. The tax preparer will not be held to be responsible for the individual’s additional taxes and interest.

How to Spot a Fraudulent Tax Preparer

There are tell-tale signs that a preparer is attempting to defraud the taxpayer or the government. According to the IRS, these signs include: 

• Tax preparers who claim they will obtain unbelievably large refunds.
• Tax preparers whose fee is set by the percentage of your refund.
• Tax preparers who do not sign your tax return.
• Tax preparers who ask you to sign your tax form before it is finished.
• Tax preparers who do not ask you for receipts.
• Tax preparers who do not ask you any questions about your finances or job. 

When you look to hire a preparer, use someone who you know has filed others’ returns and someone who is a member of professional organizations. 

Contact a San Jose Tax Attorney

If you are concerned that your tax preparer has committed fraud, you should meet with a tax lawyer to get an individualized assessment of your case. By contacting knowledgeable San Francisco Bay Area tax law attorney John D. Teter you will confidentially be advised of all your options and what is likely to happen with your situation. Contact our office at 408-866-1810 to schedule a consultation.

Sources:

https://www.irs.gov/uac/tax-return-preparer-fraud-2

https://www.justice.gov/usao-sdca/pr/local-tax-preparer-sentenced-seven-years-prison-filing-thousands-false-tax-returns-and