More of us every tax-filing season are turning to tax professions. The 2019 filing season in particular has underscored the value that tax professionals add.
This is the first year taxpayers have had to deal with the real-life effects of the many Tax Cuts and Jobs Act (TCJA) change. A knowledgeable tax preparer can help you navigate this new maze.
But you need to be careful in picking the person to be your personal tax guide.
And when you discover a tax preparer is not operating in your best interest, you need to report that person and let the system take care of putting unscrupulous and criminal tax preparers out of the business.
Picking and vetting your tax pro: While most tax professionals are honest and dedicated to helping clients meet their tax responsibilities in the most cost-effective, legal way, as in any profession there are some bad apples.
That's why in addition to determining which type of tax pro is the best fit for your filing needs, you need to thoroughly check out the person you plan to hire and be on the lookout for any red flags.
Beware ghost preparers: One of those warning signals is a tax preparer's refusal to sign your return that he or she filled out. That's illegal.
The Internal Revenue Service points out that by law, anyone who is paid to prepare or assist in preparing federal tax returns must have a valid 2019 Preparer Tax Identification Number, or PTIN. Paid preparers must sign the returns they fill out for clients and include their PTIN.
Unethical return preparers who sidestep this requirement are known as ghost preparers.
Instead of following proper tax-filing procedure, these ghosts print the return and tell the taxpayer to sign and mail it to the IRS.
Or when the return is e-filed, ghost preparers prepare the 1040 but refuse to digitally sign it as the paid preparer.
Ghost and other unscrupulous tax return preparers typically look to make a fast buck by promising a big refund or charging fees based on a percentage of the refund.
These bad preparers also may also:
- Require payment in cash only and not provide a receipt.
- Invent income to erroneously qualify their clients for tax credits or claim fake deductions to boost their refunds.
- Direct refunds into their own bank account rather than the taxpayer’s account.
If you encounter a tax preparer who exhibits any of these warning signs, walk away.
Then report the abusive tax preparer to the IRS. My earlier post on Turning in tax pros who break bad has details on how to do this.
Bad preparers face criminal and civil actions: The IRS isn't he only federal agency that's interested in finding and stopping bad tax preparers.
The U.S. Department of Justice (DOJ) announced this week some of the success it has had so far this year in stopping unscrupulous tax preparers.
Uncle Sam's law enforcement agency has already obtained several injunctions barring individuals from filing returns for others. It has filed actions against numerous others. They include:
- On Jan. 4, 2019, a federal court in Indianapolis, Indiana, permanently enjoined Antonio Chappell and G & A Tax Service LLC, from preparing federal tax returns for others. The court noted that the defendants had prepared tax returns with a wide range of scams, including falsifying reported income or losses to wrongfully increase or claim the Earned Income Tax Credit, fabricating education expenses to obtain the American Opportunity Credit for certain educational expenses; misrepresenting a taxpayer’s filing status; and reporting non-qualifying dependents to take advantage of the Additional Child Tax Credit.
- On Jan. 7, 2019, a federal court in Orlando, Florida, entered a preliminary injunction barring Erotida Harden, Michael Harden, Aida Cortes, Yahaira Claudio, Tamika Robenson, Natasha Williams, and Certified Taxes LLC, from acting as tax return preparers and directing them to immediately close all tax return preparation stores that they currently own directly or through any entity and not to reopen them without a court order.
- On Jan. 16, 2019, a federal court in Orlando, Florida, entered a preliminary injunction barring Marcgenson Marc, Tiana Character, LeNorris LaMoute, Dosuld Pierre, Shirleen Thales, Advanced Tax Services Inc., Genson Financial Group LLC, and Character Financial Solutions LLC from acting as tax return preparers and directing them to immediately close all tax return preparation stores that they currently own directly or through any entity and not to reopen them without a court order.
In addition, the DOJ noted some of the recent criminal convictions obtained by its Tax Division, including:
- On Jan. 28, 2019, a Minneapolis-based tax return preparer was sentenced to serve 121 months in prison for managing and directing a fraudulent return-preparation business, which prepared returns that reported false dependents, fake business income and losses, inflated deductions, inflated credits, and false filing statuses, in order to get customers inflated refunds.
- On Nov. 14, 2018, a Las Vegas, Nevada, tax return preparer was sentenced to 37 months in prison for aiding and assisting in the filing of false tax returns that included multiple false items, including charitable contributions, capital loss deductions, energy tax credits, and unreimbursed employee expenses—such as business meals and transportation expenses.
- On Sept. 13, 2018, a resident of Winton-Salem, North Carolina, who was licensed as an attorney in Georgia, was sentenced to 13 months in prison for aiding and assisting in the preparation of fraudulent tax returns.
"Fraudulent tax return preparers harm taxpayers, legitimate businesses, and the American public," said Principal Deputy Assistant Attorney General Richard E. Zuckerman in announcing the DOJ recent tax fraud fighting efforts and successes. "The Justice Department is committed to working with our partners at the Internal Revenue Service to protect the law-abiding American public and the treasury by stopping this fraud."
If you're interested in the Justice Department's prior injunctions, you can check out the DOJ's online alphabetical listing of persons enjoined from preparing returns and promoting tax schemes.
And if in perusing the list of shady tax preparers you discover you one that you know is still operating in violation of an injunction, the DOJ asks that you contact its Tax Division with the details.
You also might find these items of interest:
- The dark side of taxpayer-tax pro trust
- 7 states that regulate paid tax preparers
- IRS voluntary tax preparer program gets federal court OK
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