False Return Cases

Tax Return Preparers Intentionally Committing Tax Fraud

I recently noticed a couple of false return cases. The indictments and guilty pleas were a result of tax return preparers intentionally preparing and filing false income tax returns, a form of tax fraud. Internal Revenue Service-Criminal Investigation found the evidence and put it together for the prosecutors. In each of these cases, the preparer faces a maximum of three years in jail.

The key here is to avoid being indicted as an aider and abettor to preparing and filing false returns. The best way to avoid this is to pick your tax return preparer carefully. Be sure that you have someone who is reputable. CPA’s generally have high ethical standards. One is less likely to run into a false preparer in the CPA practice, than one will with tax return services.

Beware the preparer who promises you a refund. If the preparer is good, they will find and maximize a refund. But if a refund is not there, it’s not there and the preparer will not manufacture one.

Typically the false return preparer will insert into the return false deductions. Regardless whether you have a reputable preparer, give yourself some insurance. Take the time to review all of the deductions taken, to see if there is a deduction that is for an unreasonable amount. Also look for a category of expense where an amount has been taken, but you know that you have never spent money under that classification of expense.

False return preparers have on occasion understated income. This is unlikely when your income is declared on a W-2. But if you have a business, false preparers will fiddle with the amount of income reported for the business. They may report income to the extent that you have received Forms 1099, and nothing else. Once again, get yourself some insurance. Examine the amount of income on the return and compare it to your knowledge of your business. Is the number on the return about what you make a month?

All in all, do not become associated with a false return!