Consumers should do their homework before hiring a tax preparer
- Randy Hutchinson is president & CEO Better Business Bureau of the Mid-South.
In April, the U.S. Department of Justice sued to shut down a Florida tax preparer it alleges prepared more than 2,000 federal tax returns over four years using a variety of schemes to understate clients’ tax liabilities and overstate their refunds. I’m not going to name the tax preparer since she hasn’t been convicted yet, but she’s accused of defrauding the government of more than $500,000 in tax revenue in 2023 alone by:
- Making up false businesses on customers’ returns.
- Reporting fake or inflated business expenses.
- Fraudulently claiming various credits like the Work Opportunity Tax Credit, American Opportunity Tax Credit and Residential Energy Credit.
- Falsifying customers’ income and filing statuses to increase the amount of the Earned Income Tax Credit.
Her customers usually weren’t aware of the fraud, although it’s not clear whether that’s because they didn’t review their tax returns or took her word that they qualified for the various deductions and credits.
TikTok videos create stream of disinformation on tax preparation
The Justice Department’s Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers in the past decade, including some in this area. The owner and two employees of Better Dayz Tax Services in Memphis received sentences ranging from three years of probation to 15 months in prison for preparing fraudulent tax returns for themselves and others.
A Jackson man was indicted for preparing 123 fraudulent tax returns, operating an unlicensed money transmitting business, and money laundering.
During this past tax season, the IRS warned that dubious tax advice was exploding on social media, including in TikTok videos. It highlighted a spike in wrongly claimed fuel tax credits by shady tax preparers or taxpayers themselves. The fuel tax credits are meant for off-highway business and farming use, not driving to a job or taking kids to school.
FTC went after Ganadores,which schemed to steal millions of dollars from Spanish speakers
IRS Commissioner Danny Werfel said, “Promoters are pushing the accelerator on bad Fuel Tax Credit claims and driving honest taxpayers to a bad choice.” Some taxpayers thought they were going to get huge refunds due to credits and deductions they weren’t really qualified for.
Check out tax preparers before using their services
Untrustworthy tax preparers are a perennial entry on the IRS’ annual list of Dirty Dozen tax scams. They include “ghost preparers” who pop up during tax season, encourage taxpayers to claim tax credits and benefits they don’t qualify for, charge a fee that’s a large percentage of the refund or even steal the entire refund, and then disappear. They don’t sign tax returns they prepare because they don’t have the required Preparer Tax Identification Number. Unsuspecting taxpayers are left to deal with the IRS when it challenges their tax return.
Remember that you’re ultimately responsible for the information on your tax return even if you pay someone else to prepare it. Check out the preparer’s qualifications and credentials, including with the BBB. We can provide you a roster of BBB Accredited member tax preparers.
The IRS says to be wary of a tax preparer who:
- Asks for a cash-only payment without providing a receipt and/or bases the fee on a percentage of the refund.
- Invents false income to try to get more tax credits or claims fake deductions to boost the size of the refund.
- Wants to deposit the refund in their bank account rather than the taxpayer’s account.
- Doesn’t ask to see all relevant documents.
Randy Hutchinson is president & CEO, Better Business Bureau of the Mid-South.
link
