Tax Preparer Fraud Can Lead to Serious Consequences for Both the Tax Professional and Filer

Taxes

Most accountants, CPAs, and certified tax preparers are honest, hardworking people who are dedicated to their profession. Most tax professionals simply want to secure the best possible tax deal for their clients while following all best practices regarding accuracy. However some tax professionals may over emphasize their ability secure favorable tax treatment for their clients and may cross the line into overly aggressive tax minimization strategies. Even more troubling, other tax preparers may be corrupted by greed and act dishonestly by improperly obtaining or using client tax refunds or other client funds.

If you are a tax professional, you already understand the devastating impact allegations of this type can have on your professional reputation and livelihood. Therefore any tax professional potentially facing an investigation or referral to the IRS Office of Professional Responsibility (OPR) should immediately retain tax counsel. However laypeople may not understand that mistakes or other improprieties found in tax filings are ultimately the responsibility of the filer.

#1 Tax Lady Indicted for Tax Fraud
Before proceeding any further, it is important to note that this is merely an indictment meaning that charges have been filed and have been presented to the defendant, but they have not yet been proven. The defendant is still innocent under the laws of the United States until prosecutors can prove otherwise. However, this brings us to another important point; the IRS times its announcements of indictments, convictions, and plea deals to coincide with tax time. This approach is intended to deter both tax professionals and taxpayers from taking overly aggressive positions or engaging in questionable tax acts. Furthermore it has the added benefit of making taxpayers more wary so that they are more likely to ask their tax professional tough questions if things don’t seem quite right.

However, according to a press release from the U.S. Department of Justice, this deterrent effect did not prevent a slew of tax crimes from a Kalamazoo, Michigan based business. Federal prosecutors allege that Fontrice Lenee Charles participated in a number of tax schemes while promoting herself as the #1 Tax Lady. The main allegations contained in counts 1 through 25 of the indictment allege that Ms. Charles provided false information to the IRS to ensure that her clients would receive large tax refunds. Prosecutors alleged that Ms. Charles provided false information on 482 tax returns that resulted in excessive deductions of about $2 million. If convicted, Ms. Charles could face up to 5 years in prison, among other consequences, for each of these charges.

Ms. Charles also faces charges for alleged improprieties on her own income tax filings for 2010 and 2011. Prosecutors have alleged that Ms. Charles did not report the income from her tax preparation business in these returns and that she claimed a deceased individual as a dependent. Upon conviction, filing a false return can be punished with a prison sentence of up to 3 years.

Tax filers are also impacted by return preparer fraud

For clients of an accountant, CPA, or other tax professional who is convicted of fraud, providing false information or other improprieties the consequences can be harsh. The taxpayer is responsible for the information he or she provides to the IRS. In fact, when a taxpayer signs or otherwise authenticates their tax return, they are certifying the information contained within the tax filing is true and correct under the penalty of perjury. Even if the taxpayer was legitimately fooled by the representations of the tax preparer, errors will have to be corrected. This may include paying additional tax, interest and penalties to correct an underpayment. If excessive deductions were taken, the money will have to be paid back and additional penalties may also apply. In short, failing to ask difficult questions and make sure what your tax preparer is telling you adds up can lead to significant tax problems that may take years to correct.

Rely on our experience when handling tax issues due to preparer errors
The tax attorneys of the Brager Tax Law Group can provide representation for tax preparers who have been accused of tax fraud, errors or other improprieties. Furthermore we can work with individual tax payers who are simply attempting to return to compliance after discovering a tax problem. To schedule a consultation, 800-380-TAX-LITIGATOR or contact us online.

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