The Internal Revenue Service’s Criminal Investigation unit is issuing a stern warning to New Jersey tax preparers as it cracks down on preparers who falsify tax returns, while cautioning taxpayers to choose preparers carefully.
“Knowingly falsifying documents filed with the IRS is a crime,” said Shantelle P. Kitchen, IRS–Criminal Investigation acting special agent in charge of the Newark Field Office, in a statement. “Dishonest return preparers use a variety of methods to cheat the government. It is your responsibility to know what is on your income tax return. You are ultimately responsible for what gets filed with the IRS.”
Return preparer fraud involves the preparation and filing of false income tax returns by preparers who claim inflated personal or business expenses, false deductions, unallowable credits or excessive exemptions on returns prepared for their clients, the IRS noted. However, when the IRS detects a fraudulent return, the taxpayer—not the return preparer—must pay the additional taxes and interest and may be subject to penalties.
During this tax filing season, the IRS cautioned taxpayers not to rush into a decision on who to use to prepare their returns, while acknowledging that most return preparers are professional, honest and provide excellent service to their clients. Acting special agent in charge Kitchen offered the following tips when choosing a tax return preparer:
• Be cautious of tax preparers who claim they can obtain larger refunds than other preparers.
• Avoid preparers who base their fee on a percentage of the refund.
• Never sign a blank tax return.
• Use a reputable tax professional who signs their tax return and provides you with a copy. In addition, make sure the preparer includes their Preparer Tax Identification Number, or PTIN, as required by law.
• Consider whether the individual or firm will be around to answer questions about the preparation of the tax return months, or even years, after the return has been filed.
• Check the preparer’s credentials. Only attorneys, CPAs and enrolled agents can represent taxpayers before the IRS in all matters, including audits, collection and appeals. Other tax preparers may only represent taxpayers for audits of returns they have actually prepared.
• Find out if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.
• Ask friends and family members whether they know anyone who has used the tax professional and whether they were satisfied with the service they received.
Here are recent statistics on return preparer fraud from IRS-Criminal Investigation:
FY 2012 FY 2011 FY 2010
Investigations Initiated 443 371 397
Prosecution Recommendations 276 233 202
Indictments/Informations 202 176 182
Convictions 178 163 145
Sentenced 172 163 132
Incarceration Rate* 84.3% 87.1% 88.6%
Average Months to Serve 29 25 24
*Incarceration includes confinement to federal prison, halfway house, home detention, or some combination thereof.
Data Source: Criminal Investigation Management Information System
In some recent tax return preparer investigations conducted by IRS-Criminal Investigations’ Newark Field Office, the owner of Rapid Professional Consulting Services, Emmanuel Igho, 54, pleaded guilty to willfully preparing false tax returns for clients (see Tax Preparer Pleads Guilty to Falsifying Returns).
In addition, a Hudson County, N.J., man who worked as both a tax preparer and school teacher admitted that he filed falsified returns on behalf of his clients, and also failed to report his own income, U.S. Attorney Paul J. Fishman announced Elijah Washington, Jr., of Jersey City, N.J., pleaded guilty before U.S. District Judge Jose L. Linares in Newark federal court to an Indictment charging him with aiding in the preparation of false tax returns and tax evasion.
Washington was arrested after preparing a false tax return for an undercover law enforcement agent and was indicted in April 2012 by a federal grand jury. In addition to being a public school teacher, Washington owned and operated a tax preparation business, Elijah’s Professional Tax Service, in Jersey City, where he prepared tax returns for tax years 2005 through 2008. According to prosecutors, he fabricated various items to obtain larger refunds for clients, including tuition and fees deductions, child tax credits, charitable contributions and job expenses. Washington also failed to report his income from his tax prep business.