Washington (March 6, 2003) -- The Internal Revenue Service more than doubled the number of criminal investigations of tax return preparers in 2002, according to the IRS Criminal Investigation Division. In fiscal year 2002, 254 investigations were initiated, compared to 116 the year before.

Return preparer fraud generally 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. Abusive preparers may also manipulate income figures to obtain fraudulent tax credits, such as the Earned Income Tax Credit.

Unscrupulous preparers derive financial benefit from the fraud in a number of ways, including diverting a portion of the refund for their own benefit, charging inflated fees for the return preparation services, and increasing their clientele by advertising guaranteed larger refunds.

"The vast majority of return preparers are honest and reputable," said David Palmer, chief of the IRS CID. "Those who aren't can create considerable financial problems for their clients, so taxpayers really need to choose carefully when hiring a preparer."

-- Electronic Accountant Newswire staff

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