Thursday, September 18, 2008

Tax Preparer Fraud

So you did what millions of Americans have done for years and visited a local tax preparer firm or CPA to have your annual tax returns prepared. This made you feel good that your tax returns were completed and done accurately by someone who knows how to correctly prepare returns for the IRS. But did they actually prepare them correctly and who will be liable if they make a mistake?

If you are using a reputable tax firm or CPA the reality is you are probably not going to have a tax issue. But laws change and mistakes can certainly be made and when they occur the person who is liable for the accuracy of the tax returns is ultimately the taxpayer and not the tax preparer. This seems to be a little unusual since the taxpayer placed their returns in the hands of a certified professional because they themselves do not know the laws. However, the accuracy of the returns is the sole responsibility of the taxpayer even when they didn't prepare them.

Mistakes are acceptable and even tax preparers are human so every return is not going to be perfect. However, there is a fine line between errors and tax preparer fraud. Tax 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 for their clients. In most cases the taxpayer may not be aware of the returns having false or fraudulent information on them but when the IRS reviews those returns for accuracy and detects a false return it is the taxpayer - not the preparer - who pays the additional tax as well as the additional penalties and interest. This can cost the taxpayer thousands of dollars that they could have avoided by choosing a reputable tax firm. So when you are having your taxes prepared by someone else please make sure you choose them wisely. Next week I will go over some tips on how to select a good tax preparer so make sure you return to view these useful tips.

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