{"id":224734,"date":"2016-04-06T04:00:13","date_gmt":"2016-04-05T18:00:13","guid":{"rendered":"http:\/\/www.saipantribune.com\/?p=224734"},"modified":"2016-04-06T04:00:13","modified_gmt":"2016-04-05T18:00:13","slug":"beware-fraudulent-tax-return-preparers-tax-scheme-promoters","status":"publish","type":"post","link":"https:\/\/www.saipantribune.com\/index.php\/beware-fraudulent-tax-return-preparers-tax-scheme-promoters\/","title":{"rendered":"\u2018Beware of fraudulent tax return preparers, tax scheme promoters\u2019"},"content":{"rendered":"

WASHINGTON<\/strong>\u2014With tax season in full swing, the Justice Department urged the public to avoid dishonest tax-return preparers who fleece their customers and illegally drain the U.S. Treasury.\u00a0 Noting that every taxpayer is ultimately responsible for the contents of his or her own return, Acting Assistant Attorney General Caroline D. Ciraolo of the Tax Division also warned the public to be wary of anyone who guarantees a refund or who claims to sell a sure-fire way to reduce your taxes.<\/p>\n

U.S. taxpayers filed approximately 150 million returns in 2014. According to statistics available from the Treasury Inspector General for Tax Administration, the Internal Revenue Service (IRS) identified more than 2.1 million of those returns that claimed fraudulent refunds totaling more than $15.7 billion. As in past years, the IRS has designated return preparer fraud as one of 2016\u2019s \u201cDirty Dozen\u201d tax scams to avoid during return filing season.\u00a0 In 2015, the Tax Division permanently shut down more than 35 fraudulent tax-return preparers located all over the United States. The defendants in those cases spanned the spectrum from large-scale return preparation franchises to small, independent return preparers.<\/p>\n

\u201cEvery year, thousands of federal income tax returns are prepared by people who care much more about making a quick buck than about preparing accurate returns,\u201d said Acting Assistant Attorney General Ciraolo.\u00a0 \u201cMost tax return preparers are honest.\u00a0 But some preparers who charge clients a percentage of their tax refund intentionally prepare false returns to increase their clients\u2019 refund, and thus their own fees.\u00a0 Likewise, some preparers who charge by the form will intentionally prepare incorrect forms that their clients don\u2019t need in order to increase their compensation.\u00a0 Taxpayers might think that they\u2019re getting a good deal on their taxes, or that as long as someone else prepares the return, they\u2019re not responsible.\u00a0 They\u2019re wrong.\u00a0 Taxpayers who have their return prepared incorrectly are required to pay the tax they owe, or pay back the refund they weren\u2019t entitled to get.\u00a0 These clients might also owe interest and penalties, which can be substantial. Fortunately, there are red flags that taxpayers can look for and avoid when choosing a return preparer.\u201d<\/p>\n

Your refund should never be deposited directly into a preparer\u2019s bank account.<\/p>\n

In United States v. Elton L. Barnes, No. 2:14-cv-05621 (C.D. Cal.), the court barred a return preparer who caused other people\u2019s tax returns to be deposited to bank accounts in his name.<\/p>\n

Never sign a blank return or a blank form, or sign a return or a form without reading it first.<\/p>\n

By law, a return preparer must provide a client with a completed copy of the return no later than the time the customer is asked to sign the return.\u00a0 In United States v. Syed N. Ahmed et al., No. 2:15-cv-11461 (E.D. Mich.), the United States alleged that the defendants\u2019 Liberty Tax Service franchises asked customers to sign blank forms that stated that the customers had non-existent businesses, which were then used to maximize the customer\u2019s refund.\u00a0 Although the defendants did not admit to the allegations in the complaint, they agreed to an order from a federal court permanently shutting down the stores.<\/p>\n

Don\u2019t use a preparer who mischaracterizes your expenses.<\/p>\n

In United States v. Lawrence Preston Siegel, No. 3:15-00643 (S.D. Cal.), the defendant prepared returns that falsely characterized personal purchases as deductible expenses.\u00a0 For instance, one customer\u2019s return deducted purchases at Tiffany & Co., Louis Vuitton, and Royal Caribbean Cruise Lines as \u201cmedical expenses.\u201d\u00a0 The court permanently barred Siegel from preparing tax returns or providing tax advice for compensation.<\/p>\n

Do not use a preparer who fabricates business expenses or deductions, or who claims bogus credits to which you are not entitled, such as the Earned Income Tax Credit, the child care credit, or the education credit.<\/p>\n

One of the most common dishonest return-preparation practices is to prepare returns that include non-existent businesses, sometimes based on a client\u2019s hobbies.\u00a0 In 2015, for example, federal courts shut down tax return preparers in Kahului, Hawaii; Appleton, Wisconsin; and Chicago, Illinois, who fabricated supposed \u201cbusinesses\u201d for their clients.\u00a0 Federal courts have also ordered return preparers in Miami, Florida, and Memphis, Tennessee to submit to third-party monitoring at their own expense to make sure they are not preparing returns with fraudulent \u201cbusinesses.\u201d<\/p>\n

Some other fraudulent schemes and practices that have been stopped through injunction orders entered by federal courts throughout the country include:<\/p>\n

\u2022 Fabricating fake Form W-2 (Wage and Tax Statement) information;
\n\u2022 Claiming bogus education and first-time homebuyer credits;
\n\u2022 Claiming phony child and dependent care credits or residential energy credits;
\n\u2022 Claiming fraudulent fuel tax credits;
\n\u2022 Falsely exempting foreign earned income;
\n\u2022 Inflating unreimbursed employee business expense deductions; and
\n\u2022 Fraudulently inflating or decreasing a client\u2019s income or deductions to maximize the Earned Income Tax Credit.<\/p>\n

In January 2016, a federal court in Orlando, Florida entered a preliminary injunction against Jason Stinson, who ran a series of tax return preparer storefronts under the name \u201cNation Tax Services,\u201d requiring him to shut down the stores pending resolution of the case.\u00a0 As part of its explanation for why it was ordering Stinson\u2019s stores to shut down in the middle of the case, the court said that Stinson\u2019s business \u201cexposes . . . [his] customers to individual tax liability.\u00a0 Both the Government and Stinson\u2019s customers will suffer irreparable harm if an injunction is not granted. Moreover, it is in the public\u2019s best interest to protect vulnerable customers from the inaccurate preparation of their taxes, not to deplete Government resources, and to maintain the public trust in the tax system.\u201d\u00a0 The case is United States v. Jason Stinson et al., No. 6:14-cv-1534 (M.D. Fla.).<\/p>\n

The IRS advises taxpayers who ask a tax professional to prepare their return to be careful in the professional they select.\u00a0 The IRS offers some basic tips and guidelines to assist taxpayers in choosing a reputable tax professional and is also offering taxpayers a number of instructional YouTube videos to help them prepare their own taxes for the upcoming filing season.\u00a0 Several options, including free assistance with preparation and electronic filing for the elderly and individuals making $50,000 or less, are available to help taxpayers prepare for the current tax season and receive their refunds as easily as possible.<\/p>\n

Tax Division sues to shut down promoters of fraudulent tax schemes
\nIn addition to return preparers who deliberately falsify returns, the Tax Division targets those who peddle schemes that purportedly reduce taxes\u2014but in fact rely on false statements or financial sleight-of-hand.<\/p>\n

In United States v. Wayne Reeves et al., No. 12-cv-1916 (D. Nev.), the court found that defendants Wayne Reeves and Diane Vaoga advised their clients \u201cto set up sham trusts and have their wages directed into accounts for those trusts as a way to improperly reduce their tax liability.\u201d\u00a0 They advised their clients that the income the clients received from the trusts was \u201cnontaxable and did not need to be reported on tax returns.\u201d\u00a0 The court further found that Reeves prepared tax returns that \u201cwillfully attempted to understate his clients\u2019 correct tax liabilities,\u201d and that Vaoga assisted him in doing so.\u00a0 In January 2015, the court permanently barred both Reeves and Vaoga from preparing returns or giving tax advice to others.
\nIn November 2015, the Tax Division sued to shut down an alleged tax scheme based on a purported solar energy generation facility in Utah.\u00a0 The case is United States v. RaPower-3 LLC et al., No. 2:15-cv-00828 (D. Utah).\u00a0 The United States\u2019 complaint alleges that the defendants purportedly sell \u201csolar thermal lenses\u201d to customers, and tell their customers that they are entitled to claim depreciation expenses and the solar energy credit for the lenses\u2014even though the defendants allegedly know or have reason to know that their customers are not in the business of producing and selling solar energy and that the defendants\u2019 purported solar energy facilities do not actually produce solar energy in a manner that meets the Internal Revenue Code\u2019s requirements for claiming the credit.<\/p>\n

And in the same month, in United States v. James Tarpey et al., No. 2:15-cv-00072 (D. Mont.), the Tax Division sued to shut down an alleged timeshare donation scheme.\u00a0 According to the United States\u2019 complaint in that case, the defendants have their customers give rights in a timeshare to \u201cDonate for a Cause,\u201d a tax-exempt entity operated by Tarpey.\u00a0 The complaint alleges that the customers receive an appraisal that grossly overvalues the donated timeshare rights and use that appraisal to claim a large charitable donation deduction, even when the true market value of the timeshare right is a small fraction of the appraised value.<\/p>\n

\u201cThe Tax Division is committed to stopping those who promote fraudulent tax shelters and other schemes or who prepare false returns,\u201d Acting Assistant Attorney General Ciraolo said.\u00a0 \u201cAlong with our colleagues at the IRS, we will find dishonest preparers and fraudulent tax-scheme promoters and work to shut them down.\u00a0 We will hold accountable those who willfully assist taxpayers to file false returns.\u00a0 And in appropriate cases, we will prosecute them.\u00a0 But everyone can help stop fraud and protect our public finances.\u00a0 Pay attention to your tax return and make sure that it\u2019s right.\u00a0 If you think that a tax return preparer is deliberately preparing incorrect returns, or you suspect someone is selling a phony tax-loss scheme, report that person to the IRS.\u201d<\/p>\n

The IRS website has information about how to report a dishonest return preparer, as well as information about how to report other types of tax fraud.\u00a0 The Justice Department\u2019s website has a list of tax-return preparers and tax-scheme promoters whom the courts have shut down.<\/p>\n

In addition to the civil enforcement through injunctions that stop their illegal actions, many return preparers and promoters also face prosecution. Examples of those investigations can be found for fiscal years 2014 and 2015.<\/p>\n","protected":false},"excerpt":{"rendered":"

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