Most tax practitioners are careful to obtain accurate amounts from clients that correctly identify income and deductible expenses. When the figures on a tax return are inaccurate, the taxpayer is penalized. Tax professionals only face repercussions for intentional misrepresentation of facts. They should emphasize to their clients that violators of tax preparer ethics cause the taxpayers to owe any IRS assessment. Tax preparers face a different consequence if their acts were fraudulently dishonest.
Failure to follow the standards in an IRS tax preparer study guide can land a tax industry professional in prison. Recently, a tax preparer in New Jersey was sentenced to a six-month prison term for preparing false returns. He was also punished with an additional six months of house arrest after his prison term ends plus two years of supervised release.
The tax preparer, Carlo St. Jean, was also barred from the tax preparation business. St. Jean pleaded guilty during his trial, which charged him with seven counts of assisting in the preparation and presentation of fraudulent tax returns. The IRS estimates that St. Jean caused the government to lose between $30,000 and $80,000 from 2004 to 2006.
The St. Jean case is representative of the care individuals should take when conducting a tax return preparer search. It therefore also provides an illustration that honest tax practitioners can use as a cautionary tale in closing business with new clients. First, taxpayers should seek professionals that focus on tax preparation careers. St. Jean did not strictly operate a tax business. Instead, he owned Grand Travel Inc. Discount Timeshare, which also prepared tax returns.
When preparing at least seven tax returns, St. Jean counseled individuals about submitting false information. The fabricated figures were inflated deductions that created larger claims for tax refunds than the people were entitled to receive.
Eventually, the money ended up in the hands of St. Jean. He convinced taxpayers that they were entitled to special secret amounts of cash held by the federal government. Apparently, this is a story used by many dishonest tax practitioners to share in the loot sent as a tax refund.
Other scam tax operators exploit a problem in the IRS electronic filing system. That is, the IRS only matches compensation reported on, say, a W-2 several months after a tax return is filed. That leaves plenty of time for identity thieves. In the future, the IRS could modernize its processing system. This would permit matching of reporting forms with tax returns before refunds are issued. But this solution appears years away.
For now, people in the tax preparation industry should simply advise the public to avoid tax return services that promise large pools of money the government has set aside for its citizens.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.
Tags: IRS tax preparer study guide, tax preparation business, tax preparation careers, tax preparation industry, tax preparer ethics, tax return preparer search
