Something new is occurring more commonly during Enrolled Agent tax preparation work that demands knowledge of extra steps on behalf of taxpayers. The event triggering this additional process is rejection by the IRS of electronically filed tax returns due to a prior filing under the same tax identification number. When someone else has used your client’s Social Security number, you can help rectify the trouble.
Use of stolen Social Security numbers to claim fraudulent refunds has developed into a rampant problem. New Enrolled Agent jobs are on the rise for representing defrauded taxpayers. This process entails presentation to the IRS of identity confirming documents. The IRS then issues an identity code for placement on future tax returns.
A greater difficulty is presenting tax returns for the year that a fraud has already transpired. The only possible avenue for resolution is paper filing in person by the affected taxpayer while delivering identity confirmation. Unfortunately, the IRS has withheld refunds for tax returns that are properly completed after fraudulently claimed refunds using the same ID number were already processed. This situation elicits a distinctive category of EA solutions than tax preparation skills. Enrolled Agents should help the authentic taxpayers claim their refunds using assistance of the Taxpayer Advocate office.
An entirely different aspect of Enrolled Agent training is generated when you encounter a suspected tax fraud. IRS Circular 230 requires you to promptly inform anyone that you are certain has not complied with the tax laws about the existence of such noncompliance. Tax professionals are not required to inform the IRS, but a sound practice is avoiding the conduct of any business with the tax cheater.
Tax preparers in St. Louis have apparently been confronted with several tax frauds. Another woman from the area faces three years in prison after pleading guilty to filing a false tax return. She was part of a scheme involving fictitious W-2s. Eight people were indicted in the scam. Any tax practitioner with EA certification who had stumbled upon the fraud would have persuaded the individuals to move in a new direction. Every Enrolled Agent has a duty to advise cheaters about rectifying false claims before an inevitable federal indictment.
Falsified W-2s in the St. Louis scam were created showing fictitious wages and tax withholding. The issuer was a Missouri corporation called Masters Touch Cleaning Services, Inc. According to the court records, the scheme masterminds were Angenita M. Smith and Tammy M. Smith. They allegedly gave six of their friends and relatives the falsified W-2s, which were then used for filing fraudulent 2010 tax returns and claiming refund anticipation loans from tax preparation services. Funds from the loans were split with the Smiths.
Angenita Smith admitted to one tax preparer that the cleaning service received no income from clients and asked about the possible consequences from providing W-2s that were not authentic. The IRS Criminal Investigations division launched an inquiry. Tax schemes are normally ended when paid tax preparers are brought into the deception. Circular 230 mandates that tax practitioners exercise due diligence in preparation and filing of returns as well as in determination of the correctness of representations made to the IRS.
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.