MORE and more taxpayers have been receiving it from the IRS….. the audit letter asking to substantiate tax deductible expenses claimed in a prior tax year. In fact, some taxpayers have been or will be receiving it for two to five consecutive years once their credibility with the IRS has been tarnished.
There have been few cases of preparer profiling, meaning the IRS audits all returns prepared by a return preparer who has consistently demonstrated suspicious activities in what the IRS calls “return preparer fraud.” However, in these situations, the taxpayers, not the preparer, are ultimately held responsible for their individual returns.
A few taxpayers have been having the panic attack symptoms just with the idea of having to file income tax return again due to the IRS “harassing” them for the last few years.
But there should be no cause for concern if taxpayers have done due diligence in ensuring that their tax returns were prepared legally and legitimately; being able to substantiate each entry made in the tax returns. The caveat is, sometimes taxpayers are left clueless on what were claimed in their tax returns until the IRS comes knocking.
According to the IRS, 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. Preparers may manipulate income figures to fraudulently obtain tax credits, such as the Earned Income Tax Credit.
In some situations, the client, or taxpayer, may not have knowledge of the false expenses, deductions, exemptions and/or credits shown on his or her tax return.
However, when the IRS detects the false return, the taxpayer – not the return preparer – must pay the additional taxes and interest and may be subject to penalties.
The IRS Return Preparer Program focuses on enhancing compliance in the return-preparer community by investigating and referring criminal activity by return preparers to the Department of Justice for prosecution and/or asserting appropriate civil penalties against unscrupulous return preparers.
While most preparers provide excellent service to their clients, the IRS urges taxpayers to be very careful when choosing a tax preparer. Taxpayers should be as careful as they would be in choosing a doctor or a lawyer. It is important to know that even if someone else prepares a tax return, it is the taxpayer who is ultimately responsible for all the information on the tax return.
IRS Helpful Hints When Choosing a Return Preparer
Avoid tax preparers who claim they can obtain larger refunds than other preparers.
Avoid preparers who base their fee on a percentage of the amount of the refund.
Use a reputable tax professional who signs your tax return and provides you with a copy for your records. You should not sign your return as “Self-prepared.”
Consider whether the individual or firm will be around to answer questions about the preparation of your tax return months, or even years, after the return has been filed.
Review your return before you sign it and ask questions on entries you don’t understand.
No matter who prepares your tax return, you (the taxpayer) are ultimately responsible for all of the information on your tax return.
Never sign a blank tax form. Find out the person’s credentials.
For more information, the IRS website has a link related to tax preparer fraud:http://www.irs.gov/newsroom/article/0,,id=177063,00.html.
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Evangeline is a California registered tax preparer, a legal document assistant for the general public, and a freelance paralegal offering assistance to various attorneys. She can be reached at her office at 2451 Colorado Blvd. #2, Eagle Rock, CA 90041 or at her marketing location inside the Eagle Rock Plaza. Her phone number is (323) 550-1869 or you can check her website at: www.evangelinegiron.net. She is a member of the court-endorsed California Association of Legal Document Assistant (CALDA) and an Associate Member (Non-attorney) of the LA County Bar Association (LACBA).
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Note: Evangeline is not an attorney nor does she provide legal advice. She is a bonded and registered Legal Document Assistant and prepares legal documents per the specific direction of clients.