March 1, 2020 0 comment

My Tax Return Doesn’t Smell Right

I want to give you some tips for identifying kind of slimy tax preparers or unscrupulous tax preparers or maybe even fraudulent tax preparers and the reason is because there are quite a few of them. In fact just recently I was reading an article here just a few months ago and this happens every few months. The justice department stripped a tax preparer of their legal right to prepare tax returns. This was down in Florida and the reasons are the common reasons. This person didn’t sign the returns she prepared. She didn’t put her identifying information on those returns. She over stated refunds for clients, etc. These are the common telltale signs of a fraudulent tax preparer. She did them all and of course she was stripped of her ability to prepare returns. That’s not a lot of consolation to the clients that she defrauded though because now the IRS, what are they going to do? They’re going to go and audit probably every single one of her clients because of their association with her, and quite frankly they will probably be pretty successful picking fraudulent positions on those returns. In many cases she was taking the fraudulent positions without the knowledge of the taxpayer. 

So let me give you a few kind of pointers here. When you get your tax return prepared make sure that your preparer is actually listing themselves as the preparer on the bottom of your 1040, that they sign that return. Don’t think that that means more than it does. It doesn’t mean the tax preparer is taking personal responsibility for your tax positions or for the information that you provide, but it simply identifies the tax preparer to the IRS. It says hey I’m here and I’m preparing the returns. If they’re not doing that, if they’re not signing the return, if they’re not putting their names on the return and you’re paying them, good chance that they are up to no good.

Another thing to look for is just use common sense. I know if you go and sit down with your tax preparer and they say, “hey you’re getting a $7500 refund”, of course you want $7500, but does it smell right? Do you feel like wow that’s really unusual. This tax professional must be really good at what she does or he does. Wow! If it doesn’t smell right, do a little bit more investigation. Look at that return a little bit more or a lot more. Ask a lot of questions about positions on the return or the numbers on the return, how the person got them, or if you don’t want to take all that time take the return down to a different professional and have them look at it and have them tell you what they think about it. If that second opinion says oh I didn’t know you were a rancher tell me about your ranch. If they say that and you don’t have a ranch then obviously that’s a problem. By the way that’s a real story. I started my career in Vernal, Utah. It’s a rural community. Lots of oil and gas and lots of farms and ranches and we had a tax professional in town who routinely set up totally erroneous fraudulent farms on his clients tax returns and often unbeknownst to the client, and of course he’d write off all kinds of just phony deductions and his clients loved him because they got lots of really big tax refunds. In the end he went to jail and most of his clients were audited. Anyways, just a little tip don’t trust most people completely and to verify a little bit.