Don't Mess With Taxes

So maybe the criminals weren't hardcore Capone clones, but they were breaking the tax law and they now will have to pay.

The IRS announced this morning that it had executed search warrants at tax preparation businesses in five states, closing business and seizing computers and documents that federal agents believe will prove the filing of illegal inflated telephone tax refund claims.

Earlier, the IRS had reported widespread problems with the new, this-year-only tax break, which is the result of the agency's decision to stop collecting a 108-year-old long-distance excise tax.

Some of the incorrect filings were simply mistakes by folks who misunderstood how to make a proper refund claim.

But some instances, the agency said, were obviously intentional tax fraud. The IRS said some claims from tax-return preparers were seeking thousands of dollars for clients, often more than the taxpayers' actual annual income and in amounts that would have meant they had six-figure phone bills.

The IRS vowed to crack down on these tax cheaters. Criminal investigation division agents followed through with the threat this week, raiding tax preparation offices in Dallas, Tyler and Athens, Texas; Atlanta, Ga.; Riverside, Calif.; Miami, Fla.; and New Orleans, La.

''We have seen limited but serious instances of abuse, and we've sent in criminal investigators to pursue the matter accordingly,'' IRS Commissioner Mark W. Everson said.

The IRS also said that its auditors are "visiting" (although I really don't think it's a 'put the tea kettle on, honey, the IRS agent is at the door' kind of drop-by) other tax preparers across the nation who are seeking questionable telephone tax refunds.

Tax pro watch: While the IRS will definitely be keeping an eye on tax prepares this filing season, you need to look closely at any tax pro you might be thinking about hiring. This post offers some suggestions on how to hire a tax preparer who'll keep you out of tax trouble instead of getting you into it.

Searching for software: Thinking of using tax software to avoid phone refund and/or preparer problems? Make sure you pick the product that best fits your needs. This story has some general selection guidelines.

And USAToday compares the two biggies, H&R Block's TaxCut and Intuit's
TurboTax.