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Lying to your tax pro could result in a bad tax situation

UPDATE, April 7, 2017: Michael Sorrentino is in tax trouble. Again. Mike, or "The Situation" as he was known when he was one of the stars of the MTV hit "Jersey Shore", and his brother Marc were indicted Friday, April 7, 2017, on additional charges of alleged tax evasion. As noted in this post from 2014, the Sorrentino brothers were indicted in 2014 for tax offenses and conspiring to defraud the United States. Under the new charges, Michael now also faces charges of tax evasion and structuring funds to evade currency transaction reports. Marc is now also charged with falsifying records to obstruct a grand jury investigation. You can read more in The Press of Atlantic City's story.

Tax preparers have been under official scrutiny for more than a decade. Many folks, including a series of head honchos at the Internal Revenue Service, say that ill-prepared and unregulated tax professionals produce serious problems for Uncle Sam and taxpayers.

Most folks in the tax world are well aware of the IRS' efforts to oversee paid tax preparers who aren't already governed by professional standards. To date, the IRS hasn't had much luck.

It has lost in federal courtrooms, and now is fighting for the right to implement a voluntary tax preparer testing system. The tax agency also is attempting to get Congressional OK for wider regulatory control of paid tax preparers.

Bad clients, bad tax situations: True, inept and sometimes even criminal tax pros are an issue that needs to be dealt with. But sometimes, it's the tax pros' clients who are the problem.

We all know the old adage used when discussing tax-filing software: Garbage in, garbage out.

It also applies to taxpayer-tax preparer relationships. If a taxpayer isn't honest or forthcoming about his or her tax circumstances when working with a tax pro, then that preparer is going to complete and submit a 1040 that's flat-out wrong.

And that creates problems for both the taxpayer and the tax preparer.

The Situation's tax missteps: This week, such a situation came to light as a former reality television star was charged, along with his brother, with multiple counts of tax evasion and false tax filing.

As I discussed last week at my other tax blog, Mike Sorrentino, better known to pop culture and bad TV aficionados as The Situation from MTV's Jersey Shore, and his brother Marc are in big tax trouble.

They are accused of not paying taxes on nearly $9 million.


The pair made a lot of mistakes that led to their current alleged tax trouble. One of them was duping their accountants.

Specifically, according to the indictment, in order to reduce their reported income and, therefore, the amount of tax that they would have to pay to the IRS, the Sorrentino brothers:

(a) Intentionally failed to inform the unnamed accounting firm about the true income amount received from the operation of their Jersey Shore-related companies, and

(b) Provided their accountants with a list of false and/ or inflated business expenses that they claimed to have incurred from the operation of the businesses.

Trying to slip one past a tax pro: The Situation's tax case is getting a lot of attention, but it's not unusual. Almost every tax preparer has stories of clients who have at least tried to do some of the things with which the Sorrentino brothers are charged.

The tax pros I heard from say the key to keep from finding themselves in a similar situation is to be diligent. If things don't sound, look or seem right, they ask questions of their clients. Then they ask them again. And again.

When they discover or confirm that a client is being less than honest, then it's time to get tax pro tough.

"I don't file their returns. I must be satisfied," says Rita Schooley in response to my question via the ol' blog's Facebook page. "They can go elsewhere if they don't like what I'm doing. Funnily enough, they usually do it my way."

"They are former clients," says my cut-to-the chase Taxpayer Advocacy Panel pal Norma Woodward.

It's the same for David Mendenhall, who tells me via Twitter, "It's tough. I try to reassure them I am on their side. If they insist and I know they are committing fraud, I walk away."

These folks are among the tax professional good guys. May you find as careful, competent and conscientious tax help when you need it.

And when you do need it, don't lie to your tax pro!

More NJ tax woes: What is the deal with the Garden State and tax trouble? Also last week over at Bankrate I looked into the real tax trouble some Real Housewives of New Jersey stars are facing.

Bankrate Taxes Blog iconAt least these reality TV folks are teaching us all some good tax lessons.

The tax tribulations of RHONJ stars Teresa and Joe Giudice, who pleaded guilty to multiple federal charges and are to be sentenced early next month, are good reminders of married couples' joint filing responsibilities.

If that shared 1040 is problematic, maybe it's time for a couple to consider filing separately.

And if the tax troubles pop up after filing, there's the possibility a husband or wife could get innocent or injured spouse relief.

I usually post my additional tax thoughts at Bankrate Taxes Blog every Tuesday and Thursday. If you don't get a chance to check them out then and there, pop in here over the weekend where you'll usually find highlights and links.

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