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DoJ touts successes in taking down unscrupulous tax preparers

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The smartest tax move often if hiring a good tax professional.

Unfortunately, the tax community is not immune to bad actors.

Every year, the Internal Revenue Service warns taxpayers to thoroughly vet the person they want to hire to handle their taxes.

Every year, the IRS also issues warning about unscrupulous tax preparers who take advantage of trusting taxpayers and take their money. These alerts also are routinely part of the IRS annual Dirty Dozen scam list; dishonest tax pros is #6 on the 2023 list. (Preview: the 2024 list is on its way next week!)

Pre-emptive action is a good move, but when tax preparers break bad, catching them so they don't do further harm also is important.

The Department of Justice (DoJ) this week highlighted its continuing efforts to stop illegitimate tax return preparers, earning them a spot on the Tax Felon Friday list.

Successful civil actions: In the past decade, the Justice Department notes that its Tax Division has obtained civil injunctions and criminal convictions against hundreds of unscrupulous tax preparers.

But from the what have you done for me lately file, the DoJ shined spotlight on the work that the Tax Division conducted last year with U.S. Attorneys' Offices around the country to bring civil and criminal actions against dishonest tax preparers.

The results have been criminal convictions and prison sentences, as well as civil penalties and injunctions to stop ongoing fraud, and disgorgement of ill-gotten proceeds.

Some of the civil injunctions obtained by the DoJ Tax Division over the last filing season include:

  • Permanently barred on March 2, 2023, of three Florida tax return preparers and a business that prevents them from preparing tax returns for others or owning or operating a tax preparation business. The federal court also ordered a total of nearly $470,000 in proceeds among the three be paid, or technically disgorged from their illicit tax actions.
  • Permanently closed on May 17, 2023, of a New York tax preparation business and barring of the operator from preparing returns for others and from owning or operating a tax return preparation business in the future. Government officials estimated that this unscrupulous tax pro's actions cost the U.S. Treasury more than $3 million over a three-year period.
  • Permanently enjoined on Sept. 1, 2023, a Texas tax preparer from preparing tax returns or assisting or directing the preparation or filing of tax returns. The court also ordered the Lone Star State man to pay around $325,000 to the United States in ill-gotten tax preparation fees.

The Tax Division also succeeded in stripping fraudulent preparers of ill-gotten gains and in holding in contempt those who attempted to flout court-ordered restraints on further fraudulent activity. Among the cases last year were judgements against dishonest Florida preparers in West Palm Beach and Miami, and in the Houston, Texas, area.

Criminal convictions, too: The DoJ also highlights some of the criminal convictions against fraudulent preparers that its Tax Division obtained since the 2023 filing season began.

Two California men were sentenced in February 2023 to 34 months and 42 months in prison, respectively, for their roles in a Paycheck Protection Program (PPP) conspiracy to prepare and file false tax returns for professional athletes. Both were also ordered to pay over $38 million in restitution from the COVID-era tax break scheme, which officials said produced a total of $44 million in lost tax revenue.

Two Texas return preparers were sentenced in March 2023 to more than four and three years in prison, respectively, for their roles, as part of their tax return business, in preparing and filing false tax returns on behalf of clients. Each also was ordered to pay nearly $1 million in restitution.

A South Carolina woman who had operated as a tax return preparer in Miami was sentenced in August 2023 to more than three years in prison for her role in filing false tax returns that claimed false losses and tax credits on behalf of clients. She was also ordered to pay $423,917 in restitution.

Three Mississippi men were convicted in November 2023 for their roles in conspiring to file thousands of false income tax returns on behalf of customers of the tax return preparation business where they worked. The total tax revenue loss, say federal prosecutors, came to more than $3.5 million. One Magnolia State man was sentenced to more than eight years in prison, the second to more than four years, and the third to 15 months in jail.

A Maryland return preparer was sentenced in December 2023 to more than two years in prison for filing false returns for clients. He was also ordered to pay $268,634 in restitution.

DoJ's ongoing efforts: The DoJ also had a warning for unscrupulous tax preparers out there still plying their shoddy trade.

"Tax preparers contemplating filing false returns for their customers should know that our criminal prosecutors are prepared for the filing season too," said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department's Tax Division.

"As the division's work this past year reflects, we have the expertise and resources to identify and hold preparers fully accountable for their criminal conduct," added Goldberg.

Final cost falls on filers: Uncle Sam's law enforcement officials and prosecutors also have a word of warning for us taxpayers seeking professional filing help.

"Taxpayers must look out for unscrupulous preparers, who often will promise refunds that are too good to be true," said Deputy Assistant Attorney General David A. Hubbert of the Justice Department's Tax Division.

"If your tax preparer asks you to sign a blank return, refuses to sign your return as your preparer or fails to give you a copy of your return, consult the IRS website to make sure that you are not exposing yourself to trouble," added Hubbert.

Hubbert also reminded us that while dishonest tax preparers will pay a price, so could the taxpayers that they represent.

The filing taxpayer is ultimately are responsible for the information on a federal tax return, regardless of who completed the form. So, Hubbert pointed out, "it is important to choose a tax professional that you trust to prepare your returns correctly."

In addition to the ol' tax blog's posts linked earlier on how to find and check out a tax professional, you can find tips at on Choosing a Tax Professional and its tax topic on How to Choose a Tax Return Preparer.

You also should check out the IRS' free directory of credentialed federal tax preparers.

3tax felon friday_smallerTax Felon Friday: If you want to catch up on other tax miscreants that have been taken down by Uncle Sam's tax investigators and federal prosecutors, the ol' blogs' aforementioned Tax Felon Friday page is a good place to start.

And if you want more tax crime posts, notably those that were published long before I gave them a special end-of-week feature, you can peruse, what else, the tax crimes category.

You'll find this post at the top of that collection right now, so just scroll down for more.

You also might find these items of interest:



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