Many small business owners and individual taxpayers rely upon the advice and assistance of independent tax preparers. In recent years, the Internal Revenue Service has taken steps to regulate the tax preparer industry and now requires that all independent tax preparers obtain preparer tax identification numbers from the agency.
The IRS claims this new requirement is simply an attempt to keep track of and vet who is preparing taxes. However, even tax preparers who obtain a valid PTIN may be engaging in questionable or downright illegal tax return practices.
A woman who owned and operated the self-proclaimed "#1 Tax Lady business," was recently found guilty of 27 criminal counts related to tax fraud. According to officials from the U.S. Justice Department, for the tax years 2011 to 2014, the tax preparer filed 967 tax returns that contained fraudulent data and inflated tax return amounts.
Law enforcement officials contend the tax preparer's fraudulent acts resulted in "improper tax refunds of approximately $4 million." In addition to preparing false tax returns for clients, the preparer also failed to report income she earned through her tax business. She is currently facing up to 131 years in prison.
It's not clear how many of the tax preparer's clients knew about the fraudulent tax returns. However, considering that they appeared to be profiting from the willful errors, it's likely that many will also face criminal charges.
Upon filing a tax return, both a tax preparer and individual taxpayer are responsible for ensuring that all tax forms are accurate. Likewise, in the event the IRS determines that a tax return contains fraudulent information, both may face the consequences which include criminal charges, time in prison and harsh fines.
Source: Forbes, "#1 Tax Lady Found Guilty Of 27 Tax Felonies, Could Face 131 Years," Robert W. Wood, Dec. 10, 2015