The IRS Dirty Dozen 2015, #4: Return Preparer Fraud

An estimated 60% of taxpayers hire a tax preparer to prepare their annual tax return. While most of these tax preparers provide honest and competent service, every year there at least a few who violate their clients’ trust and spend the tax season engaged in identity theft, refund fraud and other scams. 

For example, on March 19th of this year the U.S. Attorney’s office announced that 54 year-old Karen Cartagena of Louisiana pled guilty to preparing a fraudulent tax return. Cartagena had previously been convicted of preparing false income tax returns and now faces up to three years in prison and a $250,000 fine.

Red flags of tax preparer abuse

Cartagena’s technique this time around was to claim educational and other tax credits to which her clients were not entitled.  In 2008 she was prosecuted for claiming deductions and losses that she knew her clients could not legally claim. She profited by charging fees above what she was permitted through her employment at Jackson Hewitt, and pocketed the difference. 

There are ways of identifying unscrupulous tax return preparers-following are a few things to look out for:

  • They claim that they can get you a larger refund than other preparers
  • They base their fees on a percentage of your refund
  • They offer you an immediate payment (this is a loan from the preparer, not a tax refund)
  • They put their bank account information on your return instead of yours (all deposits should go only into your account)
  • They ask you to sign a blank or incomplete tax form
  • They refuse to sign the return or to give you a copy for your records
  • Their preparer tax identification number (PTIN) does not appear on the return

Who is responsible?

The taxpayer is ultimately responsible for everything that appears on their return, even if a mistake was made by their CPA or tax preparer.  Quality tax professionals will not bend the rules and will remain available for you long after your return has been filed.  It is crucial that you carefully select a qualified and contentious individual who will work with you for many years.  Check your preparer’s professional credentials and get references. 

Moskowitz, LLP has a team of tax preparers, CPAs and an Enrolled Agent who are an integral part of our tax team.  Our in-house tax preparation department handles routine and complex tax returns and IRS reports and provides our tax attorneys with tremendous accounting insights. Our innovative approach to providing the entire scope of tax services in one office provides our clients with integrated and cost-effective management of all their tax matters.  


#5 on the IRS “Dirty Dozen” list of tax scams is Offshore Tax Avoidance, which we will cover in our next blog post in this series.