There appears to be no end to the phenomenon of abusive tax return preparers claiming refunds for which their clients do not qualify. So once again, inflated refund claims makes the annual IRS Dirty Dozen list.
Hardly cheaper taxes
Austin Ray and Anne Rasamee were co-owners of Cheapertaxes, LLC, a Denver, Colorado tax preparation service. From March 2006 through April 2010, Ray and Rasamee prepared fraudulent tax returns by increasing expenses and/or deductions in order to inflate their clients’ tax refunds. They accomplished this by analyzing the tax summary computed by their tax software and manipulating the numbers. If a client could not pay their tax preparation fee, Ray and Rasamee would take it out of their refund, which was paid to the Cheapertaxes bank account. The couple used the funds from that account to pay their living – and luxury – expenses. In an attempt to conceal their identities, Ray and Rasamee listed a third party as the tax return preparer.
On January 20, Rasamee pled guilty to conspiracy to defraud the United States, which carries a penalty of up to five years’ imprisonment and a maximum $250,000 fine. Ray was also convicted of conspiracy and for preparation of false returns, which carries a penalty of up to three years imprisonment and up to a $250,000 fine.
Ramifications of filing a fraudulent return
The IRS has been extremely aggressive in identifying, investigating and prosecuting unscrupulous tax preparers, and stories of arrests flood the media. However, many taxpayers still fail to recognize that they – and not the tax preparer -are the ones who are ultimately responsible for the accuracy of the information on their returns.
Filing a fraudulent return is a federal crime with severe ramifications:
- Demand for an immediate repayment of the refund
- Loss of any legitimate refund that the taxpayer is owed
- Penalties may be imposed for filing a false claim
- Possible loss of federal benefits, including veteran’s benefits
- Criminal investigation and possible fraud charges (note that the IRS prosecutes roughly 75% of the tax fraud cases that it investigates)
Taxpayers must be scrupulous in their choice of a tax preparer. In California, tax preparers must meet the required educational requirements, file a $5,000 tax preparer bond, and register with the California Tax Education Council (CTEC), which has an online registered tax preparer verification system.
Moskowitz tips for getting the biggest tax refund
Here are the Moskowitz, LLP tips for getting the biggest tax refund:
- Track all your business expenses, carefully organizing your receipts.
- Track your household expenses, particularly childcare, medical and tuition expenses.
- Remember that alimony is deductible.
- When you donate to charity, give to registered 501(c)(3) charitable organizations and bring your receipt to your accountant.
- Make sure that you are using the correct filing status.
- Review the tax deductions and credits listed on the IRS website and discuss with your preparer to which you are entitled.
Before meeting with a tax preparer, verify that they are licensed and bonded. Don’t fall for promises that they can get you a larger refund than someone else. When your return is complete, get a copy of your tax return as filed and make sure that your tax preparer’s name and PTIN are on it. And always make sure that your refund will be paid directly to you.
If you are in a dispute with the IRS, call a highly qualified tax attorney for advice.