Tax Return Preparer Fraud

FS-2008-10, January 2008 Return preparer fraud generally involves the preparation and filing of false income tax returns by preparers who claim inflated personal or business expenses, false deductions, unallowable credits or excessive exemptions on returns prepared for their clients. Preparers may manipulate income figures to fraudulently obtain tax credits, such as the Earned Income Tax Credit. In some situations, the client, or taxpayer, may not have knowledge of the false expenses, deductions, exemptions and/or credits shown on his or her tax return. However, when the IRS detects the false return, the taxpayer — not the return preparer — must pay the additional taxes and interest and may be subject to penalties. The IRS Return Preparer Program focuses on enhancing compliance in the return-preparer community by investigating and referring criminal activity by return preparers to the Department of Justice for prosecution and/or asserting appropriate civil penalties against unscrupulous return preparers. While most preparers provide excellent service to their clients, the IRS urges taxpayers to be very careful when choosing a tax preparer. Taxpayers should be as careful as they would be in choosing a doctor or a lawyer. It is important to know that even if someone else prepares a tax return, it is the taxpayer who is ultimately responsible for all the information on the tax return. Helpful Hints When Choosing a Return Preparer Be cautious of tax preparers who claim they can obtain larger refunds than other preparers. Avoid preparers who base their fee on a percentage of the amount of the refund. Use a reputable tax professional who signs your tax return and provides you with a copy for your records. Consider whether the individual or firm will be around to answer questions about the preparation of your tax return months, or even years, after the return has been filed. Review your return before you sign it and ask questions on entries you don't understand. No matter who prepares your tax return, you, the taxpayer, are ultimately responsible for all of the information on your tax return. Therefore, never sign a blank tax form. Find out the person’s credentials. Only attorneys, certified public accountants (CPAs) and enrolled agents can represent taxpayers before the IRS in all matters including audits, collection and appeals. Other return preparers may only represent taxpayers for audits of returns they actually prepared. Find out if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics. Ask questions. Do you know anyone who has used the tax professional? Were they satisfied with the service they received? Reputable preparers will ask to see your receipts and will ask you multiple questions to determine your qualifications for expenses, deductions and other items. By doing so, they are trying to help you avoid penalties, interest or additional taxes that could result from an IRS examination. Further, tax evasion is a risky crime, a felony, punishable by five years imprisonment and a $250,000 fine. For more information, visit the IRS Website

5 Things You Need to Know about Life Insurance

Inflation and Housing

FTC Releases List of Top Consumer Fraud Complaints in 2007

The FTC today released the list of top consumer fraud complaints received by the agency in 2007. The list, contained in the publication “Consumer Fraud and Identity Theft Complaint Data January-December 2007,” showed that for the seventh year in a row, identity theft is the number one consumer complaint category. Of 813,899 total complaints received in 2007, 258,427, or 32 percent, were related to identity theft.

The report breaks out complaint data on a state-by-state basis and also contains data about the 50 metropolitan areas reporting the highest per capita incidence of fraud and the 50 metropolitan areas reporting the highest incidence of identity theft.

The report states that credit card fraud was the most common form of reported identity theft at 23 percent, followed by utilities fraud at 18 percent, employment fraud at 14 percent, and bank fraud at 13 percent.

Consumers reported fraud losses totaling more than $1.2 billion; the median monetary loss per person was $349, the report states.

The top 20 complaint categories were:
Rank

Category

Complaints

%
1 Identity Theft 258,427 32
2 Shop-at-Home/Catalog Sales 62,811 8
3 Internet Services 42,266 5
4 Foreign Money Offers 32,868 4
5 Prizes/Sweepstakes and Lotteries 32,162 4
6 Computer Equipment and Software 27,036 3
7 Internet Auctions 24,376 3
8 Health Care Claims 16,097 2
9 Travel, Vacations, and Timeshares 14,903 2
10 Advance-Fee Loans and Credit Protection/Repair 14,342 2
11 Investments 13,705 2
12 Magazines and Buyers Clubs 12,970 2
13 Business Opportunities and Work-at-Home Plans 11,362 1
14 Real Estate (Not Timeshares) 9,475 1
15 Office Supplies and Services 9,211 1
16 Telephone Services 8,155 1
17 Employ. Agencies/Job Counsel/Overseas Work 5,932 1
18 Debt Management/Credit Counseling 3,442 <1
19 Multi-Level Mktg./Pyramids/Chain Letters 3,092 <1
20 Charitable Solicitations 1,843 <1

The FTC collects consumer fraud complaints from more than 125 other organizations and makes them available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad via Consumer Sentinel, a secure, online database. In 2007, the FTC received almost 140,000 more consumer fraud complaints than in 2006. These additional complaints came from numerous data contributors, primarily the Better Business Bureaus.

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, click http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. For free information on a variety of consumer topics, click http://ftc.gov/bcp/consumer.shtm.