As Tax Season winds down, it’s hard to not take a moment, when we peruse the latest Justice Department Tax Division news and not shake one’s head. Seemingly daily, unscrupulous tax “professionals” are being sentenced to prison for all types of fraud.
Now, there’s no “news” in this, people have attempted to subvert taxation for centuries all over the world, btu what seems so shocking is how many seemingly highly educated and skilled men and women do this NOT just to save a few dollars for themselves, but do it in a rather wholesale fashion for anyone who will pay them.
We’ve talked about this over and over again in these pages and in emails, but today, let’s take a quick moment to recognize this issue is so large these days the IRS has a term for it. They call it the “Dirty Dozen” of tax schemes, and while some focus on stealing information or data from tax professionals and others on protecting high-net-worth individuals, most of them focus on unscrupulous tax preparers (it’s hard to call a thief a “professional”) misappropriating or misrepresenting a taxpayer’s information for personal gain. It’s true that in many of these types of schemes, the taxpayer receives some type of financial benefit, but the real winner is the preparer or their business.
Inevitably, these same types of schemes focused on misappropriating Covid relief funds a few years ago, but, a quick review of the cases recently tried in Tax Court shows roughly two of every three cases heard revolve around some type of fraud being actively managed or planned from a tax preparer.
In some cases, those folks are highly credentialed, extremely “seasoned” and experienced in the world of accounting and taxation, and it can be extremely hard for “normal” citizens to say no to the idea of “free” money. Personally, we find it difficult to believe any tax preparer would intentionally tell a client they are going to misrepresent information on a return, so our advice? If it sounds to good to be true? It probably is!