News 12 This Morning; February 18, 2009
How to Choose a Tax Preparer and Avoid Preparer Fraud
Charlotte Field Office - IRS-CI Special Agent in Charge of the Charlotte Field Office, Jeannine A. Hammett would like to caution everyone when selecting a return preparer. She stated, “Knowingly falsifying documents filed with the IRS is a crime. Dishonest return preparers use a variety of methods to cheat the government. It is your responsibility to know what is on your income tax return. You are ultimately responsible.”
Return preparer fraud 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, for example, manipulate income figures to fraudulently obtain tax credits, such as the Earned Income Tax Credit. In some situations, the client, or taxpayer, may not know of the false expenses, deductions, exemptions and/or credits shown on his or her tax return. However, when the IRS detects a fraudulent return, the taxpayer — not the return preparer — must pay the additional taxes and interest and may be subject to penalties.
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 refund.
• Use a reputable tax professional who signs the tax return and provides a copy.
• Consider whether the individual or firm will be around to answer questions about the preparation of the tax return months, or even years, after the return has been filed.
• Check 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 friends and family whether they know anyone who has used the tax professional and whether they were satisfied with the service they received.
Here are recent tax fraud investigations conducted by the Charlotte Field Office IRS Criminal Investigation Division:
High Point man sentenced on tax charges
On September 24, 2008, in Greensboro, NC. High Point man will serve 56 months in federal prison after he was sentenced Tuesday on income tax charges. The sentence for Marcellus Thomas, 44, includes one year of supervised release but no fine. He was convicted June 6 in federal court in Greensboro on 11 counts of filing false federal income tax returns. According to the U.S. Attorney's Office, Thomas prepared tax returns as the operator of company called Refund Recovery Group in High Point. From 2002 to 2004, Thomas claimed nonexistent income for his clients on their tax returns from fictitious businesses such as hair salons and daycare centers. Most of his clients were unemployed and living in public housing. According to the federal attorney, Thomas used this fake income to claim refunds under the Earned Income Tax Credit to which his clients were not entitled. Thomas also did not identify himself on the returns as the tax preparer. Thomas received refunds from the IRS of between $1,377 and $2,726.
Four Rocky Mount employees are sentenced to jail today for tax fraud
On January 8, 2009, in Wilmington, NC. Pamela Evans, Bertha Battle, Tasha Battle, and Gwendolyn Evans plead guilty to conspiring to defraud the government and file false claims. All four worked at Independent Tax Service and admitted to making false claims for refunds for the IRS. Their sentences range from home confinement to 15 months in jail. The women conspired to file tax returns that inflated wages and withholdings for clients. They also sold fraudulent dependent information to clients to help them qualify for larger refunds.
North Carolina Professional Tax Return Preparer Sentenced to 70 Months
On Feb. 28, 2008, in Charlotte, N.C., Lloyd Anthony Bastfield, a professional tax return preparer for approximately 18 years, was sentenced to 70 months in prison and ordered to pay $6 million in restitution. Bastfield pleaded guilty in April 2007 to conspiring to defraud the United States by filing false tax returns claiming nearly $6 million in false claims for refunds for individuals between 2001 and 2005, and evading over $171,000 in personal income taxes owed by him for the years 2000 through 2004. According to a Bill of Information, Bastfield admitted that between 2001 and 2005, he prepared and electronically filed more than 10,000 fraudulent income tax returns for individual clients which claimed false and fictitious education income tax credits.
3 Jackson Hewitt employees sentenced for false tax returns
On November 16, 2007, in Raleigh, NC., Three former employees of the tax preparer Jackson Hewitt have been sentenced to more than one year in prison for submitting false tax returns. Forty-year-old Dennis Lee Best of New Bern was sentenced to 41 months in prison. Forty-one-year-old Karen Renay Raynor of Vanceboro was sentenced to 24 months in prison. And 40-year-old Linda Davis Sutton of Vanceboro was sentenced to 12 months and one day in prison. Prosecutors say that in 2003 the three employees used fake employment information to submit false tax returns requesting refunds in excess of $150,000. The government said in April that it was targeting more than 125 Jackson Hewitt tax preparation stores in four states, including North Carolina, for systematic "tax-fraud schemes." Jackson Hewitt is the nation's second-largest tax preparer after H&R Block.
Reporting Suspected Tax Fraud Activity
Tax fraud or abusive return preparers can be reported to the IRS on Form 3949-A, Information Referral. This form is available as a download from the IRS Web site at IRS.gov or by calling (800) 829-3676 to order by mail. The completed form, or a letter detailing the alleged fraudulent activity, should be sent to Internal Revenue Service, Fresno, CA 93888. The mailing should contain specific information about the individual or business, the activity, when the alleged violation took place, the amount of money involved, how the reporter became aware of it and any other information that might be helpful to an investigation. The identity of the person filing the report is not required but it could be helpful in an investigation and it can be kept confidential.
Rewards based on the amount of additional tax, penalties and interest owed can be made to individuals who report fraud. Form 211, Application for Award for Original Information, can be used to claim a reward. The IRS’ Whistleblower Office will make the final decision about whether an award will be paid and for how much. Award amounts are based on the value of the information you provided compared with the amount of additional tax, penalties and interest collected by the IRS.