Some Tax Preparers Falsify Clients’ Earnings to Turn a Larger Profit

Every year the Internal Revenue Service obtains tax returns that indicate a lot more income than was truly earned, sometimes showing double the actual earnings. That seems peculiar at first glance – why would anybody indicate they earned more than they actually did?

The answer is that Congress has made a motivation for the poorest of working people to report more than what they really made. Doing so can add up to more than $3,000 for poor working parents due to a form of negative income tax known as the Earned Income Tax Credit that distributes government money to impoverished working people.

Yet it is not the impoverished who are falsifying their returns. The issue is with devious income tax preparers, IRS Taxpayer Advocate, Nina E. Olson, and others have said. Creating fake income allows dishonest tax preparers to charge higher fees and helps draw in new clients as people hear about others receiving huge returns.

Last month the Justice Department sued to put out of business what it described as a countrywide amass of tax fraud mills that reported falsified incomes and usually did not even bother to tell people it was filing tax returns for them.

The IRS and the Justice Department recognized an issue with tax preparers inflating incomes a long time ago. Unethical tax preparers exist in big and small firms alike. Failing to come down hard on the abusers provides a big setback for honest tax preparers, whose clients don’t know about the complexities of tax and simply hire the firms that promise the biggest refund.

DISHONEST TAX PREPARERS

The issue of exaggerated incomes is not with dishonest poor people, but with deceptive tax preparers.

Nancy Abramowitz, director of the American University Washington College of Law’s tax clinic for the impoverished, said she has never heard of any individuals who had exaggerated their own income to receive a larger tax credit. “It’s always unscrupulous preparers,” she said.

Since companies confirm salary, tax preparers commonly balloon incomes by making a fake Schedule C, the tax form used by several small businesses because it is not verified unless you are facing a tax audit.

When hiring any company that provides financial services, it is important to do your research and make sure you are in the hands of qualified and trustworthy individuals. If anything seems “too good to be true”, it usually is. If you are facing IRS problems, don’t hesitate to call the knowledgeable staff at JG Tax Group. Our goal is to provide you with expert help in order to help secure your financial future.