How to Commit Tax Preparer Fraud
This morning, I was finishing up this week's MarketWatch article about the Homebuyer's Credits. (Youcan read it tomorrow.) Just as I was finishing up the article, I read one of today's features in AccountingWeb.com
Justice Department announces indictment, lawsuits targeting false tax credit claims
I don't get it. Perhaps someone can explain this to me? Why would a tax professional go out an commit this kind of tax fraud?
OK, I can understand making mistakes once in a while. We all do. After all, we all know that we can pick up anyone's tax return, including one of our own from a prior year, and seeing it with different eyes, find a way to do things differently or better.
I can understand being out there on your own, without the benefit of a firm with partners and staff to do research for you, and you don't really understand all the tax matters that come before you. Though, those are times to either refer the client out, or consult with other tax pros who can train you or guide you.
I can even understand preparing fraudulent tax returns where YOU collect/steal millions of dollars for your own account - then leave the country, never to return.
But I can't understand why you would prepare this volume of falsified tax returns for clients - or just a few for yourself. Look at these cases:
1) John Brownlee - 16 counts of fraudulent homebuyers credits that he stole. Assuming $8,000 for each one x 16 = $128,000. Huh? That's all? Why bother? For this, he's facing 80 years in prison and $4 million in fines.
2) Jose Cabrera claimed $985,000 for clients. Assuming an average of $5,000 each, that's about 200 tax returns. What did he get paid by these people? $100? $500? Best case, he collected $100,000 for tax returns he would have done anyway, even without the credit. So, what, he earned an extra $50,000 by falsifying the credit and stealing a million dollars from taxpayers? Hmpf. Hardly worth the bother.
3) Friday James hit the Treasury for $1.2 million. Assuming the same average of $5,000, that's about 240 tax returns. He earned what? Best case, about $120,000 - and now he's barred from ever preparing tax returns again. There goes his livelihood - and who knows what other penalties he faces.
The list goes on.
Isn't it easier to just make a living legitimately, and keep clients, long-term, by helping them build savings little by little, help them actually get real homes instead of faking up homes?
Let's face it, we all make mistakes. But is it worth it to help our clients rip off the system for a measly fee?
On the other hand, jail does provide nice, cozy, rent-free lodgings, free meals, access to libraries, Internet and TV. And all that time to work out and build your body! Perhaps it's a nice, alternate, stress-free lifestyle?
We all have a price.
Mine is $50 million in diamonds or rate postage, so they can be transported easily and invisibly - and pay for a whole new identity somewhere else. (The odds of anyone ever offering me that is beyond remote! Besides, why would I want to totally uproot my life and become a fugitive, just for money?)
Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.