Be Wary of Unlicensed Tax Preparers

Taxpayers beware-unlicensed tax preparers can mean big trouble, leading to hefty fines and jail time for those who file fraudulent returns, the San Antonio Express-News reported.

With half of the 8.9 million signed returns filed in Texas last year coming from unlicensed tax preparers, the potential for fraud is huge.

It is critical to check the background of the person preparing individual returns, the IRS cautions. Certified public accountants and other IRS-licensed tax preparers must pass a test and meet certification requirements. In San Antonio alone, more than 1,600 unlicensed preparers completed returns, the Express-News reported.

"Unenrolled preparers are responsible for the most number of cases where filers get into trouble," Dianne Glass, the IRS's Taxpayer Advocate for South Texas, told the Express-News. "They don't have anyone to regulate them, any testing requirements, or any continuing education requirements to stay up on tax law."

Taxpayers should be wary of putting too much faith in their preparer, especially if they are unlicensed. One Texas tax preparer wrongly told clients they could deduct nonuniform clothing worn to work, toiletries, vitamins, gym fees, haircuts and mileage travel to and from work, the Express-News reported. She completed 788 returns using those deductions between 1999 and 20002 and was sentenced last year to three years in prison.

In some cases, those who are victims of unlicensed preparers can plead innocence, but don't expect too much mercy from the government.

"No matter who prepares the return, the filer is ultimately responsible," Harlan J. Carter, special agent in charge of the 50 IRS investigators in the San Antonio criminal investigation division, told the Express News. "If a filer goes with a preparer because he promises a big refund, not only will we prosecute the preparer but we will also go after the filer."

If the IRS suspects fraud, the penalties can include fines of up to $250,000 and as much as five years in prison.

You may like these other stories...

The Public Company Accounting Oversight Board (PCAOB) is interested in what you have to say about auditing accounting estimates and fair value measurements.The US audit regulator on Tuesday issued for public comment a staff...
Hertz withdraws full-year forecast, cites accounting review, challengesRental car company Hertz Global Holdings Inc. said on Tuesday it is withdrawing its full-year financial forecast and expects 2014 results to be “...
Treasury prepares options to address tax inversionsDamian Paletta of the Wall Street Journal reported on Monday that US Treasury Department officials are assembling a list of administrative options for Treasury Secretary...

Already a member? log in here.

Upcoming CPE Webinars

Aug 26
This webcast will include discussions of recently issued, commonly-applicable Accounting Standards Updates for non-public, non-governmental entities.
Aug 28
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.
Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Sep 11
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.