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Near the beginning of 2019, Arizona tax preparer Karen Hernandez, 26, was indicted on charges of falsifying tax returns, which she altered without notifying her clients or obtaining their consent. Taxpayers who trusted Hernandez to report accurate information “were unaware that false information was included in their returns.” Hernandez, a former employee of the Phoenix business Tax Xpress, altered nine returns that she filed on behalf of clients for the 2016 and 2017 filing seasons, adding false itemized deductions that enabled her to charge higher fees. In October, the Arizona Department of Revenue announced that the former tax preparer had been ordered to serve three years of probation and compensate her victims – who, it may surprise readers, were still held liable for the taxes and interest owed due to Hernandez’s tax fraud.
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According to the Arizona Department of Revenue, “During the 2016 and 2017 tax filing seasons, Hernandez prepared nine false returns while working at Tax Xpress” in Phoenix. One of Hernandez’s methods was to falsely claim deductions on Schedule A (Form 1040 or 1040-SR, Itemized Deductions), which provides spaces for taxpayers to claim medical and dental expenses (such as doctor visits); taxes paid (such as state income taxes, which in California are collected by the Franchise Tax Board); interest paid (such as home mortgage interest); gifts to charities (which may also trigger a Form 8283 (Noncash Charitable Contributions) filing requirement); “casualty and theft loss(es) from a federally declared disaster”; and “other” itemized deductions that do not fit into the previous categories. “By including a Schedule A with false itemized deductions,” the Arizona taxing authority explained, “Hernandez would increase her fees.”
By submitting false information on their tax returns, Hernandez not only cheated the state, but also victimized several clients. Through no fault of their own, these taxpayers either received excessive refunds or were charged less than they actually owed in state taxes. However, though Hernandez’s actions are now known to the taxing authorities, “The affected taxpayers will have to file amended returns and [will still] be responsible for the additional taxes due along with interest.”
While that may seem unfair to the victims, they won’t be paying any extra expense out of their own pockets. Hernandez must pay restitution to compensate her former clients’ costs, including “the cost of preparing amended returns.” In total, Hernandez was fined $11,000.
With April 2020 just a few months away, taxpayers and tax preparers should beware audit season. As a new filing season approaches, Hernandez’s case is a timely warning to tax preparers and taxpayers alike. For tax professionals, the message is to comply with the law or face severe penalties, in addition to career damage which may be irreversible. For taxpayers, the message is to choose your tax preparer carefully. As Attorney General Mark Brnovich cautioned, “By signing the return, you are agreeing that all information on the return is correct and factual,” making careful and thorough review imperative.
At the Tax Law Office of David W. Klasing, we are California tax preparers with more than 20 years of experience, numerous client testimonials, a perfect A+ rating from the Better Business Bureau, and nationwide recognition as a leading tax firm for businesses and individuals. We have been featured by Fox Business and American Express, because we are trusted authorities in our industry. Serving taxpayers throughout California, across the U.S., and overseas, our IRS tax lawyers deliver zealous, 24/7 legal and accounting services targeted to your needs. Contact us online today to arrange a reduced rate consultation or call the Tax Law Office of David W. Klasing at (800) 681-1295.
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