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Tax Preparer Fraud Can Lead to Huge Fines and Criminal Penalties

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Tax Preparer Fraud Can Lead to Huge Fines and Criminal Penalties

Taxpayers understand that the U.S. Tax Code is complex, dense, and difficult to understand document. Furthermore, secondary sources like agency manuals are exhaustive and voluminous. In today’s day and age where people have multiple sources of income, a healthcare reporting obligation and associated potential subsidies & penalties, and yearly offshore disclosures many people realize that leaving their taxes to a trained professional is the prudent thing to do. Working with a trained tax preparer can give the taxpayer piece of mind while increasing the likelihood that the filing is comprehensive and accurate.

However, when a taxpayer selects a tax preparation professional, the taxpayer is entrusting that individual to act as a competent professional and to do the right thing. It is the taxpayer who, ultimately, remains responsible for the contents of the tax filing. This is because the taxpayer files his or her tax return under the penalty of perjury. Taxpayers who place their trust in a tax preparation specialist who makes outlandish promises or claims rarely has the taxpayer’s best interests at heart. Improper actions by a tax preparation specialist can lead to serious penalties for the tax preparer and potentially major tax problems for the taxpayer.

Tax Preparation Business Owner Indicted For Failure to File Personal Taxes

According to a press release by U.S. Attorney Joyce White Vance and Internal Revenue Service-Criminal Investigation Special Agent in Charge Veronica Hyman-Pillot, Eunice F. Plummer was charged with three counts of tax evasion.  Ms. Plummer is the owner of M&P Tax Services located in Birmingham, Alabama. According to prosecutors, Ms. Plummer failed to report all income from this business on her personal tax returns from 2011, 2012, and 2013. According to court documents, Ms. Plummer deposited funds from her business into an account held in a relative’s name. Such action was intended to conceal the income.

Under 26 USC § 7201, Attempt to evade or defeat tax, a taxpayer who intentionally or voluntarily attempts to defeat or evade the assessment of tax or the payment of tax due and owing is guilty of committing felony tax evasion. This crime can be punished by up to a five-year prison sentence and $250,000 in fines with the costs of prosecution added to the fines. In the case of corporation, the maximum fine increases to $500,000.

Tax Preparation Business Owner Also Faces Charges for Preparing False Returns for Clients

While the circumstances regarding these charges are not particularly clear, Ms. Plummer was also charged with seeking significant and improper tax refunds for M&P tax clients. In many cases where tax preparers face charges of this type, they had promised refunds regardless of the taxpayer’s finances in an attempt to build business. However, a tax preparer can never guarantee an exact or significant tax refund without first analyzing the taxpayer’s finances. Tax preparers who make such promises before even analyzing the client’s taxes may not have the taxpayer’s best, long-term interests in mind. Likewise, tax preparers who promise a larger refund than any other service may not have the taxpayer’s interests at heart.

Under 26 USC § 7206 any individual who willfully aids, abets, counsels, or advises a taxpayer in the preparation and filing of false or fraudulent documents in connection with the internal revenue laws, can face serious penalties. The tax preparer can face charges regardless of whether the taxpayer was aware of the fraud. Penalties can include up to a three-year federal prison sentence and a fine of up to $100,000 ($500,000 in the case of a corporation). The convicted individual must also cover the costs of prosecution.

Tax Preparer Enters Into Plea Agreement

Faced with multiple serious tax charges that could have resulted in a lengthy prison sentence, Ms. Plummer has entered into a plea agreement. Per the terms of the agreement, Ms. Plummer has stated that she will plead guilty to the charges in exchange for reduced penalties. She has agreed to pay restitution of more than $100,000 to satisfy unpaid income taxes from 2011 to 2013. She has also agreed to pay back nearly $70,000 from the fraudulent tax preparation scheme.

Taxpayers affected by Ms. Plummer’s scheme will likely face an increased audit risk due to their association with a tax preparation scheme. Furthermore, the taxpayers must correct their past filings or potentially face tax penalties, themselves.

Facing Tax Concerns Due to Tax Preparer Mistakes or Malfeasance?

Taxpayers who are facing tax issues due to mishandled income tax returns and other tax obligations can face serious penalties if the IRS believes the taxpayer willfully sought out such services or if the taxpayer fails to correct inaccurate filings. The Tax Law Offices of David W. Klasing can assist and provide options for taxpayers dealing with sensitive tax issues. To schedule a reduced-rate tax consultation, call our firm at 800-681-1295 or contact us online.