According to a press release by the Department of Justice, Texas tax preparer Chester Swanson pleaded guilty to a single count of preparing a false U.S. individual tax return. The guilty plea was part of a deal reached with federal prosecutors. Additionally, Swanson will pay restitution to the IRS and agreed not to prepare tax returns for taxpayers again.
According to court documents, Swanson owned and operated Chester’s Mobile Tax Service and served taxpayers throughout Texas. Prosecutors alleged that Swanson secured his clients improper refunds by inflating deductions such as medical expenses and donations to charity. Department of Justice officials estimated that Swanson’s illegal activity resulted in a tax loss of approximately $244,000, an amount that will be repaid in restitution as a part of the plea deal.
U.S. tax law places special responsibilities on those who prepare tax returns for others. Contrary to popular understandings, any person who prepares a tax return for compensation is a tax preparer. Thus, a family friend who is not a CPA or tax attorney that prepares a tax return in exchange for a de minimis compensation, such as lunch, is a tax preparer and can be criminally prosecuted if purposeful misstatements that typically understate taxable income are included on a filed tax return.
Even if a tax preparer is presented factually incorrect information that is used to prepare the return, he or she may still be criminally and civilly liable for aiding another in the commission of tax fraud if the preparer knew or had reason to know that the information was false. For example, if the tax preparer asks a taxpayer how much he gave to charity in the prior tax year and the taxpayer responds with “I don’t know, I’ll just make up a number”, the resulting charitable deduction could have been based on information that the preparer knew was fraudulent.
A tax preparer can be convicted if he or she makes a false material misstatement on a prepared tax return. Whether a misstatement is material is determined based on the type of information that was false rather than whether the misstatement caused the federal government a revenue loss.
Most tax preparers and taxpayers go about their business without intentionally or unintentionally violating federal law. Similarly, both parties typically don’t consider the need for a tax attorney until they are being investigated for criminal tax charges. A Criminal Tax Defense Attorney should be hired at the first sign of trouble. For taxpayers, that can be as soon as an eggshell audit or reverse eggshell audit is suspected. Tax preparers should seek advice from an Experienced Criminal Tax Defense Attorney if they believe that their preparation of a taxpayer’s return has led to a material misstatement of a material fact on such a tax return.
The Tax Attorneys and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience in representing taxpayers and tax preparers, alike. Whether you are facing an IRS audit or are already the target of a criminal tax investigation, it is always in your best interest to consult with an experienced Criminal Tax Defense Attorney to go over your circumstances and options. There are few financial events in a person’s life more anxiety inducing than an IRS audit or investigation. Do not lose another night’s sleep over the threat of a tax-related prosecution. Contact the Tax Law Offices of David W. Klasing today online or call our offices at 800-681-1295.
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