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January 20, 2015

TAS Helps Taxpayers Defrauded by Tax Return Preparer

Every year, the Taxpayer Advocate Service (TAS) helps thousands of people with tax problems. This story is only one of many examples of how TAS helps resolve taxpayer’s tax issues. All personal details are removed to protect the taxpayer’s privacy.

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Even with a cautious and thorough appraisal of a tax return preparer you’re considering hiring, it can sometimes be hard to tell an honest preparer from a dishonest one. Unfortunately, some preparers intentionally defraud taxpayers and the government by inflating income, deductions, credits, or withholdings without the taxpayers’ knowledge – with the goal of increasing the taxpayers’ refunds and diverting some or all of the refunds to the preparer’s own account.

In a recent case, an unscrupulous preparer had a taxpayer sign a return showing a significant balance due, then asked the taxpayer to write a check to the preparer with the understanding that the preparer would pay the balance when filing the return. After the taxpayer left the office, the preparer increased the expenses reported on the return, which decreased the tax owed. The preparer then kept the difference between what the return (falsely) showed the taxpayer owed and the check she received from the taxpayer.  If the return had been prepared correctly, the taxpayer would have received a refund.

In another case, this same preparer convinced a soldier fighting overseas that she could act as his power of attorney and file his return. The preparer claimed credits the soldier wasn’t eligible for, and secured a significant refund that she then diverted to herself while the soldier was told he didn’t owe anything.  Again, if the return had been prepared correctly, the taxpayer would have received a refund.

TAS made sure the IRS did not try to collect from these innocent taxpayers. Instead, after both taxpayers filed correct returns, the IRS paid the refunds they were legally due, and thanks to TAS did not assess penalties. The preparer has since been convicted by a federal court and sentenced to prison.

Learn more about Return Preparer Fraud and Identity Theft. Also, get tips on choosing a tax preparer.

If you need information on a specific tax topic, visit the TAS Get Help resource. It offers a step-by step guide on what you can do to settle some IRS issues on your own, what your taxpayer rights are and other options available to help you get resolution. Most issues can be resolved directly by working with the IRS. However, if you have tried, but are still unable to resolve an IRS issue, learn more about whether TAS can help you: TAS eligibility.

When working with the Taxpayer Advocate Service, each individual or business taxpayer is assigned to an advocate who listens to the problem and helps the taxpayer understand what needs to be done to resolve their tax issue. TAS advocates will do everything they can to help taxpayers and work with them every step of the way. Occasionally we feature stories of taxpayers and advocates who work together to resolve complex tax issues. Read more TAS success stories.