The IRS protects taxpayers too!
Most accountants think of tax scams as those perpetrated against the IRS by unscrupulous taxpayers. And of course that does happen. But the IRS also protects taxpayers against fraud. Every year the IRS publishes its Dirty Dozen tax scam list. In 2010, while nine of the list still concentrate of taxpayer scams, three concern educating taxpayers against fraud.
Phishing
Phishing is any scheme that attempt to gain personal information for means of identity theft. I think every accountant in Wilmington had clients asking about simulated IRS E Mails this year. For awhile, these E Mails played on greed, offering refunds to the tax payer if they would provide proof their social security number, address, bank account information etc. Remember your accountant can verify if the IRS is actually contacting you. The IRS put out lots of PR to help folks avoid these schemes.
“Just good common sense avoids most of these scams.”
Gary Bode, CPA
Accountant, Wilmington NC
Return Preparer Fraud
Unfortunately, there are unscrupulous tax return preparers out there. While this could be as innocent as the accountant filling in a missing figure, based on common sense and last year’s return, it can transcend into fraud against the taxpayer too, not just the IRS. See previous post on a unique scam by a Wilmington NC bookkeeper. See my Frivolous Positions post to for common tax return claims the IRS finds unacceptable. Apparently accountants use these prohibited tax positions and charge good fees to do so.
Other common sense precautions:
- Beware of accountants offering refunds through some special tax secret. You can call the IRS or walk in to the local Wilmington NC office on Jackyl off of Randall Parkway.
- Avoid accountants who base their fee on a percentage of the amount of the refund. This is defined as unethical by the NC CPA Board for example.
- Find out if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics. CPAs are accountants who have been certified through extensive testing, background, character reference. Their ongoing licensure depends on a strict code of ethics and Continuing Professional Education.
- Apparently accountants skim refunds too. Probably through those fast RALs, Refund Anticipation Loans, which allow the accounting and loan fees to be taken off the top before remitting to the client. BTW these RALs charge usurious interest rates generate huge profits for the bank and accountant. Hundreds of dollars that could and should go into the taxpayer’s pocket.
- Understand your fees and pay close attention to costs.
- Never sign a blank return.
- Review your return carefully. A good accountant is happy to help you understand it, or at least we are.
The IRS is vigorous about stopping and punishing accountants and other tax preparers who prey on taxpayers. Fines can be stiff, the ability to practice before the IRS can be suspended and criminal charges can be pressed against the accountant.
Zero Wage Scams
Even though the IRS doesn’t list this as preparer fraud, it seems to me only accountants with some tax background could perpetrate them. Here a Form 4852 (the Substitute Form W-2) is attached to the Form 1040 showing less wages than the original W-2. The accountant includes an explanation on the return that the employer submitted inaccurate information to the IRS and now refuses to change it. Perhaps using the pretense of fear over IRS consequences.
Similar tactics include the accountant using an incorrect “corrected” Form 1099 Misc showing lower non employee payments than the original. These zero return scams seem like they couldn’t work, but the IRS may be so over whelmed that some do slide by. The employer would have to be contacted and the “corrected” amounts verified as false. The expected amount of additional tax collected may be small. Etc.
The Softer IRS
Lately the IRS has tried to change its image through real reforms in taxpayer service. They’ve become more user friendly, especially since the recession. For example, because of the recession they allow the accountant to file an Installment Agreement, if you can’t pay all your tax at the time of filing, and it is pre-approved under certain conditions. Consumer protection against Phishing and unscrupulous accountants shows another side of the most feared agency in America.
For a free initial consult with a Wilmington NC CPA accountant, call us at (910) 399-2705.
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