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Avoiding tax fraud by return preparers: be sure to review the return

The IRS comes out every year with a list of tax schemes it seeks to warn people about. It goes by the rather melodramatic name of "the dirty dozen." But it is instructive to review which topics the agency chooses to include. One of them is what the IRS calls "return preparer fraud."

This is a type of tax fraud that can occur when tax preparers take actions that encourage or induce taxpayers to engage in questionable tax tactics that cross the line into illegality. In California and across the country, the specific deductions, credits or exemptions that are improper vary from case to case. Sometimes preparers even take these improper steps with a taxpayer's full knowledge.

But taxpayers are responsible for their own returns. Even if a tax preparer filed it on the taxpayer's behalf, it still bears the taxpayer's signature - and the taxpayer can be held liable for tax fraud committed by the preparer.

Certain tax preparers may be motivated to get or keep a taxpayer's business by trying to obtain excessively large tax refunds for the taxpayer. To be sure, seeking all the refunds a taxpayer is entitled to through aggressive tax tactics is perfectly legitimate. But sometimes a tax preparer goes too far and takes deductions or credits that seem too good to be true.

In such cases, it's up to the taxpayer to review the return and raise appropriate questions of the preparer before signing it. Otherwise, the taxpayer could end up facing an unwelcome IRS audit or a tax fraud charge.

Source: "7 Things to check before you file your tax return," MSN Money, Eva Rosenberg, 3-26-13

To learn more about our firm's practice, please visit our page on tax fraud charges.

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