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IRS Loses Millions to Tax Fraud!
How does that headline make you feel?
One of my last assignments as a Tax Audit Supervisor for the Internal Revenue Service was to manage my group of auditors working on what we called a QP Project, a Questionable Preparer Project.
When tax returns are filed the IRS computer takes the information and scores each return. There is a secret formula called DIF or Discriminant Function. When I worked at IRS we thought DIF stood for Discriminant Information Formula.
Each tax return stands alone and is scored on its own merit. The returns can also be compared to other returns from the same general area. The returns may also be compared by occupation or industry. Trends are identified.
When a preparer is thought to be questionable, IRS looks at ALL the returns signed by that preparer. Paid preparers must sign the returns they prepare. When you pay someone to prepare your return but they don’t include their name and signature or if it says “self-prepared”, that preparer is breaking the law.
In my particular project, IRS determined that the returns prepared by a particular preparer had many things in common. Today we cannot deduct our auto loan interest, but back then we could. Every single one of this man’s clients claimed interest paid to Ford Motor Credit. Some of those taxpayers did not even have a car loan at all!
The clients were all very generous both with cash and with non-cash items. Just about every return claimed $500 of non-cash contributions. This is the maximum deduction allowed before an extra schedule is required to be filed with your 1040 return. Know this: you are STILL required to be able to prove, document, or support every entry reported on your tax return.
This is just one of many recent stories. A former Alabama tax preparer was sentenced to three years in prison PLUS one year of probation. AND she was ordered to repay more than $322,800 to the US Treasury for aiding and abetting (helping) the filing of false income tax returns.
Sally Elizabeth Wynn, age 65, had prepared tax returns for 20 years. For tax years 2005, 2006 and 2007 she did the bookkeeping for Gonzalez Construction. She knew the owner was not reporting all of his income on his personal tax return. Jose Gonzalez received at least $340,000 each year, but only reported between $55,000 and $66,000. Both the taxpayer and the tax preparer are involved in signing and filing these tax returns. Mr Gonzalez still faces criminal charges for his role in these crimes.
As your tax preparer I want you to pay only your fair share of tax. I want you to pay your lowest legal tax. I want to help you take every allowable advantage. I will help you Beat the IRS, but I will not help you cheat the IRS. I will protect you and I will protect my professional standing. You and I will not see our names splashed across the headlines for anything like this.
Always to your lowest legal tax,
Nellie T Williams, EA