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Fraud of Tax Preparers: How They Cheated the IRS

June 11, 2013

Taxpayers who get their tax returns prepared by a professional should be wary of fraudulent preparers who deceive taxpayers to make quick money. Sometimes, however, there is a twist to the tale. In a recent busting of fraudulent tax preparers, it was found that taxpayers conspired with tax professionals to prepare and file fraudulent tax returns with the IRS.

The case of three tax preparers in Prince George’s County is not unique. Many taxpayers try to minimize their tax liability by using unfair means. In this case, they did it with the help of professional tax preparers.

Marvin Binion, his son and his ex-wife are charged with preparing fraudulent tax returns by claiming false deductions for miscellaneous expenses, including charitable contributions and unreimbursed employee business expenses. The preparers did not place their Preparer Tax Identification Number (PTIN) on the tax returns they filed, presumably to remain anonymous.

They charged a fee of $300 for every tax return prepared using tax software. According to the government, they allegedly earned about $30,000 a day. To remain hidden, they used a service named Universal Tax Service. After preparing the returns, they instructed taxpayers to sign and mail the returns to the IRS.

Tax fraud is a federal crime, which is punishable under law by penalties and/or imprisonment. After tax fraud by tax preparers became rampant, the IRS began to require every practicing tax preparer to have a PTIN. Tax preparers are required to enter this unique identification number on every tax return they prepare to help the IRS track tax preparers in case of fraud.

It is important for taxpayers to know that the IRS becomes suspicious of tax returns with no PTIN. Apart from the fact that such returns get rejected, not having a PTIN on a return may lead the taxpayer into trouble with the IRS. Therefore, taxpayers must ensure that they comply with the tax laws to avoid any problems.

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