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Stupid Tax Preparers Cause Problems for Their Clients

By Stacie Clifford Kitts

I’m always interested in reading about the latest tax scams. And no matter how many I read about, I am always amazed at how some tax preparers and their clients are willing to face jail time and crippling fines in order to evade paying income tax.

For me, reading press releases from the Department of Justice is like watching a tax preparation train wreck. The blatant stupidity of some preparers is genuinely mind numbing.

A recent favorite concerns a Connecticut woman who took over her father’s tax practice following his incarceration. According to the information I found on Findlaw.com , it looks like daddy was producing counterfeit checks from his place of business. The same business where he was also preparing bogus tax returns.

I can’t help but wonder what she told her father’s clients that persuaded them to stick around. Ummmm sorry my dad’s in jail – but no worries, I can still prepare tax returns for you….. Nor can I understand the mentality of someone who after watching her father go to jail would decide that taking over any business of his was a good idea. Hello – wake up.

Not surprisingly, after her father’s incarceration, the IRS started a tax preparer investigation where the IRS audited over 600 returns she and her father prepared. As a result of the investigation, this woman decided it would be a good idea to file amended returns for all her clients moving the bogus deductions that had apparently been claimed on the returns from Schedule C to Schedule A. Ummmm, bogus is bogus no matter what schedule they’re on. Dah. Did she think this would confuse the IRS into giving up?

But then her behavior gets even more bizarre when she informs her clients that the IRS does not have the authority to conduct examinations of Connecticut resident’s tax returns. Okay, what is so special about Connecticut? And if you’re wondering – yes – the IRS has jurisdiction in Connecticut and in all the other US states and districts and territories.

She also told her clients that since the clients lived in the US and not a foreign country they were not subject to US income tax. Then she proceeded to mail letters to the IRS stating this frivolous position. Yikees! Okay, let me clear this up. If you live in the US, and sometimes even when you don’t, and you are making money or your business is profitable, you are subject to income tax.

Unfortunately, it’s not just the crazy out of control tax preparer who will suffer from this train wreck. Her clients are now responsible for paying the additional taxes and associated penalties and interest that resulted from the audits of their returns. And at least one client had to barrow against their house to pay the debt to the IRS.

Federal Court Bars Ohio Accountant from Selling Oil and Gas Tax Scheme (August 4, 2008)
Statement of Deputy Assistant Attorney General John A. DiCicco on the Decision in Stobie Creek Investments, LLC v. United States (August 1, 2008)
Founders and Principals of Global Prosperity Sentenced for Tax Crimes (July 29, 2008)
U.S. Seeks to Permanently Bar Orlando, Fla., Tax Return Operation (July 22, 2008)
Federal Court Bars Southern Californian from Promoting Payroll & Trust Tax Schemes (July 21, 2008)
District of Columbia Tax Preparer Sentenced to Jail for Conspiracy (July 17, 2008)
Former Chief Financial Officer of Catholic Diocese of Cleveland Convicted of Conspiracy & Filing False Tax Returns (July 3, 2008)
Federal Judge Approves IRS Summons for UBS Swiss Bank Account Records (July 1, 2008)
Justice Department Asks Court to Serve IRS Summons for UBS Swiss Bank Account Records (June 30, 2008)
Justice Department Seeks to Shut Down Dallas Tax Preparer (June 24, 2008)
Banker Pleads Guilty to Helping American Real Estate Developer Evade Income Tax on $200 Million (June 19, 2008)
Statement of Assistant Attorney General Nathan J. Hochman on the Decision in Texaco Inc. v. United States (June 17, 2008)
Connecticut Woman Barred from Preparing Federal Tax Returns for Others & from Promoting Tax Fraud Schemes (June 6, 2008)
Court Bars Houston Area Woman from Preparing Tax Returns (June 4, 2008)
Former Skydiving Company Owner and Ex-Houston Auto Executive Convicted of Tax Charges (June 3, 2008)
Federal Court Permanently Bars Massachusetts Man from Preparing Federal Income Tax Returns (June 2, 2008)
Federal Court Shuts Down Washington State Bogus “Decoding” Tax Scheme (May 30, 2008)
Ohio Judge Rejects Tax Claims on $423 Million Alleged Purchase of German Facility Made by Cleveland & Pittsburgh-Based Banks (May 30, 2008)
Federal Court in Dallas Bars Woman from Preparing Tax Returns for Others (May 21, 2008)
Hawaii Federal Court Bars Alleged Tax Fraud Scheme (May 20, 2008)
Wyoming Firearms Dealer Convicted of Tax Evasion and Harassment of Federal Officials (May 19, 2008)
Metropolitan Police Detective Turned Tax Defier Convicted of Tax Fraud (May 19, 2008)
Federal Court Enjoins Nationwide Tax Scheme Promoters (May 16, 2008)
North Carolina Federal Court Shuts Down Alleged Tax Preparation Scam (May 16, 2008)
Court Rules Against Tax Shelter Promoter Gary Kornman Opionion Says Scheme was Like Attempt to Change “Lead into Gold” (May 13, 2008)
Federal Court Bars Northern Virginia CPA from Preparing Federal Tax Returns (May 13, 2008)
Federal Court Issues Temporary Restraining Order Against Hartford, Connecticut Tax Return Preparer (May 7, 2008)
Financial Planner Sentenced to Prison for Conspiracy in Offshore Insurance Tax Scam that Cost U.S. More Than $2.2 Million (May 2, 2008)
Justice Department Sues to Stop Alleged Illinois Tax Scam Involving More Than $12 Million (May 2, 2008)
Ex-Owner & Former In-House Counsel of Cincinnati Company Found Guilty of Tax Fraud Conspiracy & Tax Crimes (May 1, 2008)
District of Columbia Tax Preparer Pleads Guilty to Conspiracy (April 30, 2008)
Statement of Assistant Attorney General Nathan J. Hochman on Today’s Decision in BB&T Corporation v. United States (April 29, 2008)
Federal Judge Holds Notorious Tax Defier in Contempt of Court (April 29, 2008)
Ohio Jury Finds Cincinnati-Based Bank Not Entitled to $5.6 Million Tax Refund (April 21, 2008)
California Man Convicted on Federal Tax Fraud Charges for Fraudulent Tax Preparation Scheme (April 18, 2008)
Michigan Attorney and Client Plead Guilty to Tax Crimes in Connection with a Fraudulent Insurance Tax Shelter (April 16, 2008)
Federal Court Bars Oregon Family and Associate from Promoting Tax Fraud Scheme (April 11, 2008)
Federal Court Permanently Bars Michigan Man from Preparing Tax Returns (April 11, 2008)
Transcript of Nathan J. Hochman, Tax Division’s Assistant Attorney General Announcing Creation of the National Tax Defier Initiative (April 9, 2008)
Justice Department Files Injunction Suits in Nationwide Crackdown on Alleged Tax Defier Scheme Promoters (April 8, 2008)
Statement of Nathan J. Hochman, Tax Division’s Assistant Attorney General Announcing Creation of the National Tax Defier Initiative (April 8, 2008)
Assistant Attorney General Nathan J. Hochman to Hold News Conference Regarding New Tax Defier Initiative (April 7, 2008)
Complaint for Permanent Injunction Against Eugene “Gino” Casternovia, etc., et al. (April 7, 2008)
Complaint for Permanent Injunction Against Sharon Diane Kukhahn, etc. (April 7, 2008)
Complaint for Permanent Injunction Against Pinnacle Quest International, et al. (April 7, 2008)
Federal Court in Seattle Permanently Shuts Down “Warehouse Bank” Tax Defier Operation with $28 Million in Deposits Over Four Years (April 3, 2008)
Statement of John DiCicco, Acting Assistant Attorney General for the Justice Department’s Tax Division on the Decision in Enbridge Energy v. United States (April 1, 2008)
Imprisoned Missouri Tax Preparer Permanently Barred from Preparing Federal Tax Returns (March 31, 2008)
Federal Court Bars Hialeah, Florida Woman from Preparing Tax Returns for Others (March 28, 2008)
Fresno Man Barred from Promoting Tax Scheme (March 28, 2008)
Federal Court Dismisses Multi-Billion Dollar Telephone Excise Tax Cases (March 26, 2008)
Federal Court Bars Arizona Couple from Selling “Corporation Sole” Tax Scheme (March 25, 2008)
Justice Department Seeks to Bar Massachusetts Resident from Preparing Federal Tax Returns for Others (March 13, 2008)
Justice Department Seeks to Bar Illinois Tax Preparer from Preparing Federal Tax Returns for Others (March 12, 2008)
D.C. Grocery Owner Pleads Guilty to Tax Crimes Involving Over $500,000 in Unpaid Payroll & Sales Taxes (March 10, 2008)
Michigan Attorney and Client Charged with Tax Crimes Along with Four Promoters of Fraudulent Insurance Tax Shelter (March 7, 2008)
Justice Department Asks Federal Court to Bar Mississippi Woman from Preparing Tax Returns for Others (March 6, 2008)
Cheyenne Firearms Dealer Convicted of Tax Evasion and Harassment of Federal Officials (March 5, 2008)
Federal Court Permanently Bars Michigan Man from Preparing Tax Returns for Others (March 3, 2008)
Kansas-Based Tax Scheme Promoter Convicted in $78 Million Fraud (February 28, 2008)
Federal Court Bars San Diego Man from Preparing Tax Returns (February 26, 2008)
U.S. Sues Two Men to Block Alleged Tax Fraud Schemes Said to have Cost U.S. Treasury Hundreds of Millions (February 21, 2008)
Tax Preparers from Washington, D.C. & Texas Sued for Allegedly Promoting Gold Mining Tax Scam (February 21, 2008)
Dallas Area Man Barred by Court from Operating Tax Service (February 13, 2008)
Salt Lake City Jury Convicts Attorney in $20 Million Tax Fraud Conspiracy (February 13, 2008)
U.S. Sues to Bar St. Louis CPA and Son from Preparing Tax Returns for Others (February 11, 2008)
Court Bars Memphis Woman from Preparing Tax Returns for Others (February 8, 2008)
Texas Man Barred from Promoting Tax Fraud Schemes (February 8, 2008)
Federal Court Bars Charlotte Man from Preparing Tax Returns (January 25, 2008)
Three Defendants Plead Guilty in $20 Million Tax Fraud Conspiracy (January 24, 2008)
U.S. Court is Asked to Bar Dallas Firm from Preparing Tax Returns for Others (January 23, 2008)
Justice Department Seeks to Bar Two Connecticut Residents from Preparing Federal Tax Returns for Others (January 18, 2008)
Federal Court Bars Illinois Man from Promoting Fraudulent Tax Scam (January 11, 2008)
U.S. Court Bars St. Louis Man from Preparing Tax Returns for Others (January 8, 2008)


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