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Highlights From The Stupid Preparer Files
By Stacie Clifford Kitts, CPA
Here is my latest addition of the stupid preparer files. Again – mind boggling. This preparer tried to scam something as stupid and easy to track as buying a house. The thing that is most disturbing about this case, is the fact that this guy thought he could get away with it.
Today the Internal Revenue Service announced that it has successfully prosecuted James Otto Price III for falsely claiming the first-time home-buyers credit on a clients federal income tax return. Mr. Price faces up to three years in jail and a $250,000 fine.
The IRS warns potential fraudsters to beware as they have implemented technology that automatically searches for and identifies potential fraudulent claims. The IRS currently has 24 open criminal investigations and has issued seven search warrants related to the fraudulent use of the credit.
“We will vigorously pursue anyone who falsely tries to claim this or any other tax credit or deduction,” said Eileen Mayer, Chief, IRS Criminal Investigation. “The penalties for tax fraud are steep. Taxpayers should be wary of anyone who promises to get them a big refund.”
Taxpayers are reminded that even if they utilize a paid preparer, the taxpayer is still responsible for the accuracy of the return.
The IRS says:
“The First-Time Homebuyer Credit, originally passed in 2008 and modified in 2009, provides up to $8,000 for first-time homebuyers. The purchaser, however, must qualify as a first-time homebuyer, which for purposes of this credit means someone who has not owned a primary residence in the past three years. If the taxpayer is married, this requirement also applies to the taxpayer’s spouse. The home purchase must close before Dec. 1, 2009, to qualify, and the credit may not be claimed on the purchaser’s tax return until after the taxpayer closes and has purchased the home. Different rules apply for homes bought in 2008.”
Fake CPA and Partner Busted
FTB News Release September 2009 -The owner of a Glendale tax preparation business and his colleague were arrested on multiple felony charges including elder financial abuse, grand theft, state income tax evasion, and state income tax fraud related to their roles in a bogus securities investment scheme, we announced on August 5, 2009.
Donald R. Ford, of Glendale, and Gregory A. Edwards, of Culver City, were remanded into custody after their arraignment Friday. Ford allegedly persuaded clients, whose trust he had gained from his tax preparation business, to invest in a phony investment scheme. Ford, who posed as a certified public accountant and Edwards allegedly, scammed investors by promising them high rates of return on investments. Instead, Ford and Edwards used the money for their own financial gain.
Ford earned more than $1.3 million in income from the unlawful scheme and Edwards earned more than $961,000 for his role in the scam. Ford allegedly failed to report this income on his 2002 and 2006 state income tax returns and owes the state more than $231,000 in unpaid tax, penalties, and interest. Edwards allegedly failed to report his income on his 2006 state income tax return and owes the state more than $81,000 in unpaid tax. All income is taxable including income from illegal sources.
Ford and Edwards were both booked into the Los Angeles County Jail and are still in custody. Their bail is set at $100,000 each. Their next court appearance has not been set.
The filing of false tax returns and the failure to file tax returns is part of the annual $6.5 billion tax gap facing California. The tax gap is defined as the difference between taxes that are owed and what is paid.
CPAs are licensed by the state. The public can check on the status of a CPA with the California Board of Accountancy atcba.ca.gov or by calling 916.263.3680. The IRS and FTB have recently issued a brochure, FTB Publication 982, How to Select an Income Tax Return Preparer where taxpayers can learn more about choosing a tax professional.
This is a joint investigation between Department of Justice (DOJ) and us. DOJ Deputy Attorney General Edward Skelly is prosecuting this case.
Stacie's Tax Stuff 