Tax Lawyer's Blog

Mark Davidson of the Broomfield News reports that a Colorado unenrolled preparer was sentenced to 2 years for tax fraud:

[Loren] Smith served as the primary tax preparer for Windfall Tax and Financial Services, which operated in Wheat Ridge between March 2005 and March 2006.

The company would file amended returns for prior tax years and charged customers up to 50 percent of the refund they received from the IRS or state Department of Revenue, a statement from the U.S. Attorney’s Office said.

The reports listed fictitious charitable contributions, and business expenses and losses for fake companies.

Smith was sentenced to 24 months and his partner, Curtis Duff, 23 months.

Upon their release they will be monitored for 3 years by federal law enforcement officials.

In addition, Smith and Duff will be required to make restitution of an amount that is expected to exceed $500,000.

Bryan Theil, spokesman for the IRS criminal investigation division said,

Clients must pay back the refunds they received.

Taxpayers should be wary of tax preparers that charge a percentage of the return as that is “a huge red flag” for the IRS.

Good advice, indeed.

I would add that taxpayers should choose a tax preparer who is either a CPA, tax lawyer or IRS Enrolled Agent.

These are the only categories of tax preparers who are monitored by a regulatory body and the only tax preparers who are required to take continuing education courses in order to maintain their licenses.

By hiring a regulated preparer you increase your chances (it is no guarantee) that,

a) your preparer is reasonably qualified;

b) you will have recourse to a regulatory authority should your preparer err in preparing your return; and

c) malpractice insurance will be available from which you can be made whole should your preparer err.

A note about unenrolled preparers

The IRS is currently considering implementing a regulatory regime for otherwise unregulated tax preparers.

I am in favor of this because I believe the current system makes it too easy for unscrupulous and/or simply incompetent individuals to hold themselves out as tax preparation experts and thereby dupe the public into hiring them.

This, of course, is not to say that there aren’t some very excellent unenrolled tax preparers out there. I have had the pleasure to know and work with several of them.

But right now, because of the nonexistent regulatory scheme, the bad guys are lumped in with the good guys.

Good unenrolled preparers should be noisly stumping for a rigorous unenrolled preparer licensing regime that will weed out (at least some of) the bad unenrolled preparers.

As a licensed professional, I am aware that the regulation of unenrolled preparers will bring more credentialed tax preparers into the field and, thereby, increase my competition.

As some have pointed out this may be one (or even the primary) reason why the American Institute of Certified Public Accountants (AICPA) is opposed to the licensing and regulating of unenrolled preparers.

I am pushing for the licensing and credentialling of good unenrolled preparers even though it is not in my best interests to do so.

That’s because it’s the right thing to do – for the IRS, for taxpayers and for unenrolled preparers themselves.

Without a licensing/regulatory regime, incompetent and unscrupulous unenrolled preparers will continue to damage the reputations of competent and scrupulous unenrolled preparers.

Related Posts:

• Tax Fraud Update: Former Snow Cone Operator Gets Iced
• Hialeah Florida Tax Preparer Indicted for Preparing False Tax Returns: Still Don’t Want to Regulate Tax Preparers
• Ex-Jackson Hewitt Preparer Guilty of Tax Fraud
• IRS Raids “Taxes by Mr. Bill”
• Unenrolled Tax Preparers Not So Good, TIGTA Study Reveals
• Taxpayer Complaints Against CPAs Decline

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