30,000 DELINQUENT TAX PREPARERS

[Lee B]

Copied from Accounting Today:

"The Internal Revenue Service should make more of a priority of going after tax preparers who haven’t filed their own tax returns or paid their tax liabilities and penalties, according to a new report.

The report, released Monday by the Treasury Inspector General for Tax Administration, noted that as of November 2018, the IRS’s Return Preparer Database indicated that more than 30,000 preparers self-identified as being tax noncompliant on their Preparer Taxpayer Identification Number applications in tax years 2011 through 2018. TIGTA’s analysis of that database found 10,495 preparers who prepared more than 2 million tax returns for clients in 2016, but who didn’t file their own personal tax return to report the income they received.

On top of that, TIGTA identified the top 100 nonfiler preparers out of those 10,495 preparers based on the number of returns they prepared for clients in 2016 using their PTIN information. Those top 100 preparers prepared between 1,000 to 6,000 tax returns for clients in 2016, and TIGTA estimates that each of those 100 preparers potentially received somewhere from $189,000 to upwards of $1 million. In addition, TIGTA estimates $45.6 million in potential taxes could be assessed if the IRS worked on 6,903 of the preparer nonfiler cases. After reviewing a draft of the report, IRS management told TIGTA it has included 449 of the nonfiler preparers in its examination plan for this fiscal year.

TIGTA also did an analysis of delinquent preparer penalty and tax “modules” as of May 27, 2019, and it indicated the majority were in active collection status. However, a significant part of them weren’t in active status because they were in “currently not collectible,” or CNC, status or were in a queue awaiting assignment to the IRS’s Collection function. There seemed to be discrepancies when TIGTA analyzed those modules showing there were high-priority preparer penalty modules in CNC shelved status, preparers in CNC hardship status who were probably earning significant income nonetheless, and high-dollar modules that were sitting around aging in the queue.

The IRS’s new nonfiler strategy doesn’t include specific items to address preparers who have failed to file their own tax returns that are due, and the IRS’s current preparer misconduct strategy doesn’t offer specific direction on how the agency might deal with preparers who are nonfilers or have balances due on their own tax accounts.

“Paid tax return preparers (preparers) serve an important role in the U.S. tax system as they prepare approximately 60 percent of all tax returns filed, and their actions have an enormous impact on the IRS’s ability to administer the tax laws effectively,” said the report. “When preparers cannot manage their own tax affairs, or worse, if they intentionally claim credits and deductions to which they are not entitled, they could undermine the tax administration system."

[Roberts]

There was a guy who did taxes out of his home very near my previous home. Newspaper said he owed over $180k in back taxes so I looked him up. Multiple restraining orders against him and charges of beating people up, people claimed he never actually filed their taxes and he had a ton of lawsuits against him. He plead guilty and settled on his tax bill, still owns the home and somebody is still doing tax prep and accounting out of the home office.

[Medlin Software, Dennis]

I had a customer who is "vacationing" via a federal institution.  He was preparing tax returns for non-native English speakers/writers, and was altering their returns and pocketing fake refunds.  He had the gall to make a death threat against me and my family if I cooperated with a subpoena, even though I had no knowledge of his actions, nor any access to or copy of his records (he was using my payroll software).  His threat was via email, which the investigating agency was happy to receive.  I think he represented himself in court, proving the old adage about being foolish.

[Max W]

There are only 4 states -CA, MD, OR, NY - that have rigorous testing requirements for tax preparers.  In most of these, if not all, EA's, CPA's, Atty's are excepted.  However, if they are out of state, they are limited to 5 returns in OR and 10? in NY.

It would be interesting to see if there is any correlation here to the proportional number of bad azz preparers elsewhere.

[grandmabee]

Don't renew PTIN's for non filers.  That would stop it IF they are signing returns.

[Max W]

43 minutes ago, grandmabee said:

Don't renew PTIN's for non filers.  That would stop it IF they are signing returns.

It may stop some, but it is not foolproof.  If the clients are from Mexico and a few other places, students are not taught cursive writing and use block letters for "signatures".

It would be fairly easy to forge these "signatures" and make the return self-prepared.  The refunds would go to whatever address is on the return, which is what they already do.

[Abby Normal]

19 hours ago, Max W said:

There are only 4 states -CA, MD, OR, NY - that have rigorous testing requirements for tax preparers.  In most of these, if not all, EA's, CPA's, Atty's are excepted.  However, if they are out of state, they are limited to 5 returns in OR and 10? in NY.

It would be interesting to see if there is any correlation here to the proportional number of bad azz preparers elsewhere.

MD has done a decent job of closing down these fraudulent tax shops, some with big name franchises.

[Lee B]

In Oregon while CPAs and Attorneys are exempted, EAs are subject to to the State Board of Tax Examiners testing, rules and regulations.

This has been an ongoing legal battle between the NAEA and OAEA with the Board of Tax Examiners for decades now.

While we have occasional cases of preparer fraud in the Portland Metro area, it's pretty rare in the rest of the state.

 

 

[grandmabee]

22 hours ago, Max W said:

It may stop some, but it is not foolproof.  If the clients are from Mexico and a few other places, students are not taught cursive writing and use block letters for "signatures".

It would be fairly easy to forge these "signatures" and make the return self-prepared.  The refunds would go to whatever address is on the return, which is what they already do.

I was talking about signing of the paid tax preparer.  If the return is efiled it must have a PTIN on the return for paid preparer.