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Tax Return Preparer Fraud: What CPAs Should Know


It’s that time of year: taxes are due soon. While many people have fairly simple taxes that they do on their own, others may have to use tax preparers such as certified public accountants (CPAs). The knowledge of a CPA can be helpful for those who have their own business, own rental property, have retirement accounts, or have other complex matters.

However, CPAs and other tax preparers need to be wary of fraud. Sure, they want their clients to get the best outcome possible on their tax return but lying on tax returns is never a good idea. It’s actually against the law.

Tax preparers may engage in a variety of activities. They may lie about income so that their client could get tax credits. Maybe extra deductions were added. Perhaps business expenses were inflated.

The thing is that the taxpayer may not know about these fudged numbers until they get a notice from the IRS. And if the taxpayer ends up owing money, they will have additional taxes and interest to deal with. The tax preparer is not on the hook for these penalties. In fact, the taxpayer is responsible for everything on their tax return, regardless of who prepared it.

As you can see, lying is not a good business practice. It can lead to penalties for everyone. For a CPA or other tax preparer, it’s considered fraud and could lead to fines, license loss, and other penalties.

What an Ethical Tax Preparer Should Do

Be ethical when doing taxes. Here are some things to keep in mind:

  • Don’t promise higher refunds than the competition.
  • Be sure to sign the tax return and provide the client with a copy for their own records.
  • Be thorough with clients. Ask them to bring pay stubs, receipts, bank statements, mortgage statements, and other documents that can be used to show income, expenses, and credits.
  • Be available to answer questions about the return.
  • Be careful how you set your fees; it shouldn’t be based on the refund amount.
  • Be prepared to provide qualifications, such as a license or references.
  • Make sure your credentials are up to date.

In 2007, a tax preparer in Florida pled guilty to tax fraud after fraudulently preparing 25 tax returns. She was sentenced to 21 months in prison and three years of supervised release, with  250 hours of community service for each of those years. In addition, she was ordered to pay $179,369 in restitution to the IRS.

Keep Your License With Help From a Tampa Certified Public Accountant Licensing Lawyer 

CPAs are highly regulated, as they work with money, taxes, and numbers. Any unethical activity can lead to license loss and other forms of punishment.

CPAs who are facing administrative actions should contact a Tampa certified public accountant licensing lawyer from The Law Offices of David P. Rankin, P.A. Don’t jeopardize your career or future. See how I can help you protect your license. Schedule a consultation today by calling (813) 968-6633 or filling out the online form.