US Justice Department Begins Crackdown On Tax Preparers

by Glen Shapiro, LawAndTax-News.com, New York

13 January 2010

With Internal Revenue Service (IRS) Commissioner Doug Shulman having announced plans for more stringent oversight of the loosely-regulated tax preparation profession, the Justice Department has seemingly begun a crackdown on rogue tax preparers.

The Justice Department has announced that five civil injunction lawsuits were filed in Detroit, Cincinnati and Chicago against several individuals and their tax preparation services last week. The suits allege that the accused prepared thousands of federal income tax returns with fraudulent deductions and credits resulting in millions in lost revenue to the Treasury.

The five lawsuits follow action by the Justice Department last month, when it filed civil injunction proceedings against 12 individuals and entities in Rhode Island. Court filings show that over 24,000 customer tax returns were prepared containing fabricated charitable contributions and employee business expense deductions, inflated dependent exemptions, fraudulent earned income tax credit claims and false income and expense reporting relating to rental real estate.

"The IRS and Justice Department are working together closely to ensure that unscrupulous return preparers are shut down and their customers pay their correct federal tax liabilities," confirmed John A. DiCicco, Acting Assistant Attorney General for the Justice Department’s Tax Division. "Taxpayers using these types of preparers, at best, are stuck with paying additional taxes and interest, and at worst, depending on culpability, may be subject to penalties and possibly even criminal prosecution."

Earlier this month, the IRS announced a set of comprehensive recommendations to ensure people receive "ethical, competent and professional advice" when they use a tax return preparer. The proposals include requirements for paid tax return preparers to register with the IRS, complete competency tests, undergo professional education programs, and operate under Treasury ethical rules which currently only apply to attorneys, CPAs and enrolled agents who practice before the IRS.

"We want to make sure taxpayers don't pay good money for bad advice," Shulman commented. "That's why we're taking extra steps this tax season, and planning more actions in future years, to help make sure people can count on their tax return preparer."

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