{"id":41385,"date":"2022-03-24T10:02:49","date_gmt":"2022-03-24T15:02:49","guid":{"rendered":"https:\/\/federal-lawyer.com\/?page_id=41385"},"modified":"2025-08-05T16:34:11","modified_gmt":"2025-08-05T21:34:11","slug":"tax-preparer-audit-investigation","status":"publish","type":"page","link":"https:\/\/federal-lawyer.com\/tax-attorney\/tax-evasion\/tax-preparer-audit-investigation\/","title":{"rendered":"IRS Audits & Investigations Targeting Tax Preparers"},"content":{"rendered":"\n

The IRS is Using Statistical Analysis to Target Tax Preparers Suspected of Helping Taxpayers Submit Fraudulent Returns<\/h2>\n\n\n\n
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\"Lynette<\/a>
Attorney Lynette Byrd<\/strong><\/a>
IRS Audits & Investigations Team Lead
Former DOJ Attorney
<\/figcaption><\/figure>\n<\/div><\/div>\n\n\n\n
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\"Alice<\/a>
Alice Campbell<\/strong><\/a>
IRS Audits & Investigations Team
Former Special Agent (IRS)<\/figcaption><\/figure>\n<\/div><\/div>\n<\/div>\n\n\n\n\n
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Why have thousands of clients chosen Oberheiden P.C.?<\/h3>\n\t\t
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  1. Only Sr. Attorneys<\/strong>– We don’t employ paralegals, Jr. Attorneys, or Secretaries. You will work directly with a Sr. Attorney who will keep you apprised on a regular basis regarding the details of your case.<\/li>\n\t\t\t
  2. We Know The Government’s Playbook<\/strong>– Many of our attorneys previously worked for the government as federal prosecutors. Understanding the tricks, goals, and strategies of the opposing side gives us an advantage as we prepare our defense.<\/li>\n\t\t\t
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  4. Unrivaled Results<\/strong>– While we have many tools at our disposal, our greatest asset is our notable experience fighting the government. This experience has given us the privilege of winning over 2,000 cases on behalf of our clients.<\/li>\n\t\t<\/ol>\n\t

    I encourage you to compare our experience, results, and team with any local or national firm.<\/p>\n\t

    When you\u2019ve been defending clients for as long as we have, there\u2019s no trick we haven\u2019t seen, likely no tactics we haven\u2019t countered and no strategy we haven\u2019t circumvented many times before.<\/p>\n\t

    If your reputation, livelihood, freedom, or career is at stake, call us today for a free consultation.<\/p>\n\t

    We will help you clearly understand what your options are and the best path forward.<\/p>\n\t

    Call now to confidentially discuss the details of your case: 888-680-1745<\/p>\n\t

    Dr. Nick Oberheiden<\/p>\n<\/div>\n\n\n\n

    As the Internal Revenue Service (IRS) continues to grapple with a backlog caused by the recent pandemic, it is looking for new, more-efficient ways to target taxpayers suspected of fraud. One way it is doing so is by targeting tax preparers. By looking for patterns in tax preparers\u2019 filings, not only can the IRS uncover cases of tax fraud and tax evasion<\/a>, but it can also target the tax preparers who facilitate taxpayers\u2019 filing of fraudulent returns.<\/p>\n\n\n\n

    The IRS is relying heavily on statistical analysis to identify accountants and other tax preparers<\/a> that the agency can target in audits and investigations. By examining tax preparers\u2019 filings from a statistical perspective, the IRS is able to identify data trends that are indicative of fraud. The IRS can then launch targeted audits and investigations focused on individual tax preparers\u2014and focused on imposing civil or criminal penalties as warranted.<\/p>\n\n\n\n

    Red Flags for Tax Preparer Fraud (According to the IRS)<\/h2>\n\n\n\n

    When examining taxpayers\u2019 returns for signs of tax preparer fraud, the IRS looks for a number of red flags. While these red flags are not necessarily<\/em> indicative of fraud<\/a>\u2014which is critical from a defense perspective\u2014the IRS views them as warranting scrutiny. This is especially true when the same red flags appear in multiple returns filed by a single tax preparer or firm.<\/p>\n\n\n\n

    Some examples of red flags for the IRS include:<\/p>\n\n\n\n

    Cash Contributions to Charities<\/h3>\n\n\n\n

    Claiming cash contributions to charity is a common form of tax fraud. The Internal Revenue Code (IRC) allows a limited deduction for cash contributions, and the relatively low limit ($600 for the 2021 tax year) combined with the lack of documentation makes this an attractive target for taxpayers seeking to reduce the amount they owe.<\/p>\n\n\n\n

    But, while taxpayers and tax preparers might think that fraudulent cash contribution deductions will fly under the radar, this isn\u2019t always\u2014or even often\u2014the case. When multiple returns filed by a single tax preparer or firm include claimed deductions for cash contributions, this is especially likely to garner attention from the IRS. <\/p>\n\n\n\n

    Earned Income Tax Credits<\/h3>\n\n\n\n

    Abuse of the Earned Income Tax Credit is another common type of fraud that can get both taxpayers and tax preparers in trouble with the IRS. This includes fraudulently claiming the Earned Income Tax Credit as well as falsifying taxpayers\u2019 income data in order to increase the amount of their credit.<\/p>\n\n\n\n

    The IRS expects taxpayers to take steps to prevent their clients from fraudulently claiming Earned Income Tax Credits. As the agency explains<\/a>, \u201cIf you find the information provided by the client appears incomplete, inconsistent or incorrect, you should ask additional questions, document the answers and make a judgment as to whether the answers make sense. . . . If you are not comfortable with the answers or credibility of the client, then due diligence dictates you refuse to prepare the return.\u201d<\/p>\n\n\n\n

    Education Credits<\/h3>\n\n\n\n

    Education credits fall into the same category as cash contributions and the Earned Income Tax Credit in terms of being ripe for fraud. When clients claim to be eligible for education credits, taxpayers must obtain substantiating documentation. If they don\u2019t, the IRS will deem them complicit when their clients\u2019 claims prove to be false. If a tax preparer consistently files returns that claim education credits, especially credits in the same amount, this can also create an inference that the preparer is engaging in fraud on behalf of his or her clients.<\/p>\n\n\n\n

    Failure to Report Gross Receipts<\/h3>\n\n\n\n

    Businesses have an obligation to report their gross receipts to the IRS. This includes gross receipts in all forms\u2014cash, credit, checks, and cryptocurrency. Failing to report gross receipts is among the most common types of small business tax fraud; and, here too, the IRS expects tax preparers to do their part to prevent their clients from submitting fraudulent returns.<\/p>\n\n\n\n

    From comparing businesses\u2019 gross receipts and expense deductions to obtaining information about businesses\u2019 cryptocurrency transactions from their exchanges, the IRS can uncover businesses\u2019 failure to report their taxable income in various ways. If a tax preparer knows, or should know, that a business\u2019s claimed gross receipts are inaccurate, the tax preparer can face liability as a result.<\/p>\n\n\n\n

    Kickbacks Between Taxpayers and Tax Preparers<\/h3>\n\n\n\n

    Kickbacks between taxpayers and tax preparers are common triggers for criminal tax fraud investigations. If a tax preparer accepts payment from a client in exchange for fraudulently enhancing the client\u2019s refund or reducing the client\u2019s income tax liability, this transaction alone can trigger criminal charges for both parties.<\/p>\n\n\n\n

    Repeatedly Claiming Losses<\/h3>\n\n\n\n

    Claiming losses year after year is another red flag for the IRS. If a tax preparer regularly files returns for clients claiming repeated losses, this can trigger an audit or investigation into the tax preparer\u2019s practices. If a tax preparer does not have adequate substantiating documentation from his or her clients to support annual loss claims, the tax preparer could be at risk for civil or criminal enforcement action.<\/p>\n\n\n\n

    Residential Energy Credits<\/h3>\n\n\n\n

    Residential energy credits are another common source of taxpayer and tax preparer fraud. Tax preparers who offer to claim residential energy credits for their clients without the requisite documentation will be at risk for facing liability in the event of an IRS audit or investigation.<\/p>\n\n\n\n

    Suspicious Dependents<\/h3>\n\n\n\n

    The IRS views dependents as \u201csuspicious\u201d under various circumstances. This includes circumstances ranging from differences between taxpayers\u2019 and claimed defendants\u2019 last names to the repeated use of Social Security numbers and disparities between taxpayers\u2019 and claimed defendants\u2019 tax returns. Once again, tax preparers have a duty to address any questions before filing their clients\u2019 returns (if they file them at all), and they can face criminal culpability if they intentionally help their clients make false statements to the IRS.<\/p>\n\n\n\n

    Underreporting Taxable Income<\/h3>\n\n\n\n

    Tax preparers who help facilitate their clients\u2019 underreporting of taxable income can face either civil or criminal liability depending on the role they play. This applies to income from all sources\u2014including wages and salary, independent contractor income, gig economy income, and income from cryptocurrency and other self-managed investment accounts. If an IRS audit or investigation reveals that a tax preparer has either helped falsify clients\u2019 returns or looked the other way when clients underreported their income, the tax preparer can potentially face criminal penalties under the IRC.<\/p>\n\n\n\n

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    Put our highly experienced team on your side<\/h2>\n
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    \n\t\t\t\t\"Dr.<\/a>\n\t\t\t\t
    Dr. Nick Oberheiden<\/h5>\n\t\t\t\t

    Founder<\/p>\n\t\t\t\t

    Attorney-at-Law<\/p>\n\t\t\t<\/div>\n\t\t\t

    \n\t\t\t\t\"Lynette<\/a>\n\t\t\t\t
    Lynette S. Byrd<\/h5>\n\t\t\t\t

    Former DOJ Trial Attorney <\/p>\n\t\t\t\t

    Partner<\/p>\n\t\t\t<\/div>\n\t\t\t

    \n\t\t\t\t\"Brian<\/a>\n\t\t\t\t
    Brian J. Kuester<\/h5>\n\t\t\t\t

    Former U.S. Attorney<\/p>\n\t\t\t\t

    <\/p>\n\t\t\t<\/div>\n\t\t\t

    \n\t\t\t\t\"Kevin<\/a>\n\t\t\t\t
    Hon. Kevin McCarthy<\/h5>\n\t\t\t\t

    55th Speaker, U.S. House of Representatives (ret.)<\/p>\n\t\t\t\t

    Government Consultant<\/p>\n\t\t\t<\/div>\n\t\t\t

    \n\t\t\t\t\"Mike<\/a>\n\t\t\t\t
    Mike Pompeo<\/h5>\n\t\t\t\t

    Of Counsel<\/p>\n\t\t\t\t

    Former U.S. Secretary of State<\/p>\n\t\t\t<\/div>\n\t\t\t

    \n\t\t\t\t\"John<\/a>\n\t\t\t\t
    John W. Sellers<\/h5>\n\t\t\t\t

    Former Senior DOJ Trial Attorney<\/p>\n\t\t\t<\/div>\n\t\t<\/div>\n\n\t\t

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    \n\t\t\t\t\"Linda<\/a>\n\t\t\t\t
    Linda Julin McNamara
    <\/h5>\n\t\t\t\t

    Federal Appeals Attorney<\/p>\n\t\t\t<\/div>\n\t\t\t

    \n\t\t\t\t\"Nicholas<\/a>\n\t\t\t\t
    Nicholas B. Johnson
    <\/h5>\n\t\t\t\t

    Former Prosecutor<\/p>\n\t\t\t<\/div>\n\t\t\t

    \n\t\t\t\t\"Roger<\/a>\n\t\t\t\t
    Roger Bach
    <\/h5>\n\t\t\t\t

    Former Special Agent (DOJ)<\/p>\n\t\t\t<\/div>\n\t\t\t

    \n\t\t\t\t\"Chris<\/a>\n\t\t\t\t
    Chris J. Quick
    <\/h5>\n\t\t\t\t

    Former Special Agent (FBI & IRS-CI)<\/p>\n\t\t\t<\/div>\n\t\t\t

    \n\t\t\t\t\"Michael<\/a>\n\t\t\t\t
    Michael S. Koslow
    <\/h5>\n\t\t\t\t

    Former Supervisory Special Agent (DOD-OIG)<\/p>\n\t\t\t<\/div>\n\t\t\t

    \n\t\t\t\t\"Ray<\/a>\n\t\t\t\t
    Ray Yuen
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    Former Supervisory Special Agent (FBI)<\/p>\n\t\t\t<\/div>\n\t\t<\/div>\n\n <\/div>\n<\/section>\n