Filing tax returns can be stressful, which is one reason many taxpayers hire a trusted professional to handle their returns for them. But what happens if your tax preparer turns out to be less trustworthy than you thought?
Taxpayers in Apple Valley, California found themselves faced with just such an unlikely scenario earlier this month. On April 7, 2016, the owner of a local tax preparation company and her daughter were arrested by Franchise Tax Board and San Bernardino County investigators for allegedly filing more than 1,200 fraudulent tax returns over the course of three filing seasons. The two women are accused of claiming false tax credits without the knowledge of their clients, who now face collection actions for overpayment of refunds received due to the tax preparers’ fraud.
Besides their personal responsibility to pay back refund overpayments due to tax preparer fraud, taxpayers should understand that they will still be responsible for timely filing and paying their current federal and state taxes—even if their regular tax preparer is arrested. This may seem difficult if records are seized in the course of an investigation, but it is not impossible and it remains the taxpayer’s burden to do so. Here are some things taxpayers should do right away:
- Immediately file a request for an extension to file your income tax returns with the IRS and the FTB.
- Use the “Get Transcript” tool at www.IRS.gov to request your wage and income transcripts for the year(s) at issue.
- Contact your employer or any other agency that may have issued tax notices to you, and request copies of those notices be reissued to you. This includes financial institutions, mortgage companies, charitable organizations, and health insurance providers.
- If you typically owe tax to the IRS or the FTB, consider making an estimated payment by the regular filing deadline to avoid additional interest and possibly penalties. Even if you are granted an extension of time to file, interest will be calculated on amounts not paid by the regular filing deadline. Penalties may be waived under such circumstances, but it is not a guarantee.
- Keep records to prove the reason your tax return may be filed late. For example, the tax agencies may grant penalty relief if you provide a copy of the press release regarding your tax preparer along with some proof that you had in fact retained the professional to prepare your returns.
Taking these steps should provide you the time and information you need to proceed with filing your tax returns while your former tax preparer is unavailable.