DECEPTIONS UNCLOAKED BY TAX PREPARERS

How does a professional tax preparer know if the person is supplying fraudulent details to evade or cut their tax bill? Here are telltale signs.

Dubious income. Many filers indicate the incorrect income to reduce their bill and/or secure unemployment benefits. Those who report suspicious salary may transcend a perilous signal to the IRS. In certain circumstances, some taxpayers claim benefits such as federal or state assistance. Others who receive wages in cash tend to omit this income because of payroll tax.

Erroneous deductions. Filers attempt to deceive the tax agency by claiming deductions that are not backed by documents or receipts. Taxpayers tend to add unfounded expenditures just to lessen their tax payments. On that note, tax preparers can give back the tax return and ask for additional papers to support such costs or refuse to submit the claim.

Nonqualified dependents. Declare a dependent or two and lower your taxes. If the taxpayer holds the "Head of Household" classification, he is entitled to greater deductions. Not to mention he can obtain other credit or exemptions as well. In most cases, filers provide false financial support papers to justify the dependent(s) stated in tax returns. Although the IRA is generous in terms of tax claims, they have tightened the rules on certain benefits, including the Earned Income Credit.

Separation of personal and corporate expenditures. Separating personal and business expenses can be a shady area for some people. However, some tax evaders set up a bogus company to classify a considerable portion of cost as a business expenditure. Doing such reporting can subject you to intense scrutiny by the IRS.

Overseas investments. Perhaps Panama papers sound familiar, right? Some notable world leaders, athletes, and celebrities divest their money allegedly stashed their wealth into offshore entities to conceal their finances. Tax preparers are very particular with this section. Aside from the fact they do not want to be penalized for giving inaccurate returns, organizing a client’s overseas investments is a tedious task which needs thorough screening and preparation.