Most of us would not intentionally commit tax fraud. Being convicted of filing fraudulent tax returns can put a crimp in your professional life, not to mention the possibility of going to prison. Yet, some people commit tax crimes without even knowing it.
When US tax returns are filed, you sign on the bottom line that the information contained therein is accurate to the best of your knowledge. You attest that the return is an accurate reflection of your financial affairs as far as they are reported in the return.
Regardless of who prepares it, too-common tax dodges frequently uncovered by the IRS on tax returns include:
- Manipulated income and tax credits, underreported income
- Claims of false dependents
- Manipulation or inflation of exemptions or deductions
If you have an accountant or tax preparer create your tax return, FBAR, or other reports—you remain legally responsible for the accuracy of the information you provide to the IRS. Errors in your tax return can result in penalties that the taxpayer may have to pay.
Be careful when choosing who prepares the tax returns that you sign. The IRS provides a directory tool for locating a preparer in your area with credentials recognized by the IRS. Here are a couple of tips for choosing and using a tax preparer:
- Never sign your return while it is blank as a convenience.
- Steer clear of tax preparers whose fee is related to the amount of refund you receive.
- Avoid tax preparers who guarantee you a bigger return than you might receive from another tax service.
- Check the history and credentials of your accountant, tax lawyer, or tax preparer. Are they sole practitioners—if so, are they established in the community? Working with a longtime accountant or tax attorney ensures there is someone around to answer your questions if the IRS comes knocking several years from now.
- Remember to review everything you submitted on your tax return before signing or filing your tax return
- Be sure to obtain a copy of your tax return after it is filed.
The best way to protect yourself from filing a false income tax return is to verify the information going into your return and choose reputable professionals with verifiable credentials to prepare it. This does not mean you will never be audited—but it improves your chances of sailing through any questions that may eventually come your way.