Recently, a reality television host and “billionaire” has been accused of not paying his federal income tax for years. Civilian taxpayers roll their eyes, think “how stupid/greedy can one guy be?” and move on to the next article. Wealthy celebrities in tax trouble aren’t new; we’ve witnessed rich folk like Wesley Snipes and Willie Nelson fall into the same trap with stunning regularity. However, when tax-evading mug shots are splashed across the front page, we rarely think of the repercussions for the professionals behind those erroneous returns.
For example, when you hand over your documents to a Bourke Accounting tax preparer, your expert is reasonably sure that you are an honest person. And although you may be as pure as the driven snow, your tax preparer would be remiss if s/he didn’t double check a few things. If you were to claim a few children for the Child Tax Credit, for instance, it’s second nature for your tax preparer to make sure that each child has a Social Security number. This is not an indictment against your honesty, or the existence of your child, but a due diligence requirement according to the IRS.
Because tax benefits, like the Child Tax Credit, are of particular interest to the IRS, tax preparers must be vigilant. The IRS is so interested, in fact, that they actively seek out returns “with a high chance of errors completed by the same preparer” (EITC.IRS.gov) and might decide to schedule a little audit visit. When the agent meets with the preparer, actual proof that the credits were justified are demanded. These include due diligence records, questions answered by the client, worksheets and client provided documents” (EITC.IRS.gov).
If it is discovered that the preparer didn’t ask the right questions and gave an undeserving person credits/refunds, the preparer is slapped with a penalty of $530 per mistake. Not only that, but these mistakes could also result in a suspension or termination of e-filing privileges (EITC.IRS.gov). As the IRS strongly recommends e-filing, and clients like the convenience, this would put a mildly disgraced preparer at a disadvantage.
In addition to penalties for not obtaining the right back-up documentation, tax preparers also have their noses slapped for carelessness. If your preparer doesn’t sign a return – BAM! – that’s a fine of $50 per return. If the preparer forgot to furnish you with a copy of your return? That’s another $50. And if the preparer didn’t remember to save a copy of your return? Well, that’s $50, too. On a good note, the IRS won’t charge your preparer more than “$26,500 in calendar year 2020” (IRS.gov) for these sorts of infractions.
Besides the little fines for being absent-minded, tax preparers also have to protect your sensitive information. If a preparer is found guilty of “knowingly or recklessly disclosing” (IRS.gov) anything about your return, s/he can be fined $1,000, a year in prison, or both (plus court costs) (IRS.gov). This is why preparers (and their wonderful assistants) keep client records locked up tight and out of sight.
For a preparer like the one the “billionaire” used, the penalties might be a little steeper. If wrongdoing is proven, that preparer could be fined for lovely things like willful or reckless conduct. Basically, if the preparer knew the information was questionable, but created the return anyway, the possibility of total disbarment and heavy prison time could become the reality.
The relationship between a client and a tax preparer is special. The preparer trusts you to furnish legit paperwork and you trust that the preparer won’t getting imaginative with your legit paperwork. All in all, it’s a good, symbiotic relationship for everyone.
Bourke Accounting experts haven’t been disbarred, nor do they plan to be. Your Bourke Accounting specialist makes sure to play by the rules – for their good, as well as yours. When you sit down for a Bourke Accounting appointment, rest assured that everyone in the room is in good standing with the IRS.
Written by Sue H.