Beware of Tax Fraud

When placing job candidates in jobs as independent contractors or consultants, recruiters might want to spend some time discussing the tax ramifications of this type of position, or even develop relationships with reputable accountants and tax preparers that they can recommend.  Especially since the IRS and Department of Justice are serious about prosecuting tax fraud.  Job candidates should be made aware that if they come across a tax preparer offering to get them a much better refund than they expected, they should be very wary.

Case in point:

A federal court has permanently barred Atlanta-area financial planner T. Michael Haney from promoting the use of Internal Revenue Service (IRS) Forms 1099-OID to support false tax withholdings, the Justice Department announced today.

The government complaint alleged that Haney advised his customers to prepare false IRS   forms, such as Form 1099-OID, to request fraudulent refunds based on phony claims of large income tax withholding.   According to the complaint, Haney’s customers have submitted fraudulent refund claims of more than $3.5 million.

Claiming bogus tax refunds based on false Forms1099-OID is identified by the IRS as one of the “Dirty Dozen” tax scams that taxpayers are urged to avoid.   Since 2001, the Justice Department’s Tax Division has obtained hundreds of injunctions to stop the promotion of tax fraud schemes and the preparation of fraudulent tax returns.

While it might be easy to tell yourself that your accountant is a professional and must know what he or she is doing, and then take that bigger than expected refund and not ask questions, it’s just not worth the risk.  Make sure your accountant is legit.  As stated on the IRS website: “Don’t fall prey to people who encourage you to claim deductions or credits you are not entitled to or willingly allow others to use your information to file false returns. If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution.”