The IRS is on the lookout for falsely padded deductions
Posted on April 6, 2018
The CPAs at Teipen Selanders Poynter & Ayres have worked closely through and with the IRS for years. We subscribe to their daily, weekly and monthly updates and take all required CPA training.
So, when the IRS lets us know they are cracking down on something, we take note. This year, the IRS has stated they are on the lookout for taxpayers falsely inflating deductions and/or expenses on 2017 tax returns.
Here’s what the IRS means by that:
- Tax preparers overstating deductions such as charitable contributions, padding business expenses.
- Taxpayers including credits that they are not entitled to receive, such as the Earned Income Tax Credit or Child Tax Credit.
Some taxpayers may be tempted to take these steps in hopes of getting a larger refund or paying less than what is owed. Don’t. Even if an unscrupulous tax preparer encourages you to. You will get caught. And the tax penalties with interest will be steep.
Preparing an accurate tax return is a taxpayer’s best defense against scams – and the best way to avoid triggering an audit. TSPA reminds taxpayers that significant IRS penalties are levied on taxpayers who file incorrect returns including:
- 20 percent of the disallowed amount for filing an erroneous claim for a refund or credit.
- $5,000 if the IRS determines a taxpayer has filed a “frivolous tax return.” (A frivolous tax return is one that does not include enough information to figure the correct tax or that contains information clearly showing that the tax reported is substantially incorrect.)
- In addition to the full amount of tax owed, a taxpayer could be assessed a penalty of 75 percent of the amount owed if the underpayment on the tax return resulted from tax fraud.
- Taxpayers may be subject to criminal prosecution and be brought to trial for actions such as willful failure to file a return, refusal to supply accurate information, or refusal to pay any tax due. Criminal prosecution can also be sought for fraud and false statements including identity theft, or preparing and filing a fraudulent return.
No matter who prepares your return, taxpayers should know that they are legally responsible for what is on their tax return.
Additionally, the CPAs at Teipen, Selanders, Poynter & Ayres want you to know that as a taxpayer, you have protected rights. The Taxpayer Bill of Rights is available to read at IRS.gov. This is a set of fundamental rights each taxpayer should be aware of when dealing with the IRS, including when the IRS audits a tax return.
TSPA cautions taxpayers to know their taxpayer rights, and to file an honest return – on time — with the help of a reputable tax professional.