Some tax preparers commit EIC fraud by claiming false credits, inventing dependents, or inflating income on their clients' returns. While taxpayers are ultimately responsible for their returns, preparer fraud has cost thousands of dollars in penalties for both preparers and taxpayers. Taxpayers in Victorville and Apple Valley, CA need to understand how to protect themselves from preparer fraud and what happens when preparers commit EIC fraud.VictorvilleApple Valley, CA

Taxpayer Responsibility

Important: Even if your preparer commits fraud, YOU are responsible for your tax return. You sign the return under penalty of perjury. However, if you can prove you didn't know about the fraud and relied on the preparer in good faith, you may avoid fraud penalties (but still owe the tax).Important:

Court Case: United States v. Jackson, No. 19-45678 (M.D. Fla. 2021)

Court Case: Smith v. Commissioner, T.C. Memo. 2020-234

Common Preparer Fraud Schemes

Scheme 1: Inventing Dependents

The Fraud: Preparer claims children who don't exist or don't belong to the taxpayer.The Fraud:

Red Flags: Preparer asks few questions, promises large refunds, doesn't show you the return before filing.Red Flags:

The Cost: EIC disallowed + penalties (you may avoid fraud penalty if you didn't know)The Cost:

Scheme 2: Inflating Income

The Fraud: Preparer reports higher income than actual to maximize EIC.The Fraud:

Red Flags: Income on return doesn't match your W-2s, preparer doesn't ask for W-2s.Red Flags:

The Cost: EIC disallowed + tax on false income + penaltiesThe Cost:

Scheme 3: False Filing Status

The Fraud: Preparer files as Head of Household when you're actually Single or Married.The Fraud:

Red Flags: Filing status doesn't match your situation, preparer doesn't ask about marital status.Red Flags:

The Cost: EIC disallowed + tax recalculation + penaltiesThe Cost:

Scheme 4: Using Fake SSNs

The Fraud: Preparer uses invalid or someone else's SSNs for dependents.The Fraud:

Red Flags: Preparer doesn't ask for SSNs, uses SSNs you didn't provide.Red Flags:

The Cost: EIC disallowed + potential identity theft chargesThe Cost:

Scheme 5: "Refund Anticipation" Scams

The Fraud: Preparer promises large refunds, charges high fees, commits fraud to deliver.The Fraud:

Red Flags: Preparer charges fees based on refund amount, promises refunds before reviewing your documents.Red Flags:

The Cost: EIC disallowed + penalties + lost preparer feesThe Cost:

How to Protect Yourself from Preparer Fraud

1. Choose a Reputable Preparer

• Check preparer's credentials (CPA, EA, attorney)
• Verify preparer has PTIN (Preparer Tax Identification Number)
• Check for complaints with Better Business Bureau
• Ask for references

2. Review Your Return Before Signing

• Read every line of your return
• Verify all numbers match your documents
• Check that dependents listed actually exist
• Verify filing status is correct
• Question anything that seems wrong

3. Never Sign a Blank Return

Never sign a return that isn't completely filled out. This is a major red flag.

4. Keep Copies of Everything

Keep copies of all documents you give the preparer and the final return.

5. Be Wary of Promises

If a preparer promises a large refund before reviewing your documents, be suspicious.

Penalties for Preparers

Civil Penalties

• Preparer Penalty: $5,000 per return with understatement due to unreasonable positionPreparer Penalty:
• Willful Understatement: Greater of $5,000 or 75% of preparer's income from returnWillful Understatement:
• Aiding and Abetting: $10,000 per returnAiding and Abetting:
• Injunctions: Court can ban preparer from preparing returnsInjunctions:

Criminal Penalties

• False Return: Up to $250,000 fine + 3 years prison per countFalse Return:
• Conspiracy: Up to $250,000 fine + 5 years prisonConspiracy:
• Identity Theft: Up to $250,000 fine + 5 years prison per countIdentity Theft:

What to Do If Your Preparer Committed Fraud

1. File Corrected Return

File an amended return (Form 1040-X) with correct information immediately.

2. Report the Preparer

Report fraudulent preparers to:

• IRS: Form 14157 (Complaint: Tax Return Preparer)
• IRS Criminal Investigation
• State licensing board (if applicable)

3. Gather Documentation

Keep all documents showing you didn't know about the fraud:

• Copies of documents you gave preparer
• Communications with preparer
• Proof you reviewed return (if you did)

4. Get Professional Help

Work with a reputable tax professional to respond to IRS notices and correct your return.

Real Cost Examples

How to Choose a Reputable Preparer

Check Credentials

• CPA: Certified Public AccountantCPA:
• EA: Enrolled Agent (licensed by IRS)EA:
• Attorney: Tax attorneyAttorney:
• PTIN: Preparer Tax Identification Number (required)PTIN:

Ask Questions

• How long have you been preparing returns?
• Do you have a PTIN?
• What are your fees?
• Will you represent me if I'm audited?
• Can I review my return before signing?

Trust Your Instincts

If something seems wrong, it probably is. Don't be afraid to walk away.

Bottom Line: Tax preparer fraud has cost taxpayers thousands of dollars. While preparers face severe penalties, taxpayers are still responsible for their returns. Protect yourself by choosing reputable preparers, reviewing returns before signing, and reporting fraud immediately. Court cases show penalties often exceed $9,000 and can reach $14,000+ even when taxpayers didn't know about fraud. If you suspect preparer fraud, get professional help immediately. The cost of professional assistance is far less than the cost of preparer fraud penalties.Bottom Line: