If it seems too good to be true, it likely is. This is a story about tax returns. It’s tax season, and everybody wants to get a refund. No one wants to owe Uncle Sam or the State of Michigan. This is the time when people go to the accountant, cross their fingers and toes, and hope and pray they’re getting a refund. Lately, magically, refunds have been appearing.
Let me set the stage for you. It’s close to the end of tax season, your return is almost due, and somebody says to you, “Hey… I’ve got a great person to help you get your taxes done; they got me a giant refund! It’s unbelievable, I’ve never gotten a refund like this before! “And you say, “Wow!, I need to see them, the guy who does my taxes never gets me a refund, I always owe!”
So they give you the phone number of this person, you call them, you talk to them, and they sound fantastic. They promise they have analyzed the Internal Revenue Code and figured out every possible way to maximize your refund. In fact, they’re going to get you a refund of somewhere between $6,000 and $12,000 after they get your taxes done. You are absolutely enamored with this person; they have made it sound so great, because your last tax guy never got you a refund! So, you say to them, “I want to schedule an appointment with you.” and they say, “It’s not necessary, we’ll take their information over the phone, you don’t even have to come to the office.” How convenient! They say, “Just give me the numbers off your W2s and 1099s.” You think, “Wow, this is great. I don’t have to waste my time going to an appointment; I’m going to get a big refund and buy that new giant-screen TV set.” You get so excited, you get giddy with the anticipation of a large refund.
A day or two later, the tax preparer calls to say your taxes are done, and you’re getting a $10,000 refund. You are ecstatic. You start thinking of all the things you can buy with the money. They then ask you to pay them in cash or via Zelle, Cash App, or some other method. They charge you $1,500 to $2,000 to get your taxes done. You don’t even think that’s a lot of money, because you’re getting a $10,000 refund. You would have owed if you had used your old tax preparer.
You’re so excited that you don’t even ask for a copy of your tax return. The preparer says I’ll get it filed. Maybe they e-mail you a copy of the return, maybe they don’t, but you don’t look at it. If they do, it’s a tiny set of numbers on your phone screen, and, like most of us, you generally don’t understand what you’re looking at.
What you don’t notice is that the tax preparer has created a fictitious business for you and taken a huge loss against the business. This fictitious business is what allows you to get a refund. What you also don’t notice is that the tax return they eventually send you says it was self-prepared. Their name is nowhere to be found on the return. Why? Because they’re committing a crime. Their whole goal is to get you a giant refund. You paid them in cash, and they just disappear. This is a scam. You are subject to being audited by the Internal Revenue Service and the State of Michigan. When they find out that you have filed a fraudulent return, they will hit you with interest penalties and a fraud penalty. You can pay as much as 75% penalty plus interest. You have no one to look to for help or blame because the tax preparer has disappeared, leaving you with the problems. Thus, you go from joy at getting a giant refund to soiling your pants.
Are you asking yourself, “What do I do if I am the victim of such a scam?” If so, know this… it is a fixable problem that starts with calling us and showing us your tax returns. You may have a solution as simple as amending your return, or as complex as doing an offer in compromise.
What should not be done is to ignore the issue. All of us need to be vigilant today, as scammers are becoming increasingly sophisticated.
So, during this tax season, this is a warning: if it seems too good to be true, it probably is. If you or anyone you know has a tax problem, please reach out to us at Thav Gross PC. We have been helping people solve tax problems for over 40 years.
Brian J. Small
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