Federal Criminal Charges Against Tax Preparers: Mitigating a Federal Tax Preparer Charge

Tax preparers are people who make a very profitable living filing other people’s tax returns. Also called preparing or cooking taxes; according to US law it is a federal crime. The preparer fraudulently changes details in people’s taxation forms to enable them file for higher tax refunds. This is called a grand felony as it combines the crime of counterfeiting with tax fraud, while lesser crimes may crop up in the investigation’s course; such as aiding and abetting a crime.

Investigation and Prosecution

Federal charges against tax preparers are pressed for prosecution and indictment by the United States Inland Revenue Service’s aggressive Criminal Investigating Section. This is the federal body mandated with investigating, apprehending and prosecuting most taxation issues. A tax preparer is seen as more or less a big fish in the eyes of the IRS investigators; since a successful prosecution will take a whole lot of tax fraud off the streets. There are three categories that are of interest in these proceedings; the subject, the witness and the target.

Categories of Interest

The target is a person on whom the case is being built against, or proof is being sought to necessitate their prosecution. Investigators normally have probable cause to believe that the target is the main offender. A witness, however; is any person that may have seen, heard or might have evidence that incriminates the target. A grand jury subpoena can be used to impress upon a witness the necessity of testifying against a target. The subject on the other hand is not targeted for prosecution; though federal investigators might suspect that one may have played a part in the conspiracy to commit crime.

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Legal Scenario: What Would You Do?

Scenario

You work as an independent tax preparer and just learned that several of your former clients received IRS audit notices questioning inflated deductions you added to their returns without their knowledge. An IRS Criminal Investigation agent has contacted you requesting an interview about your tax preparation practices over the past three years.

What federal charges could I be facing as a tax preparer, and what steps should I take right now to protect myself?

Attorney's Answer

As a tax preparer, you could be facing charges under 26 U.S.C. § 7206(2) for aiding in the preparation of false tax returns, which carries up to three years in prison per count, as well as 18 U.S.C. § 1349 for conspiracy to defraud the United States if prosecutors believe you acted as part of a broader scheme. You should immediately decline the IRS agent's interview request and retain a federal criminal defense attorney experienced in tax fraud cases before making any statements. An experienced attorney can negotiate with the DOJ Tax Division, potentially securing a cooperation agreement or pursuing a voluntary disclosure that may significantly reduce your exposure. Early intervention is critical because demonstrating good faith, such as amending affected returns and making restitution, can be a powerful mitigating factor at sentencing under the U.S. Sentencing Guidelines § 3E1.1 for acceptance of responsibility.

This is general information only. Contact us for advice specific to your situation.

Challenges in Prosecuting a Tax Preparer