IRS Cracking Down on Bad Boy Preparers

IRS Cracking Down on Bad Boy Preparers

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The IRS is getting much more aggressive in pursuing criminal prosecution of unscrupulous tax preparers. WebCPA has the story:

Two New York City tax preparers are facing prison time and the payment of substantial sums of money in a pair of recent cases.

“The tax return preparer industry is at the dawn of a new era of accountability,” said IRS Criminal Investigation spokesperson Joseph Foy. “With new rules regulating the industry, tax preparers who prepare fraudulent tax returns will stand out even more. These sentences are a reminder that all tax professionals have to respect the law and protect the interests of their clients and the taxpaying public.”

Ivan Coss was sentenced to 18 months in prison for preparing tax returns as part of a large conspiracy to defraud the government. He was ordered to pay back $3,166,143 in restitution for the scheme in which he was involved. Coss prepared fraudulent tax returns out of an apartment in Manhattan and in Pennsylvania using the identification information of people in Puerto Rico. He began his prison term last month.

Joseph Cadet, a tax preparer who operated tax return preparation businesses in Canarsie, Brooklyn, was sentenced last Friday by Judge Nicholas Garaufis in Brooklyn Federal Court to 41 months and ordered to pay back $102,000 to the government. Last year, he was found guilty of preparing false tax returns by inflating deductions on Schedule A, C and E forms that he filed for clients. 

That there is no shortage of crooked tax preparers is no surprise to us. Recently we represented a New York night club owner who was undergoing a state tax audit. After analyzing the taxpayers Z-tapes and bank statements we determined that it had failed to report upwards of $1,000,000 in gross receipts  in 2006, 2007 and 2008.

When I called the taxpayer’s New York CPA preparer to alert him to the underreporting he said that he was aware of it and called us idiots for recommending that the taxpayer voluntarily amend its S corporation and individual tax returns to correct the underreporting. Here’s was his justification:

Nobody reports all of their cash receipts. That’s the way we do things in New York.

Believe it or not, the taxpayer, on the advice of this crooked preparer, fired us and hired a New York tax attorney¹ to represent it.

Footnotes:

¹  Presumably, this tax attorney agrees with the CPA preparer that it is no crime to intentionally underreport cash receipts.

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About Peter Pappas

Peter is a tax attorney and certified public acccountant with over 20 years experience helping taxpayers resolve their IRS and state tax problems.

He has represented thousands of taxpayers who have been experiencing difficulty dealing with the Internal Revenue Service or State tax officials.

He is a member of the American Association of Attorney-Certified Public Accountants, the Florida Bar Association and The Florida Institute of Certified Public Accountants and is admitted to practice before the United States Tax Court, the United States Supreme Court, U.S. District Courts - Middle District of Florida

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