Accounting News

Wednesday, May 9, 2012
Higher Fines for Fraudulent Tax Preparation

Representative Erik Paulsen of Minnesota has introduced legislation to increase the fines for preparers who file fraudulent returns for personal benefit. The bill is called the Fighting Tax Fraud Act and is currently in the House Ways and Means Committee. The bill is in response to recommendation from Nina Olson, a taxpayer advocate.

These fraudulent returns are most commonly from tax preparers who use their clients information to file false returns. In effect it is just another form of identity theft. But there are also schemes that alter the return after the client reviews it. An amendment is filed but the refund goes to the tax preparer.

These are already crimes but the bill would increase the fines. Rep. Paulsen believes increased fines will act as a deterrent to future criminals. It is impossible to prevent all fraud but it seems like a better solution would be to reduce the ability of tax preparers to file without authorization for the filer. No one would argue that fraud should be weeded out and the perpetrators sent to jail. But increased fines rarely have a deterrent effect on crime.