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How to Keep Your Tax Prep Business on the Right Side of the Law

As a tax preparer, it is your responsibility to be updated on the latest laws and to file your client’s taxes accurately. Any mistakes can not only result in getting your clients in trouble, it can cause you to lose your license.

Let’s take a look at some tax prep workers who may be no longer able to practice due to missteps they have made.

Belle Glade, FL

The United States has recently filed a claim in the U.S. District Court for the Southern District of Florida against Belle Glade tax preparer Brandhi Shaw seeking to bar her from owning and operating a tax preparation business. 

The suit alleges that Shaw prepared returns with false refundable fuel credits and American Opportunity tax credits. It also alleges that the returns she prepared claimed fabricated income and expenses and fictitious losses making it seem as if her clients were eligible for tax credits they shouldn’t have been getting.

By underreporting these tax liabilities and reporting bogus claims, Shaw caused her customers to incorrectly file their taxes making for loss of United States tax revenue that may exceed $6 million.

It is further alleged that Shaw has never been a registered tax preparer and has been preparing taxes under some else’s identity. This makes it difficult to determine the extent of the damages she has done.

West Palm Beach, FL

In nearby West Palm Beach, another tax preparer, Lena D. Cotton had her practice permanently shut down due to violations of a prior order that required her to prepare returns with certain restrictions.

In 2017, the United States filed a complaint against Cotton alleging that she prepared returns with improper education credits, manipulated filing statuses, reported incorrect vehicle deductions and other issues. In 2019, the defendant was found in contempt of the allegations but the court allowed her to continue filing with restrictions on the number and type of returns she could prepare.

In 2021, the court found her to be in contempt a second time due to her violating the terms of her injunction. As a result, Cotton, as well as other entities and individuals who prepared prohibited returns out of her Professional Accounting LDC West Palm Beach Office are no longer permitted to file returns.

Chicago, IL

Across the country in Chicago, tax preparer Lavon Boyd is facing legal action in which the United States filed a complaint to bar him from preparing federal income taxes.

The U.S. District of Illinois alleges that Boyd prepared tax returns that understated liabilities by fabricating business losses. It also alleges him of fabricating or exaggerating customer business expenses and fabricating childcare expenses.

The Right Resources Can Help

It is unclear as to whether the tax preparers listed above purposely violated the law or whether these were errors due to an unclear understanding of current tax laws, but that doesn’t matter in the eyes of the IRS.

In any case, one thing is for sure. Being on top of the latest tax updates can make all the difference when it comes to avoiding legal actions that can result in you losing your ability to practice.

2021 Tax Updates is a resource that can keep you on the right side of the law. It covers 2020/2021 annual inflation adjustments of standard deductions, tax rates and refundable and nonrefundable credits. It provides information on how the pandemic makes this season different. It also provides guidelines regarding changes made regarding qualified business income, Form 1040 and the schedules. 

If you are a tax preparer, continuing education can help you provide great services to your clients so you can look forward to years as a successful tax prep expert. Check out the 2021 Tax Updates course to be ready for what the 2020 tax year throws your way. Disponible también en español.