Olson has been calling for more oversight, training and licensing of commercial tax-return preparers. In her most recent report to Congress, she recommended that Congress enact a federal registration, examination, certification and enforcement program for unenrolled tax-return preparers.
"Preparers occupy a position of trust and can facilitate compliance with the laws, or alternatively, can influence the taxpayer to take aggressive or even unlawful positions on tax returns," Olson said in another report laying out 2009 fiscal year objectives.
Even if you didn't know your return was fraudulently prepared, the IRS still holds you responsible. Ignorance won't get you out of trouble. If the IRS catches a fraudulent return, it's you -- the taxpayer, not the preparer -- who has to pay the additional taxes, interest and/or penalties.
Although individuals are held responsible for what's on their tax return, the IRS does go after bad preparers. The IRS can assess civil penalties against deceitful return preparers. The agency also refers criminal activity by return preparers to the Department of Justice for prosecution. As an example, in May the manager of a local franchise of Jackson-Hewitt in Houston was sentenced to 30 months in prison without parole for preparing false U.S. income tax returns that cost the government about $40,000. In another case, the branch manager for an H&R Block office in Minneapolis was sentenced to 38 months in prison after admitting to preparing about 125 fraudulent federal tax returns. As a result of the fraud, the IRS made more than $230,000 of false refund payments.
In fiscal year 2008, 124 tax-return preparers were found guilty of fraud. In 81 percent of the cases, the preparer was sentenced to some form of incarceration, including prison time, home confinement, electronic monitoring or a combination of all of those punishments.
Although the IRS is catching many tax cheats, greater scrutiny, licensing and regulation could bring in more tax dollars. And lord knows the country needs the money.