Maryland Comptroller Peter Franchot announced on Tuesday that he has suspended processing from 16 more Liberty Tax Service locations (bringing the total suspended to 23). The decision was made based on suspicious characteristics found on the returns:
- Business income reported when taxpayers did not own a business.
- Refund amounts requested much higher than previous year tax returns.
- Inflated and/or undocumented business expenses.
- Dependents claimed when taxpayers did not provide required 50 percent support or care.
- Inflated wages and withholding information.
These reasons sound like tax fraud 101–what’s been done by unscrupulous preparers year after year. This year, though, at least one state is making an effort to nip these problems before they grow too large.
It should be noted that these stores were owned by franchisees. Jim Wheaton, General Counsel, Chief Compliance Officer, and Vice President of Legal and Government Affairs at Liberty, told Accounting Today that they have a “…robust compliance program, and we expect our franchisees to make sure that their offices comply with all federal and state tax requirements.”
For consumers, the advice that Maryland noted in their press release is accurate: “Taxpayers should carefully review their returns for these issues and should be suspicious if a preparer: deducts fees from the taxpayer’s refund to be deposited into the tax preparer’s account; does not sign the tax return; or fails to include the Preparer Taxpayer Identification number “PTIN” on the return.” I’ll add, if you don’t own a business and see business income on your return, there’s a problem. If you’re not attending college (or have a dependent attending college) and see education tax credits, there’s a problem. If it looks too good to be true, it probably is.