Recently, a new client reached out to me for help on preparing his 1040. He has been using TurboTax and wants to pay less taxes. When I took a look at his personal tax return, I noticed a severe error. He was claiming the child and dependent care tax credit without providing the care provider’s taxpayer identification number (SSN), which apparently is allowed by Turbo Tax since the tax return is considered “self-prepared.” Hence, Turbo Tax takes no responsibility of his violation of the IRS tax law (Source: https://www.irs.gov/newsroom/understanding-the-child-and-dependent-care-tax-credit). This also means that he was not reporting the household employment taxes that are also rightfully owed to the IRS.
I come across these scenarios every day. Some individuals using TurboTax are reaching out to CPAs to find tax savings opportunities. However, when mistakes or non-compliance issues were detected, these individuals choose the route of non-compliance and violation of tax laws, confidently assuming that they will not get caught!
So, what are the consequences that these individuals will eventually have to face? In general, the IRS has three years from the date you file your tax return to audit and propose adjustments to it. In the case of fraud, the IRS can audit your return at any time. Therefore, there is no limit on how far back the IRS can go.
Let’s refer back to the individual discussed earlier who fraudulently claimed the dependent care credit. If his tax return is audited by the IRS, he will face back taxes, penalties, and interest for ALL the years that he has claimed the credit fraudulently. This means that if you fraudulently prepare your return and file it, the law extends the period during which the IRS can audit that tax return from the usual three years to every single tax return you have ever filed!
Submitting a dishonest tax return to the IRS is tax evasion. When the IRS catches the dishonest tax payer, it opens all of your tax returns up to IRS examination forever.
XQ CPA’s Values
At XQ CPA, it is our main priority to always protect our clients. Hence, we stand behind every tax return we prepare! We believe in INTEGRITY. We believe in reducing taxes through LEGAL and LEGITIMATE ways! We believe in giving business owners and individuals PEACE OF MIND. We do not believe in cheating the IRS or the Government. If you truly need HELP with your taxes, you can trust us because we strive to always act in your best interest, only in the RIGHT and ETHICAL ways!