If you’re a tax preparer and you want to help your clients save money, one way would be to invent a dependent or two for them. Sure, you’re violating a law (or two), but your clients will save money. Not only will they get the extra exemption, they may get some education deductions or credits.
Yes, there’s a problem with this scheme (actually, several, but I’ll focus on the biggest). The Social Security Number of dependents is reported on tax returns. The IRS isn’t perfect, but they do a good job of matching information such as SSNs. Sooner or later—probably sooner—this scheme would be doomed.
So did someone actually do this? Well, since I’m writing about it here you already know the answer. Four women in Rocky Mount, North Carolina did just that. They also inflated wages of their clients to help them qualify for the Earned Income Credit.
All of this occurred in early 2004. Last March the women were indicted. They pleaded guilty in September and they were sentenced last week. The women received terms ranging from 180 days of house arrest to 15 months at ClubFed. All must make restitution of between $1,883 and $40,041 to the government.
This was truly yet another Bozo scheme due to fail. If your tax preparer offers to sell you a dependent, find another tax preparer fast.
Tags: BozoTaxPreparer