You can go to jail for reporting too much income on client tax returns? Indeed you can, as a Georgia woman who once prepared tax returns in Iowa learned yesterday. Demetries Johnson was sentenced to two years in prison after pleading guilty to four counts of Earned Income Tax Credit fraud. All four counts involved overstating client income to boost their EITC, which gives low-income taxpayers more cash as their income increases, to a point. Two of the counts also alleged improper use of dependents.
Fraud has long been a big problem with the EITC, and with other refundable credits. The attraction of filling out some forms incorrectly and getting government cash, even when no tax is due, is irresistable to fraudsters. The IRS is requiring preparers to file a checklist with returns filed in 2012 showing that they have done "due diligence" when claiming the EITC, but don't expect EITC fraud to disappear just yet.
Somewhat related: Earned income credit veto: heartless, or good policy?
The items included in the Tax Update Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation.
Joe Kristan writes the Tax Update items, and any opinions expressed or implied are not necessarily shared by anyone else at Roth & Company, P.C. Address questions or comments on Tax Updates to