Sheriff auditing

[Zee]

What is tax preparer privilege?

According to this article, it isn't anything like attorney/client privilege:

http://www.fool.com/personal-finance/taxes/2003/09/12/tax-preparerclient-privilege.aspx

[erchess]

Interesting article

I was probably most surprised by the apparent fact that unenrolled preparers have no privilege at all. Even so I would have thought that HRB would not give something about their client to the IRS without either the permission of the client or a court order. I also did not know that when you are dealing with a tax attorney to have your return prepared your privilege is reduced to the level it would be at if you were using another Circular 230 Preparer.

Anyway nothing in the article addressed what happens if a Circular 230 Preparer who is not also an Attorney reveals to law enforcement the fact that in the course of an interview about his taxes a person revealed that he is an identity thief.

[Bees Knees]

Anyway nothing in the article addressed what happens if a Circular 230 Preparer who is not also an Attorney reveals to law enforcement the fact that in the course of an interview about his taxes a person revealed that he is an identity thief.

Any tax preparer can disclose information to law enforcement without client's consent if the tax preparer believes a crime was committed.


Regulation Section 301.7216-2(q), Permissible disclosures or uses without consent of the taxpayer.

(q) Disclosure to report the commission of a crime. The provisions of section 7216(a) and §301.7216–1 shall not apply to the disclosure of any tax return information to the proper Federal, State, or local official in order, and to the extent necessary, to inform the official of activities that may constitute, or may have constituted, a violation of any criminal law or to assist the official in investigating or prosecuting a violation of criminal law. A disclosure made in the bona fide but mistaken belief that the activities constituted a violation of criminal law is not subject to section 7216(a) and §301.7216–1.

[DonPriebe]

... to inform the official of activities that may constitute, or may have constituted, a violation of any criminal law or to assist the official in investigating or prosecuting a violation of criminal law.

And just to be complete, is working without a valid SSN a CRIMINAL offense, as opposed to a civil infraction?

[erchess]

Don

Remember the usual case is not that someone makes up an SSN that is not in truth the SSN of any real person. The usual case is that they steal the SSN of a real person or they buy it from the thief possibly with several middlemen. Everyone involved in that kind of deal is guilty of identity theft even if none of them use the number for work or tax purposes.

[Bees Knees]

And just to be complete, is working without a valid SSN a CRIMINAL offense, as opposed to a civil infraction?

According to the Social Security Website, identity theft is a crime.

http://www.ssa.gov/pubs/10064.html

If someone is working without a valid SSN, how do I know that the fake SSN they give me doesn't belong to someone else? For all I know, a crime could have been committed, and I can report it to law enforcement per IRS regs, even if it does not in fact turn out to be a criminal matter.

[taxea]

Sheriff auditing

The client in this case admitted to using a fake SSN. Whether it is "stolen" or made-up it should be reported to the IRS...they have a criminal division....no need to report to any other law enforcement agency.

No preparer, who knows the SSN is fake, should prepare a return using the SSN. The preparer was correct is having the client obtain an ITIN. However, I still maintain that the IRS should be advised of the use of the fake SSN. taxea

[DonPriebe]

No preparer, who knows the SSN is fake, should prepare a return using the SSN. The preparer was correct is having the client obtain an ITIN. However, I still maintain that the IRS should be advised of the use of the fake SSN.

The IRS would be informed by the very fact that a return was filed showing a W2 with a SSN that didn't match the taxpayer's name, and didn't match the ITIN on the return. The filing procedure is covered in detail in the IRS textbook for VITA volunteers (Pub 4555). The return is prepared using the valid ITIN, while the W2s are entered exactly as presented - with the incorrect SSN that will show a mismatch to the SSN database. (Prior to 2006 this would have caused a fatal filing error.) The preparer is cautioned that the use of an ITIN precludes any claims to EIC. There is nothing in the text that would suggest that the preparer contact any other government agency.

The IRS has a form (3949A) that, at first blush, could be used to alert the government of any suspected violations of law. The form has check boxes for Narcotics Income, Wagering and Gambling, Organized Crime, Kickbacks, etc. Upon closer examination however, the form is only used to report "Alleged Violation of Income Tax Law". If your local drug dealer wants to avoid the Al Capone trap by correctly giving the US Treasury their share of his profits, you don't fill out the form.

Should an ethical preparer assist an illegal alien in filing a tax return? Should an ethical preparer offer RALs? If your best client mentions that he won $500 in the office football pool and wants to put it on line 21, are you going to turn him in for illegal gambling? The only correct answers are your answers, for reasonable men and women may disagree on these questions.

[taxea]

Sheriff auditing

The IRS compares so many things, such as W-2 income reported by employer against W-2 Income reported on tax return. These items are done by their computers, not by hand so they won't match the Itin return to the SSN W-2, They are more likely to send a failure to report income letter to the name on the SSN.

The employer payroll department has the responsibility of verifying the SSN of the employee. This law was put into effect in an effort to curtail fake SSN's. Surely you are aware that there are many crooks out there that supply birth certificates, drivers licenses, etc so it is likely that the fake SSN is registered with SSA. I still think the IRS/SSA should, at least, give EA's and CPA's that prepare taxes this option.

I would report illegal income but don't you think that $500 in illegal gambling money hardly
compares with knowlingly using a fake SSN. Office pools are SOP and not enforced as gambling activity. When they are, yes I would report the offender.taxea