For more information:
Martha J. Lockwood
202-822-6232 x 104 
mlockwood@naea.org

For a printable copy of this news release click here.

For Immediate Release

Most Tax Woes Avoidable

Geithner, Others Made Common Mistake

WASHINGTON, DC, January 23, 2009—The juxtaposition of two very divergent news items this week provides fair warning about the hazards of the tax season just ahead and what can be done to avoid them.

          Just about the time that Treasury Secretary-nominee Timothy F. Geithner revealed that he had prepared his erroneous tax return using an over-the-counter tax prep software program, the United States Attorney’s Office in California was releasing details about a case that resulted in an 11-year sentence being handed down to Abdul Wahid. He is the Chino Hills (CA) man who operated several tax preparation businesses that defrauded both clients and the Internal Revenue Service.

Software’s Soft Spot

          In the case of Mr. Geithner’s return, he’s made it clear that he is not blaming the software. Nor, according to a story in The Washington Post, should he. In that story, Fernando Flores, a research assistant at the U. N. Economic Commission for Latin America and the Caribbean and a tax preparation volunteer assisting his American colleagues working for the international agency, is interviewed and reveals that he, too, uses an over-the-counter tax program—but with a bit of a tweak. By way of background, employees of international agencies do not receive a W-2 statement as most U. S. employees do. Instead, international agency personnel receive a statement of earnings either as a Form 1099 or as a year-end tally prepared specifically by the agency. To file an accurate U. S. tax return, according to the article quoting Mr. Flores, “U.S. citizens must delve into the worksheets used in the software… [F]ilers are able to override the system and force it to calculate the self-employment tax owed.”

          According to Robert Kerr, Senior Director of Government Affairs for the National Association of Enrolled Agents (NAEA), the trade group representing independent tax preparers who are licensed by the federal government, “Knowing how to override a computer program takes immense skill, know-how, and—especially in the case of tax preparation—enormous courage. You’re marching off into uncharted territory, and in the main, it’s a very dangerous idea. You’d be far better off using the services of a competent, professional, licensed tax preparer—for instance, an enrolled agent—whose career requires continuing education that provides the basis for asking the technical and nuanced questions that yield the proper result the first time around.”

          Or, as Danny Underwood, EA, President of the Florida Society of Enrolled Agents is fond of saying: “Tax programs are no substitute for tax knowledge.”

Taxpayer Beware

          Although mistakes in using an over-the-counter program are far more common than one might believe, the instances of unscrupulous preparer, as in the cases of Mr. Wahid, are insidious and have dire consequences for the unsuspecting filer and for the American people.
 
          On Thursday, the Justice Department announced the sentencing of Abdul Wahid to an 11-year prison term earlier this month. Wahid not only admitted to defrauding customers of his tax preparation business, he further defrauded unwary customers by continuing to operate his scheme while out on bond. And while his clients face not only uncertainty about the whereabouts of their money, they will need to face the IRS, as well. Adding the final insult to all this injury, it was also revealed that Wahid failed to file his personal returns for the years 2002 through 2006, attempting to evade payment of nearly $1 million in federal taxes. The case was investigated by the Treasury Inspector General for Tax Administration (TIGTA), IRS-Criminal Investigation, the FBI, and the Social Security Administration.
Commenting on this egregious fraud, Californian David Hatt, EA, President of NAEA said, “Although taxpayers are ultimately responsible for the information reported on their returns, millions rely on programs or individuals to prepare correct returns.

          “Fraudulently or incompetently prepared tax returns are not victimless crimes. Law-abiding taxpayers are stuck with the tab, and those who are swindled by unscrupulous preparers are left dealing with the consequences—audit, fines, additional taxes and interest. And taxpayers who find themselves in an adverse position with the IRS because they owe back taxes, didn’t file taxes, or knowingly filed a false return, should consider contacting a licensed tax preparer to help them set the record straight.

          “Enrolled agents can make filing tax returns far less perilous. Their competency, demonstrated through fulfillment of continuing education requirements, and federal license makes them the most reliable source for tax advice over the long haul,” Mr. Hatt concluded.

The National Association of Enrolled Agents is a nonprofit membership organization dedicated to representing, promoting and enhancing the enrolled agent (EA) profession. EAs are unique as the only group of tax practitioner specialists required to maintain their credentials through continuing education reported directly to the Internal Revenue Service. NAEA provides a national, toll-free EA Referral Service hotline, (800) 424-4339, for taxpayers seeking the services of an enrolled agent. NAEA’s Web Site (www.naea.org) includes an online referral of licensed tax preparers available to the public.

Enrolled agents are available to answer the media’s tax questions. Please contact Martha Lockwood at 202-822-6232 (202-822-NAEA) or mlockwood@naea.org for a source for your story.
 

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