1. IRS Scrutiny of False Deductions and Refund Claims
The IRS may examine one return or patterns across clients. A preparer-penalty examination evaluates compliance; IRS-CI examines possible crimes.
False Deductions, Credits, and Refund Claims
Schedule C expenses, Form 4136 fuel credits, Form 4797 losses, and unusual refund accounts can draw scrutiny. Source records, refund calculations, and client instructions may show whether an entry was supported, mistaken, or fabricated.
Civil Preparer Examinations and IRS-CI Referrals
Civil examiners review returns and § 6694 penalties. IRS Criminal Investigation (IRS-CI) investigates suspected crimes. A civil review does not establish fraud; disputed assessments may require tax controversy analysis.
2. Criminal Liability for Preparing False Tax Returns
An incorrect return alone is not criminal fraud. Prosecutors must prove each charged offense.
Willfulness and Material False Statements
Under 26 U.S.C. § 7206(2), willfully assisting in preparing or presenting a document false as to a material matter is a felony. Willfulness requires an intentional violation of a known legal duty. The client's knowledge or consent and proof of a tax deficiency are not required. Each violation carries up to three years in prison.
Penalties, Wire Fraud, and Professional Consequences
Section 6694(a) addresses certain unreasonable positions causing understatements, subject to a reasonable-cause and good-faith exception. Section 6694(b) concerns willful or reckless conduct; § 7407 permits injunctions in qualifying cases. Wire fraud under 18 U.S.C. § 1343 separately requires a fraudulent scheme involving money or property and qualifying interstate or foreign communications. It generally carries a 20-year maximum, not the § 7206(2) penalty.
Circular 230 discipline may suspend a CPA's or enrolled agent's IRS practice rights, while e-file sanctions can restrict a firm's filing participation. Neither follows automatically from an inquiry. These risks require criminal tax defense analysis.
3. Tracing Disputed Entries through Client Files and E-File Logs
Within one firm, the person entering, reviewing, and transmitting a return may differ.
Client Records, Forms, and Filing Credentials
Compare Forms 1040, 4136, 4797, and Schedule C with receipts, fuel logs, and asset records. Form 8879 documents e-file authorization, not who entered a figure. A PTIN identifies a paid preparer; an EFIN identifies an authorized e-file provider. Neither alone proves who entered a disputed credit. An electronic return originator may transmit a return without selecting its entries. Software logs, user permissions, and transmission records may distinguish preparation from filing.
Preparer Intent, Approval, and Supervisory Roles
Intake notes, review comments, and messages may show who altered figures. Supervisory instructions differ from employee entries, even under one EFIN. Refund account instructions, fees, and bank transfers may reveal diversion without client consent. Ownership or client signatures alone do not establish willfulness.
4. Responding to IRS-CI Investigations and Federal Charges
Before speaking with IRS-CI, determine whether an interview is voluntary. Summonses and grand jury subpoenas carry separate duties.
Interviews, Summonses, and Client Confidentiality
Preserve original client files, correspondence, and software histories. Review demands, privilege, and objections before production. Section 7216 restricts unauthorized disclosure of tax return information, but 26 C.F.R. § 301.7216-2 permits certain disclosures to the IRS, under qualifying subpoenas, or to obtain legal advice. Section 7525's limited tax-practitioner privilege does not extend to criminal tax matters. Individual and firm interests may diverge during white collar investigations.
Evaluating Charges before Prosecution
Assess altered entries, refund accounts, and filing access. On October 8, 2026, DOJ reported Damaris Beltre's 48-month sentence following pleas to false-return assistance and wire fraud; her case also involved PPP fraud. On October 9, DOJ reported Frantzson Saintilien's conviction on 18 counts after a one-week trial. Sentencing had not occurred at that announcement. Their charges and procedural stages differ.
5. Frequently Asked Questions about Tax Preparer Fraud
Q: How long can federal prosecutors bring false-return charges against a tax preparer?
A: Section 7206(2) generally carries six years under 26 U.S.C. § 6531(3), subject to the offense date and tolling rules.
Q: Does a client's signature protect a preparer from fraud charges?
A: No. Form 8879 or a signed return does not excuse a preparer's willful misconduct. Preparation and approval records matter.
15 Oct, 2026
