Costlier Tax Preparers Encourage More Fraudulent Returns

NBC sent an undercover intern to different tax preparers. It looks like the big names in tax prep may charge higher fees, but that’s more than made up for by their ability to help you commit tax fraud.

At H&R Block, they advised the intern, posing as a waitress who earned $11,000, to not report her $4,000 in cash tips.

Here’s a select transcript:

Woman (to man): I mean, you know, that’s a legal loophole.
Man: There’s no paper trail on it.
Woman: Exactly.
Man (to intern): You’re not making a lot of money. It’s not like the IRS is going to track you down.

Jackson Hewitt was likewise compliant and helpful.

Intern: So what about my cash that I made? Does that not get taxed or something?
Man: That’s not taxed. It’s one of the perks for… you know.

It’s certainly not a perk, it’s illegal. Taking it, though, would’ve saved her $585. Jackson Hewitt was even willing to help the girl have an immaculate conception.

Intern: So if I had kids or something would I get more money back?
Man: We can make up a kid and put it in there, just to show you, if you want to do that.

We wonder, however, what would have happened if the investigative reporters hadn’t been asking leading questions.

Vid here at MSNBC (requires IE). [via Hit and Run]


Edit Your Comment

  1. Frankly, I think it’s kind of apalling. Our entire tax system is basically designed to promote capitalism and keep money in the hands of the rich people who are willing to move it around. You know every upper class citizen in this country hires a private accountant to find every single loophole in the book to keep them from forking over thier fair share. I know that not claiming certain things is illegal and all, but c’mon! Do we really need to go after these employees for helping out the little guy keep a slgihtly larger chunk of his $20000/year earnings when people making 100 times that are managing to pay little to nothing? I kinda think that’s appalling.

    I know, I know, 2 wrongs don’t make a right, but you gotta give some kind of edge to the lower class, right? Do they really deserve to be wrung for every last penny? Maybe Forbes was onto something with that flat tax… maybe not

  2. GenXCub says:

    I don’t know if that has the correct sentiment, Paul. While richie riches are known to defraud the IRS once in awhile, I think the larger injustice is that their money and connections gives them better access to services that can find actual legal loopholes to save them money, while Joe Six-Pack has to dole out what he thinks is correct because of the lack of services.

  3. MrEleganza says:

    I’m not sure that such an investigation would be possible/meaningful without the “leading” questions, which will hardly go down in history as the most coercive as all time…and even if they are leading, that mitigates the cheatingness on Block/Hewitt’s part about 0%.

    Not that you said it did. And Kudos Dr. Paul, I like your attitude.

  4. Let’s get those rich fatcat waiters! Okay, too simple. But I think the illustration would be more powerful if they had sent someone posing as, say, a greedy plastic surgeon.

  5. Drinker Nisti says:

    “That’s not taxed. It’s one of the perks for… you know.”

    The issue is clarity– you’re paying for somebody to tell you what you can and can’t get away with. That information should, at a minimum, be accurate. Ultimately you’re the one who decides whether or not to commit tax fraud.

    (I’m a Turbo Tax gal, myself… Hell, it guilted me into paying CA sales tax on my internet purchases. Guess I need to pay more for less moral clairty from H&R Block…)

  6. Amy Alkon says:

    Either you’re ethical or you’re not — whether it’s a dollar or $500,000 in question.

  7. Ben Popken says:

    Lisa writes:

    “We usually do our taxes ourselves, but a couple of years ago went to
    H&R Block because we had a couple of new things that we didn’t want to
    screw up: we had bought our first house, and I was a graduate student
    on a government training grant which is not directly taxed. We had
    been hearing conflicting information on whether these sorts of grants
    were taxable or not, so we thought going to one of these tax companies
    would help. Of course, the tax preparer knew less than we did and told
    us it was non-taxable income (which we know now, it isn’t),
    incorrectly filed our taxes, leaving us to have to refile after the fact.

    When we were going through the form with the preparer, she asked if we
    had made any charitable donations, which we had not (or nothing
    substantial anyhow, maybe had taken some clothes to Goodwill or
    something). She told us to put down $500 of charitable donations,
    because “they don’t check on donations $500 or less”. It seemed
    totally shady to us, and I was surprised that she didn’t seem to know
    much about taxes in the first place, but was encouraging us to do
    something like that.”

  8. The Unicorn says:

    What I really want to know is, who is held accountable (no pun intended) in the event of an audit? If I go to H&R Block, & they lie for me/encourage me to lie, can I blame them if I’m later accused of tax fraud?

    My guess is no. And methinks this is some of that ol’ proverbial bullshit.

  9. Spr1dle says:

    Actually, if memory serves, if you go to a professional tax preparer, they assume liability for improperly preparing your taxes. They, after all, sign their name on your return as well.

    I don’t know if that means that you’re both jointly liable or if they get all the blame when they screw up, but I do know they assume some liability when they prepare your taxes for you.

  10. taxeylady2002 says:

    People, I work for Jackson Hewitt. Not all of us do taxes that way. I happen to enjoy my job and I enjoy helping people but only in the legal way!!!!!!!!!