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When consumers think about tax fraud, they typically think about the individuals who fail to report all their income or who take bad deductions. Many times the professional tax preparers themselves are forgotten, even though they can be willing participants in the fraud (and sometimes they're the masterminds!).

With this in mind, tax officials in New York launched a sting operation directed at dishonest tax preparers. They sent in undercover agents to pose as tax clients, and were shocked at the amount of tax fraud suggested (and carried out) by tax preparers. They went so far as to tell the "clients" that they were purposely not reporting some income, and they destroyed records related to taxable income.

In all, 85 tax preparers were approached by undercover agents, and 40% of them committed fraud. This infuriates me, because for every dollar in taxes that one taxpayer illegally avoids paying, that dollar must be collected from the other honest taxpayers. I've prepared plenty of tax returns in my professional career, and I can't imagine advising clients to cheat.

I've even assessed plenty of "gray areas" for clients and advised them to go the route that would cause them to owe more in taxes, because that's what I believed to be the most responsible and defensible position.

Professional tax preparers who aid clients in cheating on their income tax returns should be punished severely and barred from providing tax services in the future. There is simply no excuse for this behavior, and I hate that their actions reflect poorly on the rest of us who prepare taxes honestly.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.

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