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Complicated code, preparer error could cause problems with immigrants' tax returns

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An Indianapolis television station ran a series of reports in May about a “loophole” in the law that allows undocumented immigrants to claim tax credits for children living in other countries. But the reports – which relied on an anonymous tax preparer as a key source – failed to disclose the role of some tax preparers in filing bogus tax returns.

Loophole or legal credit?

cervantes-wendy.jpg Cervantes

Undocumented immigrants working in the United States are required by law to pay taxes. In order to do that, they must obtain an Individual Tax Identification Number, which is used to file their tax return.

The additional child tax credit may be available to anyone – immigrants or citizens – who had custody of a child for more than half of the previous year, meaning it’s a legally allowable credit for undocumented immigrants.

Wendy Cervantes, vice president for immigration and child rights policy for First Focus in Washington, D.C., said the additional child tax credit is one of the few tangible benefits struggling immigrants can claim for the benefit of their children.

“The real issue at hand here is the tax preparer industry and what could be the abuse on that side, and I think any legislative proposals out there should be targeted at that and not focused on immigrants who are just trying to support their kids,” Cervantes said.

Understanding tax code

Jamie Andree, director of Indiana Legal Services’ Low-Income Taxpayer Clinic, said understanding various tax exemptions and Internal Revenue Service publications can be challenging, even for someone with her level of experience.

“I’m a native English speaker, I have a law degree, I’ve been a tax lawyer for low-income people for approximately six years, and I have practiced poverty law of some sort for 33 years, and I find these (publications) complicated,” she said. “For example, a child can qualify as a dependant on your tax return but maybe not as the qualifying child for the purpose of child tax credit – so that’s complicated, that’s confusing.”

Sam Pollom, a lawyer and certified public accountant for BCBG Partners in Indianapolis, said that due to the complexity of tax code, it would be difficult – but not impossible – for an average person to know how to fraudulently claim exemptions.

The additional child tax credit may entitle a filer to a refund, unlike the child tax credit, which reduces an individual’s tax burden. Undocumented immigrants pay into Social Security, but they do not qualify for benefits. They also cannot qualify for Medicaid, Medicare, food stamps or the Earned Income Credit, so the additional child tax credit may be in some cases the only exemption they can claim that results in a refund.

Herb Hernandez, executive director for United Hispanic-Americans in Fort Wayne, is an American citizen and the child of immigrants. He said that his father, who had only a ninth-grade education, never did his own taxes because he found the task too complicated. He believes the same is true for today’s immigrants.

“They are not familiar with the U.S. tax regulations is the first thing, and the second thing is a high percentage of them would have limited English proficiency, so they are not able to read the instructions in the booklet for every form you complete … because of that, they won’t be able to complete their own taxes.”

Even though tax instructions are available in Spanish, he doesn’t think that would help immigrants understand the process. Hernandez said most first-generation immigrants would need to live in the United States for several years before gaining enough familiarity with the tax system to be comfortable filing their own returns. In many ways, their experience may mirror that of a young U.S. citizen who is overwhelmed and confused by the prospect of filing his first tax return. That’s why many immigrants may turn to tax preparers for assistance, and choosing the wrong one could have disastrous results.

The tax preparer’s role

The U.S. Department of Justice’s Tax Division has identified several tax preparers in the past decade that targeted immigrants and filed fraudulent returns on their behalf.

In 2006, a federal judge issued a permanent injunction against Angelique Tinder, prohibiting her from preparing tax returns for others. The justice department found Tinder had falsely told immigrants from Bosnia that they could claim as dependents persons in their home country to whom they sent support payments.

In 2009, a jury returned 10 guilty verdicts for Somali citizen and Nebraska resident Siyad Ali, who falsely listed his own foster children as dependants for Sudanese immigrants when filing their tax returns. While his former clients were not prosecuted for the faulty returns, they were assessed additional taxes when the errors were discovered, in some cases owing penalties and interest.

Until recently, almost anyone could set up shop and purport to be a tax preparer – with no training and almost no oversight. In an audit of tax preparers in 2006 and 2008, the General Accounting Office and U.S. Treasury Inspector General for Tax Administration found that several tax preparers made significant errors in preparing returns. The results of the Tax Return Preparer Review – Publication 4832 – can be found on the IRS website.

The results of that review motivated the IRS to push for additional regulation of tax preparers. By the end of 2013, tax preparers who are not attorneys, CPAs or federally licensed “enrolled agents” must pass a basic competency test. Aside from the mistakes made by tax preparers, some may be intentionally misrepresenting their abilities to clients and fudging returns to get more business.

“They, in fact, try to attract lower-income and foreign folks, immigrants, and market to them that they can help them get refunds – we’ll get you a big refund, we’ll take care of you, we speak Spanish,” Pollom said. But those impossibly large refunds – while good for generating business for tax preparers by way of word-of-mouth – could cause clients to end up paying a penalty at some point down the road.

Andree said the people she helps at the taxpayer clinic have often gotten a notice from the IRS that they are being audited or that there are questions about their return.

“We are seeing more and more cases, particularly this spring, where people filed their 2011 tax return, and the IRS held some or all of that refund to determine if they were entitled to credits they had claimed,” she said. As upsetting as that may be for people, she said it’s probably preferable to receiving a refund, spending it and finding out years later that the amount must be repaid.

Tax preparers, too, may unwittingly run afoul of the law, simply because they’re overworked and aren’t asking the right kinds of questions, she said. Even using software to put together a return, tax preparers must ask for additional information that helps them determine what credits to claim for a client.

“And if the taxpayer and tax preparer are speaking two different languages, that complicates things,” Andree said. “Speaking Spanish is different than communicating with someone in Spanish about tax issues.”

Outreach needed

Hernandez wishes he had the budget to get the word to immigrants about how to choose a reputable tax preparer. He thinks advertising in newspapers would be an effective way to reach immigrants, whose communities often have their own native-language publications. Otherwise, it’s hard to know how to find first-generation and undocumented immigrants.

“That first generation, they’re in the cracks; you don’t know who they are, and they do not surface unless they have to,” he said. “They surface only to go to work and come home. That’s the challenge – how do you get the information to them?”•

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Flawed returns

In 2008, the Treasury Inspector General for Tax Administration had its auditors pose as taxpayers and “shopped” 28 unenrolled tax return preparers in a large metropolitan area for its study. The shopped tax return preparers were asked to prepare a federal tax return based on one of five scenarios developed by TIGTA. TIGTA did not consider any of the scenarios to be complex as the tax topics raised by each scenario were specific, straightforward and not dependent on interpretation.

Although all tax return preparers correctly reported income from savings account interest, wages and self-employment, no tax return preparer correctly calculated the expenses relating to self-employment income, and 17 tax return preparers did not show the correct amount of tax owed or refund due on the returns they prepared. If taxpayers had filed the 17 returns that did not show the correct amount of tax owed or refund due, the net effect would have been $12,828 in understated taxes. TIGTA also found that the preparers of six of those 17 returns prepared incorrectly acted willfully or recklessly during the preparation of the shopped returns.

These tax return preparers added or increased deductions without permission and, in some situations, did so after the shopper questioned whether they were entitled to receive the deductions. These six individuals prepared more than 950 tax returns during the 2008 filing season. To review the study, visit: http://www.irs.gov/pub/irs-pdf/p4832.pdf

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  1. Am I the only one who sees that the City is essentially giving away the MSA site AND giving millions to build new buildings on the site when this site would be the perfect place for the Justice Complex? Across from City-County, check; keeping it centrally located, check, etc. It's my understanding that the GM site must be purchased by the City from Motors Liquidation Company. STOP WASTING WHAT WE ALREADY HAVE AND OUR TAX DOLLARS! The Ballard Administration has not been known for it's common sense...never voted for him and never will!

  2. This guy sounds like the classic molester/manipulator.

  3. Louis D. Brandeis was born in 1856. At 9 years of age it would have been 1865. The Brandeis family did not own slaves. My source Louis D. Brandeis: A Life, by Melvin L. Urofsky.

  4. My name is Matthew Lucas Major, I recently went through a jury trial in Bloomington , In. It was the week of Feb 19-21. Although I have been incarcerated since August 5, 2014. The reason I 'am writing to you sir is on the 21 of February the jury came in with a very excessive and wrongful verdict of guilty on 6 child molesting charges against my daughter who was 9 at the time I was accused. I also had 2 other Felonies one of Intimidation and 1 of Sexual Vicarious Gratification. Judge Marc Kellam on the second day of trial gave me a not guilty on those 2 felonies. The jury was sent out during that time and when brought back Judge Kellam told them to not concern themselves with the 2 Felonies that he ruled on them. They were told to not let evidence they had already heard influence there verdicts. I never in my life touched any child sexually and definitely not with my own daughter. When I was arrested Detective Shawn Karr told me I would be convicted guilty just on my daughters word even without evidence. That's just what happened. my public defender did me so wrong he never once proved to the court and jury all the lies the child told, and Jeremy Noel my public defender could of proven the lies easily. The stories in Serenity's depositions and Forensic interview changed and were not consistent as Prosecutor Darcie Fawcett claimed they were. Yet my attorney never mentioned that. The facts that the child accused me of full penetration in her vagina and rectum was proven lies. Doctor Roberta Hibbard of Riley hospital in Indianapolis confirmed Serenity's hymen intact, no scars, no tearing, no signs of rape to her. Yet my attorney didn't use that knowledge . the DNA was all in my favor. I tell you I will spend my entire life in prison going through rape and beatings etc. even Judge Kellam abused his authority by telling the jurors to listen and believe what the prosecutors side in evidence like my daughters testimony. In one interview with the detectives my daughter got flustered with her mom and said on camera " I'm saying what you told me to mom"!! Yet Mr. Noel said nor did anything to even resemble a defense attorney. Judge Kellam allowed edited version of a taped conversation between the child and her mother. Also Judge Kellam allowed the Prosecutor too bring in to my case a knife found under my seat, the knife wasn't part of my case. She was allowed by my attorney and the judge to put a huge picture of it on the screen and huge picture of my naked privates in a full courtroom and open court. Ms. Fawcett says to jury see how easy Mr. Major could reach the knife and cut his Childs throat. Even though I had no weapons charge against these cases. This gave the jurors prejudice thought against me thinking I threatened her with that knife and how scared she would of been knowing i could get it and kill her. On my sentencing court March 19, 2014 my public defender told Judge Kellam he wish to resign from being my attorney and wished for the court to give me outside council to file a error to trial or appeal. We were denied. Now after openly knowing my public defender don't want to represent me he has to. Well when as parents we make our kids clean a room when they really don't wish to, well the child will but don't mean she will do a good job, that's where I'm at with Mr. Noel. please dont ignore mine and my families pleas for your help . we have all the legal proof you could need to prove Im innocent. Please dont make my spend years in prison innocent when you can fix this wrong. Im not saying Im a perfect man or that I was a perfect dad to my 2 children none of us are. Ive made some bad choices in life and I paid for them. But I didnt ever touch or rape my daughter . I love my children with all my heart. And now through needing attention and a ex-wife who told my granny several times she wish she could put me in prison to get me out of their lives. Well my ex finally accomplished her goal. Sad part is she is destroying our daughter with all this horrific lies and things she taught my daughter to say. My daughter will need therapist to ever hope for a chance of a normal life after what she had done to her by her mom and their side of the family. My daughter told everyone even on stand she had a dream months before i supposedly molested her in this dream I was molesting her and when I finally did it matched her dream perfectly. She admitted to watching movies about little girls being molested and watching U-Tube videos about child molesting all before it happened supposedly to her. Doesn't that sound very unusual that a non molested 9 yr old would need to know so much about being molested? The only reason I could think a 9 year old would need so much information is to be prepared to know what to say and be able to say how it felt what took place etc.. So when questioned by authorities she would be prepared. And there again sir if a parent is pre grooming a 9 year old child she would need intimate details . Like telling her daughter about a couple moles on my private area. The child admitted to sneaking my cell and looking many many times at nudes of me and my girlfriend even one where my penis was entering my girlfriends vagina. In that picture my moles are obvious. Yet when prosecutor showed everyone in court my privates and pictures of the moles she said the only way the child would know about them is if she saw them for herself. My attorney once again said nothing about the pictures my child saw. Or could a ex-wife be able to describe my moles to help her case against getting rid of me? I beg you help me. This is my very existence. Ive lost everything , a good job, a wonderful girlfriend, my freedom, but worse thing Ive lost is my children. They were my reason to get up every morning and strive to be better. The wonderful bond I had with my Serenity is gone. After this I would be afraid to even hug her for fear of what next can they do to me. I'm not afraid to tell you I sit here in this cell and try to hold back my tears. Everyone knows you cant show weakness in prison. My life has already been threatened here at Wabash Valley Prison. After only 3 days of arrival. I was tricked into signing a waiver now Im in G Block General Population with 6 child molesting felony charges. Mrs. Hart as a 18 year old I almost died hooked to machines in hospital almost 1 month and now I know that fear was childish compared to this . I cant help but put emotions in this, after all Mrs. Hart Im human and God help Me I never been more afraid in my life. I didnt hurt my little girl I didnt touch her sexually. As much as it shreds me and fills my mind what Im facing I worry more about my mom and granny because of their great love for me mam they are suffering so deeply. I aint done this things but my loved ones suffering right along beside me and If you take my case you will be in essence freeing them also. I sent momma this letter and asked her to email it to you. I'm scared I have been done so unjustly by our legal system and I need you to fix this and give me freedom. I ask you please don't just ignore my pleas. Here in America its nice to be able to trust our legal justice system, well they destroyed my and my loved ones trust in our justice system . And I'm trusting in You !!! My entire family is suffering this nightmare with me. My 77 year old granny had a stroke and isn't doing so well. My single mother that raised 3 kids alone is dying from Lupus and since my arrest has stayed so sick and weary. Our lives torn to peices by a government I was taught I could trust in. my momma has tried so many innocent project and wrongfully accused and cant get anywhere. please please help me. A quote from the late Nelson Mandela: To be free is not merely to cast off ones chains, But to live in a way that respects and enhances The Freedom Of Others. I have Faith in you and your clinic to cast my chains off and give me freedom I do deserve as a wrongfully accused Man, son, brother, father, friend. Matthew Major DOC# 246179 Cause # : 53c02-1308-FA-000779 God Bless you. Please contact me with your decision so I know you made a life changing decision for me , just please at least write me so I know you care enough about your citizens to respond to cries for your help. You can speak openly with my mother Charlotte Spain (828) 476-0406: 71 Lakeview Dr. Canton, NC 28716 Thank You Matthew Major I know yall get thousands of request and inmates claiming innocence, and each person who are innocent deserve to have organizations like yours willing to fight for them and I give yall so much Thanks and I thank God everyday yall are out there caring enough to help free the innocents. Since discovering firsthand how easily lives and families can be destroyed by Poor Defense attorneys not doing their job . And Prosecutors allowed to do as they please in court

  5. Frankly, it is tragic that you are even considering going to an expensive, unaccredited "law school." It is extremely difficult to get a job with a degree from a real school. If you are going to make the investment of time, money, and tears into law school, it should not be to a place that won't actually enable you to practice law when you graduate.

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