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Home Local Maryland Government Announcement Originally published February 14, 2012

Comptroller Franchot’s Agency Has Stopped More Than $10 Million in Fraudulent Tax Refunds



- Taxpayers Found Guilty of Tax Fraud Can Face Criminal Prosecution -

ANNAPOLIS, Md. (February 14, 2012) – Today, Comptroller Peter Franchot announced that his office has identified 4,290 fraudulent returns and prevented the payment of more than $10 million in questionable refunds so far in Fiscal Year 2012. In just the first two months of 2012 alone, officials stopped the payout of more than $7.8 million in refunds from fraudulent returns compared to just over $3.3 million for the same period in 2011.

In all of Fiscal Year 2011, more than $9.4 million in questionable refunds were denied. The Comptroller warns all Maryland taxpayers that his office is always on the lookout for tax fraud and employing new methods to catch offenders.

“We have more advanced systems in place to catch tax fraud than in years past. The returns we’re talking about are not returns where someone accidentally leaves off information or makes an honest mistake in calculations. The returns we’re concerned with include those with intentionally false and fraudulent information, credits or other deductions which would grant the taxpayer a bigger refund than they are entitled to.”

The agency’s team uses high tech methods to scrutinize returns for questionable or fraudulent information and deductions before it is processed. If a return is flagged as questionable, it is then audited and the refund can be delayed pending investigation. Once the investigation is completed, the refund will be recalled if it is found to have been obtained fraudulently. The taxpayer will be billed for additional fraudulent deductions if the agency finds that the taxpayer has committed fraud on previous returns.

The team responsible for fraud detection works closely with the agency’s Field Enforcement Division and the Attorney General’s office to raise civil and criminal penalties against the tax preparer, taxpayer or in some cases both.

Under Maryland’s tax laws, the Comptroller can assess a penalty not exceeding $500 if an individual files an income tax return that appears to contain information that is substantially incorrect or frivolous because there is no basis in law or fact, is unlawful and does not reflect an inadvertent or clerical error.
"Even if you don’t prepare your own tax return, you are ultimately responsible for what goes on that form,” said Comptroller Franchot. “So if you pay to have a preparer do your taxes or if a family member does your taxes, at the end of the day it’s your name that goes on file in my office and if there are any signs of fraud, we will come after you first and then anyone who may have helped you.”

There are plenty of things to do to avoid filing a fraudulent return. To help taxpayers avoid potential fraud, the Comptroller’s Office produced The Maryland Taxpayer’s Bill of Rights and Consumer Guide. The guide states the rights all taxpayers are entitled to as well as presenting tips on how to select a tax preparer and the warning signs of a fraudulent tax preparer. The Bill of Rights reminds taxpayers that a tax preparer should never:

· promise you a refund before looking at your financial information

· guarantee you a larger refund than another preparer

· charge you a percentage of your refund rather than a flat fee

· ask you to sign a blank or incomplete return

· ask you to sign a return in pencil

· claim they have a special relationship with the Comptroller's Office or IRS

Additionally, the publication informs taxpayers to review the entire return before signing it and to make sure the tax preparer also signs the return. The Comptroller also warns of the risks of Refund Anticipation Loans (RAL) and Refund Anticipation Checks (RAC), which are high-interest loans designed to get taxpayers their refunds quickly but at a high price.

“I’ve always said the RALs and RACs schemes are simply a scam for someone to get rich off of another’s hard work and this scam takes advantage of the most vulnerable taxpayer,” says Franchot. “If you want a quick refund you do not need to use RALs or RACs, all you need to do is file electronically and request direct deposit. Your refund will be on its way in 72 business hours after we accept it. It’s also safer to file electronically because there is no risk of a paper check being intercepted at the mailbox or lost.” E-filing returns allows taxpayers to have their refund directly deposited in up to three different bank accounts.

There are 12 Comptroller branch offices across Maryland which offer free tax preparation for everyone at any income level. All that is required of taxpayers is to bring their completed federal return and a copy of their W2 information and branch employees will help prepare and electronically file the state return for FREE. The Internal Revenue Service (IRS), as well as other reputable organizations such as the Maryland CASH Campaign and AARP, also provides free and trustworthy tax preparation.

Visit www.marylandtaxes.com for a list of branch office locations and to review The Maryland Taxpayer’s Bill of Rights and Consumer Guide.