The 1099 is when you get paid money and you’re responsible for paying the taxes, right? Contractors, side gigs, that kind of stuff.
That’s exactly right.
With a W-2, you’re working a traditional 9-to-5, and you get taxes taken out of that. Can you get in trouble even if you just have a W-2, especially if you have somebody doing your taxes?
Yes, you can. What happens is the tax preparer prepares the Schedule C form for a W-2 wage earner. So a W-2 is just like you just mentioned, taxes are taken out. The Schedule C form is where you can actually itemize your expenses from the 1099 income. The problem is, that most people who prepare fraudulent returns, don’t put any income on the Schedule C form. They give you all of these expenses, I guess that W-2 income, and then you get this big refund. Two years later, here comes the IRS, and [they] want that money back with interest.
So, if there is something wrong with your tax filing is the preparer in any trouble, or is it just you as the taxpayer?
You as the taxpayer, when you sign the return, you’re signing the return saying everything on this return is true and correct, to the best of your knowledge. When you sign, that can be held up in a court of law. Typically, they don’t go after the tax preparer unless there’s a pattern. So if there’s a pattern that this tax preparer is preparing these returns fraudulently, then they’ll go after the tax preparer, but in most cases, they just go after the taxpayer.
You all have been in operation for years, you’ve helped clients save millions of dollars. Why is it important for a firm like yours, to tell the client to take a seat, relax, we’ll take care of you?
It’s important because you as a taxpayer have rights. We exercise those rights based on the tax code. The tax code is not just written one-sided, it’s written so that you get to take advantage of it and pay your fair share of taxes rather than paying more.