Don’t Become A Victim

April 29, 2013

When you turn your paperwork over to a tax preparer, you are trusting that person with an awful lot of personal information. You have given that person your social security number, your income information, where you live, the names of your spouse and children….. In short, you are trusting your tax preparer with everything that is important in your life.

What if that person is not worthy of your trust? And how can you determine who is or isn’t worthy, BEFORE you hand over all of your vital information?

Tax Preparer Arrested for Fraud

Recently a man in Southern California was sentenced to 24 years in prison for stealing from his accounting clients, and then plotting their murders so that they could not testify against him.

Steven Martinez is a former IRS agent who became a tax preparer and catered to wealthy clients. He lived a terrific life, in a multi-million dollar mansion, and a beach house in Mexico, all funded by his clients’ phony tax returns.

The FBI and federal prosecutors had accused Martinez of filing false tax returns for several clients for the tax years 2004 through 2007, and Martinez admitted to stealing the refund money, which amounted to over $11 million.

Not only did Martinez use the ill-gotten gains on his California mansion and Mexican beach house, but he also used it to hire a private jet, and to pay off his personal credit cards and loans.

A man with a pistol on the back oh his head.And it would have ended there, with a charge of white collar crime and a lengthy – but reasonable – jail term, except that Martinez took it one fateful step further.

Plots Murder of Witnesses

While out on bail, he arranged with a hitman to eliminate the clients who would be able to testify against him at his trial. He provided the would-be assassin with detailed dossiers on each of his intended victims, including photographs, home addresses and other personal information.

What Martinez did not know, however, is that his hired gun was actually an undercover witness for the FBI, and that the assassin was recording all conversations with Martinez.

Martinez reportedly suggested to the hitman that he “use two different pistols” and that he should also “acquire a silencer.” He promised that he would make the hitman “rich for the rest of his life,” and offered him $100,000 in cash to eliminate a woman in La Jolla and another in Rancho Santa Fe.

Steven Martinez pleaded guilty to all counts, including murder-for-hire, solicitation of a crime of violence, mail fraud, filing false tax returns, Social Security fraud, aggravated identity theft, and money laundering.  He was sentenced to 24 years in prison and ordered to pay over $14 million in restitution to the victims, the IRS, and the California Franchise Tax Authority.

The prosecutor on the case, U.S. Attorney Laura E. Duffy, says that the situation began as a case of extreme greed, but that spiraled out of control and almost resulted in the murder of four people.

Never Meant to Hurt Anyone

Martinez’s defense attorney, David Demergian, maintains that Martinez never intended to hurt anyone. He blames the greed on Martinez’s need to provide for his family, including expensive diagnosis and treatment for an autistic son. He says the murder-for-hire plot was a result of Martinez’s diagnosis of Asberger syndrome, and that he never would have gotten away with such a scheme.

“There’s no question in my mind, he never believed anybody was going to get hurt. Of course, that’s not the way it looks,” he said.

How To Protect Yourself

Of course, this is an extreme case, and 99.9% of tax preparers are legitimate, law-abiding, honest professionals. But there are steps you can take to make sure that you do not end up a victim.

  1. Before 2011, anyone could claim to be a tax preparer, regardless of education or training. In 2011, the IRS instituted a plan to track planners to make sure they adhered to a basic level of competence, and assign each an identification number. The plan is currently on hold as a federal judge hears the case, but you can still protect yourself by asking for references and proof of training.
  1. Tax franchise chains, like H&R Block or Hewitt Jackson, may be great for simple returns, but if yours is more complicated – if you own a business, for example – you may want to look for someone with experience handling your type of tax situation.
  1. You may want to look for an EA, or Enrolled Agent. These are professionals who are licensed by the federal government after having passed a comprehensive exam, and they must maintain current tax training. Many are former IRS agents. You can find one who specializes in your particular tax area, and you can search on the National Association of Enrolled Agents website.

Whoever you choose for your Los Angeles tax preparer, make sure you are completely confident in them, not only in their ability to prepare your taxes, but also in their discretion and honesty.

If you feel even the slightest bit of discomfort over something that your tax preparer does or says in your initial interview, you should not hesitate to find someone else. Remember, you are handing over all the information that they might require in order to completely steal your identity and commit major fraud.