Tax pros say fake W2 fraud is 'a huge problem' 

San Francisco’s major tax-preparation firms are noting a sharp increase in the number of customers bearing fake wage and tax statements this year, a type of tax fraud the Internal Revenue Service confirms is spiking nationally.

"We are experiencing outrageous fraud," said Lionel Mayrand, owner of a Jackson Hewitt Tax Service franchise in The City with two offices. "We saw it a little bit last year, but this year the ringleaders seem to have it down to a science."

If successful, the fraud allows tax cheats to receive thousands of dollars, either from the federal government or from companies making tax refund anticipation loans. It is sometimes coupled with identity theft, which can create problems for law-abiding citizens when they go to file their own taxes.

Mayrand estimated that his two offices have received approximately 80 potentially fraudulent W-2 forms this year. Karl Lindinger, a partner with another San Francisco Jackson Hewitt franchise, estimated that his office has seen between 60 and 100 fake W-2s.

H&R Block’s northern San Francisco district manager, Denise Vasquez, confirmed that her offices have also seen an increase in these forms, though she could not provide figures.

The California Franchise Tax Board said it sees such fraud every year but reported no increase this year.

"It’s a huge problem," said Arlette Lee, spokeswoman for the Northern California office of the IRS’s criminal investigation division. "It’s not just here in the Bay Area. It appears to be a nationwide problem."

Generally, the fraudulent taxpayers give tax accountants a W-2 that is either hand-typed or made with sophisticated software, often complete with essential information such as the proper employer ID number. If hand-typed, the customer generally claims it is a replacement for the lost original form, Mayrand said.

The form indicates that the customer qualifies for the Earned Income Tax Credit, a 30-year-old program designed to provide tax relief for low-wage workers. A person making less than $38,348 with two or more children can receive nearly $5,000, while single people without children get a maximum of $412, IRS spokesman Jesse Weller said. The credit can be combined with withholdings and other credits for large refunds.

None of the accountants said they confront suspected cheats, because they don’t want to endanger the staff or falsely accuse, accountants said. H&R Block doesn’t file the completed return before checking with an employer, Vasquez said. Jackson Hewitt alerts its financial partners not to issue refund loans, but files the return with a flag for review by the IRS and alerts the Franchise Tax Board.

Since the tax preparers are paid out of the tax refund, if the fake refund doesn’t go through the tax accountants don’t get paid, Lindinger said.

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