Comptroller Peter Franchot today announced that his office has noticed an increase in the number of questionable income tax returns this tax season and warns Maryland taxpayers that his office is on the lookout for tax fraud. The agency has identified nearly $6.6 million in fraudulent deductions and credits claimed so far this fiscal year, $3.3 million of which was detected in February as the tax filing season began. In Fiscal Year 2010, more than $6.5 million in questionable refunds were denied.
“These are not tax returns with inadvertent or clerical errors of computation or misspelling,” said Comptroller Franchot. “These returns include fraudulent and false information, deductions and credits intended to increase refunds or obtain refunds not properly due to the individual.”
A team of nine Comptroller employees reviews each return for questionable or fraudulent information and deductions before they are processed. If a return is found to be questionable, that return is audited and the refund could be held pending investigation. Once the department completes its investigation, the refund will be intercepted if it is found to be fraudulent. The taxpayer will be billed for additional fraudulent deductions if the agency identifies fraud committed in prior tax years.
The questionable return detection team works closely with the agency’s Field Enforcement Division, as well as the Attorney General’s office to invoke civil and criminal penalties against the taxpayer, tax preparer or 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.
“Whether you are preparing your own tax return or relying on the guidance of a tax preparer, it’s important to remember that you, as the taxpayer, are ultimately responsible for the information you file with my agency,” said Comptroller Franchot. “Therefore, taxpayers must be conscientious of the deductions and credits they claim because if we detect any signs of fraud, we are coming after you.”
In an effort to help consumers avoid fraud, the Comptroller’s Office released The Maryland Taxpayer’s Bill of Rights and Consumer Guide, last year. In addition to stating the rights all taxpayers are entitled, the guide features tips on selecting a tax preparer and warning signs of a fraudulent tax preparer. The Bill of Rights reminds taxpayers that a tax preparer should never:
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