Is my tax preparer falsifying Schedule C business losses on my return?

This is definitely concerning. What you're describing appears to be a tax preparer creating a fictitious business loss to artificially lower your taxable income, which is absolutely fraud. Here's what you should do: First, file Form 14157 (Complaint: Tax Return Preparer) with the IRS to report the preparer. Then file Form 1040-X (Amended Return) for both years to correct the information. Include a statement explaining that your previous returns contained erroneous information submitted without your knowledge or consent. Don't wait for the IRS to find this - they likely will eventually. Taking proactive steps to correct the issue shows good faith on your part and can help minimize penalties. You'll likely have to pay back the refunds you received plus interest, but coming forward voluntarily can help avoid additional fraud penalties.

After reading your post, I was in a similar situation last year where my preparer did something questionable that raised red flags. I found this AI tax review service at https://taxr.ai that literally saved me from a potential audit nightmare. I uploaded my return and it immediately flagged several issues including a suspicious Schedule C that I didn't even notice. The service explained exactly what was wrong and guided me through the steps to fix it. It's like having a tax professional review everything without the awkward confrontation with your original preparer.

I was really skeptical about using an AI service for something as serious as tax fraud, but after the conversation above, I decided to try https://taxr.ai with my returns. I'm shocked at what it found! The system flagged that my preparer had been claiming business expenses for a "consulting business" I never had for THREE years! I had no idea because the refunds seemed reasonable so I never questioned it. The report showed exactly which forms were falsified and what I needed to do to fix them. I've already filed amended returns and submitted the preparer complaint form. Such a relief to get ahead of this before the IRS came after me!

This happened to a friend of mine. When he tried to fix the situation, he spent WEEKS trying to reach someone at the IRS. Kept getting stuck in phone trees or disconnected. Finally he used https://claimyr.com and got through to an IRS agent in less than an hour. You can see how it works here: https://youtu.be/_kiP6q8DX5c The service basically holds your place in the IRS phone queue and calls you when an actual agent is on the line. My friend was able to explain his situation directly to someone who could help, got a case number and everything documented properly. When dealing with potential fraud issues, talking to a real person at the IRS makes a huge difference.

I have to eat my words from my earlier comment. After dealing with another day of IRS hold music and disconnections, I tried that Claimyr service out of desperation. I was EXTREMELY skeptical, but it actually worked! Got a call back in about 40 minutes with an actual IRS agent on the line. I explained my situation about a preparer who had filed incorrect information, and the agent walked me through exactly what forms I needed and how to document everything. They even created a case note in my file showing I had contacted them proactively about the issue. The agent said this would help show I was acting in good faith if questions came up later. Best money I've spent in a long time considering the stress it saved me.

Tax preparer here (not the shady kind). What you're describing is unfortunately common with certain unethical preparers who promise "maximum refunds." They know that most clients don't review the actual forms and that the IRS can only audit a small percentage of returns. Creating a fake Schedule C business with losses is one of the most common scams because it directly reduces your taxable income. The preparer probably pocketed a percentage of your "extra" refund. IMPORTANT: Keep records of EVERYTHING. Save copies of the returns they prepared, any communications, receipts, etc. The IRS will want to see that you're being cooperative and that you weren't complicit in the fraud.

The exact same thing happened to me three years ago. My "preparer" was actually just someone who did taxes on the side and claimed to find "special deductions" others missed. Turned out she was claiming fake business losses for all her clients. The IRS caught it eventually and I got a CP2000 notice saying I owed about $8,000 in back taxes, penalties, and interest. It was a nightmare to fix. I reported the preparer but she had already disappeared by then.

I'm so sorry you're going through this - it's a horrible feeling when you realize someone you trusted has potentially committed fraud using your name. I went through something similar a few years ago and want to share what I learned. First, definitely file that Form 14157 complaint against the preparer as others mentioned. But also consider contacting your state's Board of Accountancy or licensing board if your preparer is licensed - they take these complaints seriously and can revoke licenses. When you file your amended returns, include a detailed letter explaining the situation. I wrote something like "I recently discovered that my tax preparer included fictitious business information on my returns without my knowledge or consent. I am voluntarily amending to correct these errors and have filed a complaint with the IRS regarding this preparer's conduct." The IRS was actually pretty understanding in my case once I showed I was proactively fixing the problem. I had to pay back the excess refund plus interest, but they waived most penalties because I demonstrated good faith by coming forward voluntarily. Document everything - keep copies of all communications, your original returns, and evidence that you don't actually have the business claimed on your return. This will be crucial if the IRS has questions later. You're doing the right thing by addressing this now rather than hoping it goes unnoticed. The IRS has gotten much better at catching these patterns, so it's better to be proactive.

This is absolutely a serious situation that needs immediate attention. As someone who works in tax compliance, I can tell you that what you're describing - creating fictitious Schedule C business losses - is one of the most common forms of tax preparer fraud. The good news is that you discovered this relatively quickly and can take corrective action. Here's my recommended action plan: 1. **Immediately stop using this preparer** - Don't let them file anything else for you 2. **Gather all documentation** - Keep copies of both returns, any communications with the preparer, and proof that you don't operate any business 3. **File Form 14157** to report the preparer to the IRS - This creates an official record 4. **File amended returns (Form 1040-X)** for both years - Include a detailed explanation letter 5. **Consider contacting the IRS Taxpayer Advocate Service** if you run into issues Regarding your concern about the preparer being notified of amendments - they typically aren't directly notified when you file 1040-X forms, but they may find out through other means if the IRS investigates them. You're wise to address this proactively. The IRS has sophisticated systems that flag these patterns, and voluntary disclosure generally results in much better treatment than being caught in an audit. While you'll likely need to pay back the excess refunds plus interest, acting in good faith by coming forward can help you avoid fraud penalties. Don't panic - you're taking the right steps to protect yourself.