Phoenix, AZ (PRWEB) February 15, 2012
Technology developed by Randall C. Sorensen, CPA, identifies tax filers that claim phantom income and expenses to obtain cash refunds from the US Treasury. The Internal Revenue Service estimates that 23 to 28 percent of Earned Income Credit payments are issued improperly each year, which equates to between $11 billion and $13 billion.
Here is how tax frauds utilize phantom income: Jane Doe claims income of $13,720 from an imaginary cleaning business. Since she doesn’t really have a business, Jane doesn’t need to purchase any brooms, dust pans, cleaning supplies or mops. For Jane’s efforts she will qualify for federal tax credits of $6,600. Before the US Treasury deposits a tax refund of $4,900 into her bank account, they make a deposit into Jane Doe’s social security retirement account for $1,700. From start to finish, Jane can complete her phantom tax return using phantom income in 15 minutes!
In contrast, tax filers that utilize phantom expenses want to drive their income down. A Phoenix couple learned that because the husband’s earnings increased to $55,000 they wouldn’t qualify for an earned income credit in 2011. That was before the wife got creative. She is self-employed and brings home gross income of $4,000/yr. However, by subtracting phantom business expenses of $25,000 she drives the couple’s earned income down to $34,000. In minutes, the couple goes from owing $100 in federal income taxes to qualifying for a cash refund of $5,300.
Randall Sorensen, CPA has practiced as a financial forensic expert for over 25 years. Recently Mr. Sorensen developed EICCA (Earned Income Credit Compliance Audit) that will identify EIC tax frauds in real-time.
EICCA works quickly and efficiently. A beta test using simulated EIC data for 30 million tax filers was conducted in December. It is estimated that EICCA could identify as much as $2.6 billion in phantom income and another $7.8 billion of phantom expenses. Unscrupulous individuals are going to be paid $3.7 billion in fraudulent refunds between February 16th, 2012 and April 16th, 2012. During the course of 20 years, one dishonest taxpayer can defraud the US Treasury of $300,000 and never have to work one day. Last week, IRS Commissioner Douglas Shulman was informed that in addition to identifying tax fraud in real time, EICCA is a permanent solution to prevent this fraud in the future. Sorensen states, “The IRS has seen their fiscal budget gutted recently. The technology will not require Congressional funding. The EICCA program can test 30 million EIC filers and 25 million self-employed businesses in 30 minutes. This would save the US Treasury as much as $100 billion over the next ten years”.
Randall Sorensen, CPA has been practicing accounting for over 30 years and has specifically worked as a forensic accountant for over 25 years. Randall Sorensen’s accounting practice is located in Phoenix, Arizona. Mr. Sorensen can be reached at 1-480-752-0000.