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Posted by Administrator on November 17, 2009

By Daniel Njenga (CPA) in Dallas

(*Names mentioned are fictitious and are used solely for presentation purposes)

I have known Mathew* for a period of five years but it was not until I introduced myself to him as a CPA that he opened up about his business. He told me that on average he gross earnings range between 70K and 150 K all from a self employed business.  Mathew was concerned by the many audits that the IRS was performing on his tax return starting with the 2005 return where he paid a fine of about $1000, 2006 a fine of $10,000 and on his 2007 returns which the IRS said were unfiled and had assessed him a tax amount of about $17,000.

In our discussions we talked about “Tax Avoidance” which is a legal way of avoiding taxes. I inquired about why his 2007 taxes are unfiled and his story is like the many that I have heard in the metropolis.

When Mathew started his business back in 2001, he reached out to Steve* and John*, fellow Kenyans with a tax office, to help him with his taxes.

All appeared well until 2004 when the FBI and the IRS raided the offices of Steve and John. John hastily left the country with a few possessions, leaving behind two brand new cars, a house and a thriving entertainment business.

Steve moved the location of the offices from Dallas to Arlington. When Mathew inquired about why the office was raided by the IRS, Steve explained that John had been involved in a tax fraud scheme and that Steve did not know about it until the FBI came knocking.

After filing his 2005 tax return, Mathew received an audit letter from the IRS, stating that he had claimed some deductions that he was not eligible to take. The IRS also asked him to refund some of the amounts that were sent to him.

Mathew could not remember claiming a these deductions or receiving a check from the IRS but reached out to Steve to inquire why the deductions were on his tax return and where the check from the IRS was. Steve was nowhere to be found and it was long after Mathew had paid the IRS fine that Steve was found.  Steve, insisted that the deduction information was provided by Mathew and that he, Mathew received the amounts claimed by the IRS. Mathew at the time was busy with his business and assumed that he must have forgotten about cashing the IRS check.

The story repeated itself in 2006 only with a bigger claim from the IRS.  When Mathew received the IRS audit letter, he went straight to Steve’s office. When Steve printed the 2006 tax return, Mathew could not recognize any of the numbers. His deductions were highly inflated and Steve had claimed a number of deductions that Mathew was not aware of.

Some of the obvious mistakes were that Steve had claimed children on Mathew’s return that he, Mathew did not even know existed. To make matters worse, the IRS refund did not get to Mathew. Steve claimed that the check must have been mailed to Mathew, but Mathew was sure he would remember a $14,000 check!!

Before Mathew could investigate, Steve went underground. He took with him, all documents relating to the 2006 and 2007 tax year. Until our meeting Mathew had not had any success in locating his documents.

Tax fraud perpetrated by Kenyans on their fellow Kenyans and on the IRS is on the increase. While some circumstances may be different, the end result is usually the same: the tax preparer goes to jail, is deported or goes missing, the tax payers  are haunted by the IRS for fraudulent deductions and claims and they end up losing money and property.

I will discuss some simple rules that will prevent tax fraud from camping at your door step.

Rule #1: Your Taxes are your responsibility. You cannot pass that responsibility to another person. Many people assume that because they pay for tax preparation services that they somehow pass the responsibility to the paid preparer. Take all precautions to make sure your taxes are filed correctly. Points to consider- do not ignore correspondence from the IRS. It does not go away. Make sure you get professional help from a CPA, an enrolled agent or an attorney when dealing with the IRS.

Rule #2: Identity theft is real. The media is full of cases of tax fraud. And that’s just the tip of the ice berg. Protect your tax information in the same manner that you protect your credit cards and checks. If you do not give your credit card numbers, social security card and your bank account information to strangers, then think twice before you give out your tax information to a stranger. It is your duties to safe guard your hard earned property including your identity.

Rule #3: Qualifications do matter. If the person preparing your taxes is under a tax authority for example a state board, the IRS or any authoritative body, it is more likely than not that your taxes will be prepared right. In my opinion an authoritative body works to make sure that

a) The tax preparer is knowledgeable in the corresponding field,

b) That the prepare operates under certain guidelines and does not break the law

c) That you, the client, have an avenue of redress

This is important to you. Ask your tax preparer about their qualifications and about where you can file a grievance. Also the tax code changes a whole lot during the year. If your tax preparer does not keep up with these changes, then your tax filing could be erroneous.

Point to consider- Do not let the qualifications stop you from seeking help; sometimes tax clients equate higher qualifications with a higher tax filling cost. In fact in most cases CPAs charge less than most off the beat tax preparers and they are better knowledgeable of the tax rules.

Rule # 4: Always double check your tax forms. Make sure that the tax preparer gives you a copy of the tax return. Keep this copy and once the tax return is filed, contact the IRS and get a free transcript of your return. Compare the transcript with the filed return. Always make sure that you retain all documents that support a filed tax return. These documents can be used to respond to the IRS in case of an audit.  Point to note;–The statute of limitation for most tax offences are between 3-6 years.

Rule # 5: Use technologies to your advantage. Just because you are stuck in rural Blunts North Dakota does not mean you cannot access a CPA in Dallas, Texas. With a computer and a few clicks your tax filing will be performed by a professional and you do not have to settle for less even in Boring, MD.

Rule #6: Do not play with the numbers. Some people use math to commit fraud. They figure that is the IRS has over 139 million individual returns to sift through, on average they are unlikely to be audited. Well, if you are stepping on hot coals and your head is in the freezer, then on average you should be just fine!  When your number is picked up, please be ready to support your tax return numbers.

Rule #7: Report all tax fraud. It is your duty and a responsibility to report all Tax fraud to the IRS and/or to the local police.

In addition to the above “rules” please remember “a stitch in time saves nine”

I hope the above “rules” will help you avoid very costly mistakes. Please reach out to us with any comments and questions. If we cannot help you, we know someone that can.

Please visit us at www.njengacpa.com and /or email the author at info@njengacpa.com for more information


The author is the President and Principal Accountant of Daniel Njenga CPA LLC. He is a Certified Public Accountant (CPA) – Texas State Board and a Certified Internal Auditor (CIA) – Institute of Internal Audit and a graduate of both the University of Virginia McIntire Business School and the University of Texas Arlington College of Business.



10 Responses to “Kenyans in the US: TAX PREPARATION AND TAX FRAUD”

  1. Solomon said

    Thanks Daniel that is an excellent article. As a former tax preparer and a CPA, I cannot over emphasize the need vouch for your Tax preparers credentials.

    Unfortunately for some people I met during my practice time, they picked their Tax preparer based on whoever guaranteed them the Maximum return, regardless of how fudged up their numbers were.

    A case in point was a Friend who refused to file with me coz some other guy was promising her $1800 in refund while my calculations were showing $900. I told her to go ahead and file with them but to allow me to pay $40 and get a copy of their filed return straight from the IRS. As I had suspected, their filed returns had cooked up expense deductions and fake dependents. The copy she got from the filer was showing an $1,800 in refund while the IRS copy was showing $2,700.

    So basically the filer fudged their numbers, got more refund that he told her, pocketed the difference a whopping $900. God help her, if she get audited, the IRS will not understand the excuse of, “I didn’t know they put that on my taxes” She will be wholly liable.

    Lessons choose your filer carefully; vouch for their credentials, and the Golden rule, “if what they are promising is too good, think twice”

  2. Shem Odero said

    This is a good piece and man I am loving this newly founded site. Very good information for us Kenyans and straight to the point. I am especially gratified by this piece as I know Iam one of those who got commed by the so called “Accountants wa Nyumbani”. Seriously why are Kenyans doing this to fellow Kenyans. We all came here for the same thing. Anyway, I was in a situation where the tax guy filed for me for two yeras in a row. Firts year i got $2,300 and the next year I got $2,500. Then a friend recommeneded that I get my tax return copies. Boy..oh..boy…the return showed that i received refunds for $3,800 and $4,200 respectively. The information on the tax forms was not what was on my copies received from the tax guy. Go figure. He is no longer my tax guy and I have now found a partner in Turbo-tax. I do it myself through the self help prompts. Thank you Mr. Njenga. They need to know that we Kenyans are not their money mill.

  3. James Ngare said

    Thank you for this. You have no idea how many Kenyans have fallen for these unsrupulous Kenyans. They are disgusting. How do they live with themselves? I would advise kenyans to have the tax preparer prepare the taxes, go through them and MAIL THEM YOURSELF. That way you know they cannot files a second one. That would be criminal and fraudulent!!!

  4. Nyokabi said

    Wow…this is scary. I did not know this. Does this mean I have to request my copies from previous years to verify? Does it cost me much to request them? This is maddening. And to think they are licking their chops waiting for tax season. I guess HR Block here I come.

    • Shem Odero, I am glad this has been of help to you and please reach out to us if there is anything we can do for you.

      James Ngare- This is the world we are living in but we all have to do our part to make it better.

      Nyakio- Transcripts are free and they take less that 10 days to get. Please reach out to us, the reason we are writing these articles among other things is to take advantage of the large numbe rof Kenyans in the area. We want to get serve our people because we are equiped with the knowledge and credentials to serve them. We also recognize the responsibility we have to you and acknowledge past breaches of that responsibility.

  5. Rab said

    thats why i cannot trust kenyans. thieves robbery and criminals. i heard someone say he earn 300,000 thousands dollars in 3 months… am not surprise thats how he did it. siku za mwizi ni 40 days. they days are over. how can i request my info from IRS..

  6. John (ACCA, CPA, IMAC) said

    Good Points Njenga (CPA) K or USA?

    I couldn’t help it but wonder on your motive when you call other Professionals “off-beat tax preparers! its the first time I have ever heard such a demeaning stupid arrogance in this CIVILIZED American society.
    If you want to market yourself then do it like a CPA not like an off-Beat Broke CPA.
    How Can YOU Sign a TAX refund of $14,000? and have nothing to do it? Please be Real!!
    Any Tax preparer Doing E-Filing must pass Background check, and must be registered With IRS.
    I have been Filing Taxes for the Last 15 years/ an IRS Agent. A few Years ago, all roads led to Arlington to a Brothers House who was also a CPA because he was willing to do what Kenyans wanted. Fix their Returns for MAXIMUM refunds.
    I have had problems with my fellow Kenyans coz they still think Kenyan!, they want Kids, Business on their returns etc while they have no proof of it.
    Last year I declined to File for several Colleagues who are being Audited Right now for Claiming 1st Time Home Buyers Credit!! a cool $8000.
    The point I am making is we Kenyans never accept Consequences of our Actions and if TRUTH is Told Kenyans would rather do business with a Nigeria and Zimbabweans as these guys are Prepared to cut corners, then seek our own for HELP to FIX these problems and Trust me this is what I have been doing this off tax season!
    Its all simple and straight! There are NO free stuffs and YOU CANNOT BEAT the American system, it might take 1, 2, or 5 years but when they Get you then DON’T CRY wolf…JUST DO IT RIGHT!!!
    Most of these Tax Preparers have been put in problems by our own people who are too demanding, hovering from one office to another getting free quotes and Looking for ways to Beat the system. Trust me I know my People; “Njenga” can’t and wont accept a Clean Refund of $1,300 while “Obajusuko” can get him a Refund of $4,900….

    • njenga said

      John, If my article reaches and helps one person, then it has accomplished its intentions. Broke CPA or not, I intend to not only point to the problems afflicting the Kenyan commnunity in the diaspora, but also offer solutions like I did in the the article above.

  7. mike said

    Good reasoning/augment. But show lots of greed and stupidity on the victims. how can you not read and keep a copy of Taxes. That is the law you are fully responsible for the information on that piece of paper, at least for 7yrs.

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