In a recent case on Judge Judy, the following facts are claimed:
Defendant, Alice, runs an accounting businesse and prepares the tax return for the plaintiff, Betty. Betty claims that Alice quoted a fee of $200 for tax preparation. Alice's computes a tax over payment [i.e. refund] of $5400. Filing electronically, Alice routes $4600 to Betty's checking account and routes $800 to Alice's account as her "fee". Originally, Betty is suing Alice for $600 as Betty was told the fee would be $200.
My question is: Will the IRS split the refund and pay the preparer's fee directly from the refund?
What follows is even more bizarre. Without Betty's permission, Alice files an amended return which reduced the refund by $4300. The IRS sends Betty a bill for the $4300, so Betty is suing for $4900 (the $4300 bill from the IRS as well as the $600 overcharge). When Alice admits that she did file an amended return without Betty's permission, Judge Judy awards Betty the full $4900 without hearing any other arguments.
What we never heard was Alice's reason for filing an amended return. Betty implies it was revenge for the lawsuit. It questions whether Alice did a little creative bookkeeping when computing Betty's taxes.