MJG CPA Posted January 31, 2008 Report Share Posted January 31, 2008 A loan officer received copies of a borrower's 2006 tax return directly from the CPA - copy had taxpayer's signature, CPA firm info; appears complete. Loan officer compares return to IRS transcript: AGI per paper return = $85,000 vs $13,000 per IRS. Lots of differences between the two, not just one item that was misreported. (Sch C gross income $120,000 on paper - $9,200 per transcript; Est tax pmts of $18,000 per paper; none per IRS, etc.). Loan officer digs out paper copy of 2005 tax return also provided by CPA last year (in 2007) and compares to IRS transcript for 2005 which was just obtained this year. Same thing - large discrepancies between the two. (AGI of $90,000 on paper - $19,000 per IRS; $75,000 net income from sch C on paper - no sch C per IRS; $18,000 est pmts on paper - none per IRS). Loan officer asks me what reasonable explanation could explain these discrepancies. I say, there is no reasonable explanation - one or both parties is lying. Loan officer calls taxpayer to say there are discrepancies. He says, "I don't know - that's why I have a CPA - you'll have to ask her." CPA says, "Sorry, we sent you copies of draft returns we had prepared for tax planning purposes. We have a new staff member and she must have sent the wrong forms." I look at copies of the returns provided by the CPA with date stamps of May 2007 on the 2005 returns and 1/18/08 on the 2006 returns. 1) How would such an error have been made two years in a row? 2) Why would the taxpayer's signature be present on a "draft" copy? 3) If I had prepared "draft" copies, there would have been "DRAFT" stamps all over the place so they could never be mistaken for anything else. This thing stinks to high heaven. I can't imagine why the CPA would participate in such a scam, if that's what it is. My question to you is, what do you think is going on here? And second, would you report your suspicions? Quote Link to comment Share on other sites More sharing options...
GeneInAlabama Posted January 31, 2008 Report Share Posted January 31, 2008 In 1987 I worked for a CPA and one of the preparers who was not a CPA, but working toward it, bragged about preparing two tax returns for the same person, one for the IRS and one for the bank. The CPA we were working for was aware of the situation and condoned it. I didn't work there for very long. Quote Link to comment Share on other sites More sharing options...
MJG CPA Posted January 31, 2008 Author Report Share Posted January 31, 2008 In 1987 I worked for a CPA and one of the preparers who was not a CPA, but working toward it, bragged about preparing two tax returns for the same person, one for the IRS and one for the bank. The CPA we were working for was aware of the situation and condoned it. I didn't work there for very long. Were they smoking crack??! Why would you ever put yourself or your license in that position?? Quote Link to comment Share on other sites More sharing options...
jainen Posted January 31, 2008 Report Share Posted January 31, 2008 >>one for the IRS and one for the bank<< Egads! I won't even give the bank a letter saying my Schedule C client is self-employed! The problem is that if the bank relies on your signature, then YOU might be liable on the loan when the borrower skips town. Quote Link to comment Share on other sites More sharing options...
Eli Posted January 31, 2008 Report Share Posted January 31, 2008 When my Wife & I applied for our home loan, one of the loan officers we talked to suggested the same thing. She said it would look more favorable with a "little more income". Needless to say we didn't choose them as our mortgage company. Eli Quote Link to comment Share on other sites More sharing options...
Lion EA Posted January 31, 2008 Report Share Posted January 31, 2008 Maybe the tax payer asked his preparer for a mortgage letter and was turned down. So, he went to another firm and gave them "enhanced" info, received returns, but never filed them. Where do YOU fit in this story? Are you at the CPA firm? The mortgage company? I met a realtor, of all people, who told me (long before I was a tax preparer) that he'd "kept" his net income low for a few years, and then was turned down for a loan when he tried to buy a house! Why was he surprised?! Quote Link to comment Share on other sites More sharing options...
SUE A. Posted January 31, 2008 Report Share Posted January 31, 2008 ITS JUST THIS SORT OF THING THAT HAS GOTTEN THE BANKS AND THE BORROWERS INTO THE TROUBLE WE HAVE TODAY WITH PEOPLE LOSING THEIR HOMES AND BANKS BEING STUCK WITH HOUSES THEY CANT SELL. I DONT KNOW IF I WOULD REPORT IT OR NOT, BUT I CERTAINLY WOULDNT GO ALONG WITH IT. I WOULD PROBABLY TURN A CLIENT LIKE THIS AWAY. IMHO. SUE Quote Link to comment Share on other sites More sharing options...
Booger Posted January 31, 2008 Report Share Posted January 31, 2008 Were they smoking crack??! Why would you ever put yourself or your license in that position?? It's called MONEY. Not everyone with a CPA, MD, or ESQ designation behind their name is honest. The CPA (and the taxpayer) were betting that the loan officer/mortgage company wasn't going to request a filed copy of the return from the IRS. Ooops, they LOST. Booger Quote Link to comment Share on other sites More sharing options...
MJG CPA Posted January 31, 2008 Author Report Share Posted January 31, 2008 ITS JUST THIS SORT OF THING THAT HAS GOTTEN THE BANKS AND THE BORROWERS INTO THE TROUBLE WE HAVE TODAY WITH PEOPLE LOSING THEIR HOMES AND BANKS BEING STUCK WITH HOUSES THEY CANT SELL. I DONT KNOW IF I WOULD REPORT IT OR NOT, BUT I CERTAINLY WOULDNT GO ALONG WITH IT. I WOULD PROBABLY TURN A CLIENT LIKE THIS AWAY. IMHO. SUE I most certainly won't go along with it - I can't believe this firm would knowingly create such bogus tax returns for any amount of money. What fee would be worth it when the bank comes back against them on a defaulted loan they issued on the reliance of the CPA's "tax returns?" At that point, you can make any excuse you want [new staff member, draft version, etc], but I think you're on the hook - as well you should be if you're dumb enough to go along with a scam like this. Not only does that CPA office give a bad name to all CPA's, accountants, tax preparers,etc., but you're right, they are also contributing to the credit problems. It amounts to outright fraud in my opinion. And you can bet this is not the only client they're doing this for. Now I'm on the fence - if you do nothing, I'm sure this firm will continue to spew out bogus returns for their clients' bankers. But it's not really my job to blow the whistle on them either - I'm not even "involved" in this situation. I was just asked to advise what was the likely cause of the discrepancy. Likely, the loan officer will just reject the loan and move on. It just burns me! Quote Link to comment Share on other sites More sharing options...
Pacun Posted January 31, 2008 Report Share Posted January 31, 2008 I fired a client a couple of years because after we finished the IRS return, he wanted me to prepare another return with less money paid to employees and subcontractors. The second copy was going to be shown to his insurance company so he could pay less. On the spot, I told him I didn't do that and that I couldn't continue preparing his taxes. On the question at hand, let's imagine that I have filed my taxes reporting $19,000 to the IRS but I come to you (CPAs) and I say, "I haven't filed for 2005 and 2006 and I would like you to prepare my taxes". I continue to say "I made $90,000 and I had very few expenses on both years". What will you do? I guess you will prepare the taxes and give me the envelopes to send to the IRS and to the state. I pull out the forms from the envelopes and try to get a loan with that information. Believe me, taxpayers are smarter that what we think and they play these games. So, next time your client gets nailed by the government, do not feel sorry, maybe they deserve it. Also, I do not feel sorry for the greedy people that lost their homes because they knew they could afford it to begin with. Quote Link to comment Share on other sites More sharing options...
OldJack Posted January 31, 2008 Report Share Posted January 31, 2008 >>Now I'm on the fence - if you do nothing<< Suggest to the loan officer that they file a complaint with the CPA's state board to investigate his license/permit to practice. Of course you could do the same. Quote Link to comment Share on other sites More sharing options...
MJG CPA Posted January 31, 2008 Author Report Share Posted January 31, 2008 >>Now I'm on the fence - if you do nothing<< Suggest to the loan officer that they file a complaint with the CPA's state board to investigate his license/permit to practice. Of course you could do the same. Yes, actually I'm considering that. Quote Link to comment Share on other sites More sharing options...
mircpa Posted January 31, 2008 Report Share Posted January 31, 2008 I fired a client a couple of years because after we finished the IRS return, he wanted me to prepare another return with less money paid to employees and subcontractors. The second copy was going to be shown to his insurance company so he could pay less. On the spot, I told him I didn't do that and that I couldn't continue preparing his taxes. On the question at hand, let's imagine that I have filed my taxes reporting $19,000 to the IRS but I come to you (CPAs) and I say, "I haven't filed for 2005 and 2006 and I would like you to prepare my taxes". I continue to say "I made $90,000 and I had very few expenses on both years". What will you do? I guess you will prepare the taxes and give me the envelopes to send to the IRS and to the state. I pull out the forms from the envelopes and try to get a loan with that information. Believe me, taxpayers are smarter that what we think and they play these games. So, next time your client gets nailed by the government, do not feel sorry, maybe they deserve it. Also, I do not feel sorry for the greedy people that lost their homes because they knew they could afford it to begin with. I totally agree with pacun, clients are more smarter than us, Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted January 31, 2008 Report Share Posted January 31, 2008 >>Now I'm on the fence - if you do nothing<< Suggest to the loan officer that they file a complaint with the CPA's state board to investigate his license/permit to practice. Of course you could do the same. I am with OldJack on this one. I would probably "suggest" to the bank officer that he should contact the AICPA or other governing body, expain that these returns are questionable, and that he thinks a peer review is in order (without making accusations of course!). Since it is in the best interest of the AICPA to police their members, and they would not want a story like this "getting into the local press", they might want to take some action. A person who was really steamed could call the local press "anonymously" and give them the name of the bank and the CPA and say "sick em". Every reporter is looking for a good mortage meltdown story that will show how we got into this mess. Not that I would use the second method, it was just a thought. Tom Lodi, CA Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted January 31, 2008 Report Share Posted January 31, 2008 Yeah, right! :lol: Quote Link to comment Share on other sites More sharing options...
MJG CPA Posted January 31, 2008 Author Report Share Posted January 31, 2008 I am with OldJack on this one. I would probably "suggest" to the bank officer that he should contact the AICPA or other governing body, expain that these returns are questionable, and that he thinks a peer review is in order (without making accusations of course!). Since it is in the best interest of the AICPA to police their members, and they would not want a story like this "getting into the local press", they might want to take some action. I tried to do a license lookup and this firm is not coming up, so I'm guessing if there is a CPA there at all, they are unlicensed. So they would not be subject to oversight agencies such as the state licensing board, the AICPA, or anyone wlse for that matter, right? So now what? They just fly under the radar and continue on defrauding their way around the globe - making it tough for the rest of us who are trying to do things the right way? Grrrrrrr... :angry: Quote Link to comment Share on other sites More sharing options...
lbbwest Posted January 31, 2008 Report Share Posted January 31, 2008 I tried to do a license lookup and this firm is not coming up, so I'm guessing if there is a CPA there at all, they are unlicensed. So they would not be subject to oversight agencies such as the state licensing board, the AICPA, or anyone wlse for that matter, right? So now what? They just fly under the radar and continue on defrauding their way around the globe - making it tough for the rest of us who are trying to do things the right way? Grrrrrrr... You got it. lbb Quote Link to comment Share on other sites More sharing options...
jainen Posted January 31, 2008 Report Share Posted January 31, 2008 >>they would not be subject to oversight agencies such as the state licensing board<< Oh yes they would, if they are holding themselves out as CPAs. However, signing a tax return is not actually accounting, so it might not be an infraction unless the state licenses preparers too. Even then, well, it wasn't actually a tax return, was it? But it was a conspiracy to commit bank fraud, and these days that is a felony being targeted by everyone from the local D.A. to the FBI and SEC. On the other hand, maybe the loan app was accurate and the tax return was fraudulent. Quote Link to comment Share on other sites More sharing options...
GeneInAlabama Posted January 31, 2008 Report Share Posted January 31, 2008 Were they smoking crack??! Why would you ever put yourself or your license in that position?? When I realized what was going on, I got out. Quote Link to comment Share on other sites More sharing options...
lbbwest Posted January 31, 2008 Report Share Posted January 31, 2008 >>they would not be subject to oversight agencies such as the state licensing board<< Oh yes they would, if they are holding themselves out as CPAs. However, signing a tax return is not actually accounting, so it might not be an infraction unless the state licenses preparers too. Even then, well, it wasn't actually a tax return, was it? But it was a conspiracy to commit bank fraud, and these days that is a felony being targeted by everyone from the local D.A. to the FBI and SEC. On the other hand, maybe the loan app was accurate and the tax return was fraudulent. I was the technical support for the legal team in a rather ugly divorce. The now ex-spouse was a CPA AND CFP in Fl & MI. He had taught MACPA & AICPA CPEs. He had three sets of tax returns, (1) Credit Card Companies (2) IRS/States and (3) Local Banks. Additionally he kited monies from the defined pension plan to the business & personal accounts. The court was baffled and said his businesses weren't worth anything and allowed him to keep all business assets at a marital value of Zero, and sold all personal marital assets at auction. He purchased at auction the lake house, the commercial rental property, the jag, the MG, etc. etc. His wife lost half her pension from the school system. His ex-wife turned all documents over to the SEC, the IRS, the MACPA, the AICPA, FBI and nothing was done. He was indicted by the Florida Department of Commerce last year for misappropriating funds from investor's portfolios but nothing was ever done on the bank or tax fraud. lbb Quote Link to comment Share on other sites More sharing options...
Booger Posted January 31, 2008 Report Share Posted January 31, 2008 I was the technical support for the legal team in a rather ugly divorce. The now ex-spouse was a CPA AND CFP in Fl & MI. He had taught MACPA & AICPA CPEs. He had three sets of tax returns, (1) Credit Card Companies (2) IRS/States and (3) Local Banks. Additionally he kited monies from the defined pension plan to the business & personal accounts. The court was baffled and said his businesses weren't worth anything and allowed him to keep all business assets at a marital value of Zero, and sold all personal marital assets at auction. He purchased at auction the lake house, the commercial rental property, the jag, the MG, etc. etc. His wife lost half her pension from the school system. His ex-wife turned all documents over to the SEC, the IRS, the MACPA, the AICPA, FBI and nothing was done. He was indicted by the Florida Department of Commerce last year for misappropriating funds from investor's portfolios but nothing was ever done on the bank or tax fraud. lbb Guy sounds like a real piece of work. How some people can sleep at night astounds me. Booger Quote Link to comment Share on other sites More sharing options...
MJG CPA Posted February 1, 2008 Author Report Share Posted February 1, 2008 UNbelievable!! The preparer and the taxpayer are now VERY nervous, realizing they have been caught in their lies. The lending company has said it is their policy to file a complaint in cases like this (with whom, I don't know). At any rate, these two are sweating bullets, asking the loan officer, "what's going to happen now?" I guess they should have thought of that BEFORE they submitted fictitious returns!! Quote Link to comment Share on other sites More sharing options...
michaelmars Posted February 1, 2008 Report Share Posted February 1, 2008 what happens is that the irs will take the postion that the return filed with the bank is the correct one and assess the additional tax. i've seen that before. Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted February 1, 2008 Report Share Posted February 1, 2008 what happens is that the irs will take the postion that the return filed with the bank is the correct one and assess the additional tax. i've seen that before. That would force the taxpayer to either pony up a bunch of taxes, interest, and penalties, or admit to a fraudulent return. Pretty smart on the part of the IRS. Quote Link to comment Share on other sites More sharing options...
OldJack Posted February 1, 2008 Report Share Posted February 1, 2008 >>asking the loan officer, "what's going to happen now?"<< The preparer is probably going to lose his state license and his ability to represent taxpayers with the IRS. The taxpayer is going to pay dearly and might go to jail if it qualifies as fraud. Its a good thing. Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.