Terry D EA Posted January 6, 2012 Report Share Posted January 6, 2012 Sorry for the long subjet line but it really covers my topic here. I have a new client that came to me with tax problems for 08, 09 & 10. Each tax year their "paid preparer" fraudulently entered 5k, 10k & 10k respectively for IRA contributions as well as inflated education expenses, student loan interest and property tax payments deductible on Schedule A. Also, on Sch A 2009 there has been claimed 9k in unreimbursed employee expenses reported on form 2106 that is not included in the transcript and 450.00 in non-cash chartible contributions reported on form 8233 that didn't need to be used at all. The bottom line is a seriously inflated refund for each year the tax payer was not entitled to and you guessed it, the IRS has caught up with this for 08 & 09. 2010 is probably on the radar as well. I do know the spouse in this situation quite well and they are of the trusting sort and like many, trusted their return preparer as well as the advice this preparer has given which has got them on the hot seat. I obtained transcripts from the IRS to see what was filed as their preparer does not have copies of their returns. They do not have copies as they gave their copies to the preparer to correct their returns and now the preparer claims she doesn't have any of their documentation and has told them not to worry as the IRS will take it out of their refund the next year. The document issue I know is a direct violation of Circular 230. Is their any recourse this client has against this preparer? I know they are responsible for every line on the tax return and at the very least this preparer should pay the penalities and interest charged. My clients agree they should have only received as a refund what they were allowed by law and do agree to pay back the over payment amounts. My question is how many other people has this person screwed up? Can they turn this person in to the IRS for fraudulenty preparing tax returns? This preparer knows she has done this and one of the red flags to me is the third party representative box has not been checked as indicated from the transcripts. I can't tell if the preparer signed the returns but I would guess not. Quote Link to comment Share on other sites More sharing options...
joanmcq Posted January 6, 2012 Report Share Posted January 6, 2012 The third party box not being checked isn't a red flag to me (if you are talking about the 'can we discuss this return with a third party), but the reluctance of the preparer to not give the return copies back is a red flag. Has the preparer not given any of the original documents back either? Not giving back originals is a big Cir. 230 violation. There is a form your clients can file to complain about the prior preparer and 'not signing' is one of the complaints. But without the return, you can't see if it was actually signed or not. Quote Link to comment Share on other sites More sharing options...
ILLMAS Posted January 6, 2012 Report Share Posted January 6, 2012 Don't waste your time, if the preparer has a habit of doing this for his/her clients the IRS will pay them a visit . I would be more concern the TP repays any amount they are not entitle to. MAS Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted January 6, 2012 Author Report Share Posted January 6, 2012 I am not overly concerned about the tax payer not paying back what they should. They have graciously agreed to do so but want to take action against the preparer. I agree Joanmcq that the third party box not being a flag but it does raise a little suspiscion. No, the preparer has not returned any original documents and insists she doesn't have them when in fact my clients said she does. They have asked for them on three different occasions. Do you know the name or number of the form you are talking about? Quote Link to comment Share on other sites More sharing options...
Pacun Posted January 6, 2012 Report Share Posted January 6, 2012 If you know the wife in this case, why didn't she trust you and came to you to prepare their taxes? They go to these type of preparers because they know they will get bigger refunds!!! They come to you ONLY when the IRS gets them. Believe me, they would not be calling you if they were not in the "hot seat". They would never be your clients because the other preparer gets bigger refunds than you. For years we have had a preparer who is very famous in my area. People come to my office and after I talk to them, they go back to that preparer. They go to him and the explanation that some of them tell me is "He knows more than you about taxes because he knows how to deduct my hair cut, food, cell phone, etc." I wish them a nice day and call the next client. One question that the IRS will ask your question is: "Did the preparer gave you a copy of the return when it was presented for signature?" The answer will be yes. If she claims that she left her documents with preparer and the preparer says "no", what proof she has? Were there any witness, is there a document signed by the preparer. She might be better off taking him to regular court. Good luck with that. I have been efiling almost 100% for about 4 years and I NEVER checked the third party box. I take back the NEVER, I do it on my OWN return, I check the box to contact my preparer. 1 Quote Link to comment Share on other sites More sharing options...
joanmcq Posted January 6, 2012 Report Share Posted January 6, 2012 http://www.irs.gov/pub/irs-pdf/f14157.pdf Form 14157. Wouldn't have known about it, but there was just a rant about it on one of the other message boards I peruse. Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted January 6, 2012 Author Report Share Posted January 6, 2012 Thanks joanmcq. I did some research on my own and found the form as well. Pacun you are assuming alot here. There are honest people that make honest mistakes. These folks do not fall under your assumptions. Quote Link to comment Share on other sites More sharing options...
Pacun Posted January 6, 2012 Report Share Posted January 6, 2012 I agree Terry. Maybe your clients are more honest than most of mine. I think Form 14157 is better if filed before you spend your refund NOT when the IRS has pulled your return.What do you think your clients do when they get audited by the IRS? Do you think they blame the preparer? Imagine that the auditor would say, "we are auditing your return and you owe us money, this is form 14157, if you want to file it, I will give you 30 minutes to fill it out and I will file it for you".I do agree with MAS. Time is running out for these type of preparers, just ask them to pay because the IRS is right. Refer them to an attorney if they want to go after the preparer. That's what I do! I concentrate on taxes and let attorney give legal advice. Quote Link to comment Share on other sites More sharing options...
jainen Posted January 6, 2012 Report Share Posted January 6, 2012 >>they are of the trusting sort<< Sorry, I don't buy it. Maybe the preparer didn't sign it, but the taxpayers sure did. I agree with Pacun here. "They go to these type of preparers because they know they will get bigger refunds. They come to you ONLY when the IRS gets them." Trusting sort, indeed! They knew perfectly well they weren't paying into the IRA or incurring those employee expenses. The only trust they had was believing the preparer when he promised they could get away with these kind of deductions in these amounts. Nevertheless, I believe you should accept them as clients and serve them professionally. That would include requesting penalty abatement based on bad preparer advice--sometimes the IRS will allow it if you can show they have changed preparers and taken other SPECIFIC action to ensure future compliance. You can also suggest they file a small claims suit, but don't don't get involved in that yourself. 1 Quote Link to comment Share on other sites More sharing options...
OldJack Posted January 6, 2012 Report Share Posted January 6, 2012 I agree with Pacun and Jainen. It was the job of the paid preparer to "suggest" an IRA contribution and the taxpayer must have agreed and know they were required to make the contribution by the required date. You don't want this client!! Quote Link to comment Share on other sites More sharing options...
joanmcq Posted January 6, 2012 Report Share Posted January 6, 2012 The thing is, these days the taxpayers don't sign the 'return'. They sign the 8879. And if the preparer doesn't go over the return line by line....well I have clients whose eyes glaze over when looking at a tax return. They rely on me to explain it, or just to do it properly; I've seen that eye glaze happen even if I try to go over it line by line. A fraudulent preparer could easily redirect those clients to the refund. People have also been trained by commercials by the storefronts and ads for 'the Box' just to focus on deductions and refund, not completeness and correctness. And I understand the 'eye glaze' thing because the same thing used to happen to me when confronted with a math problem...brain just shuts down. In fact it did yesterday when I was asked the simple question, what did you do today? 1 Quote Link to comment Share on other sites More sharing options...
OldJack Posted January 6, 2012 Report Share Posted January 6, 2012 >>taxpayers don't sign the 'return'. They sign the 8879.<< And they are given a paper copy of the return for their review and approval before the return is transmitted. The taxpayer is responsible for their return, not the preparer. Quote Link to comment Share on other sites More sharing options...
jklcpa Posted January 7, 2012 Report Share Posted January 7, 2012 I'm thinking that this preparer gave the couple a return to be paper filed, otherwise the IRS would know who this preparer is if the return was efiled. The 3rd party box not being checked isn't a red flag to me. I ask each of my clients if they would like to have that box checked and all but one says yes. I don't know why that one man does not want it checked. Maybe he thinks that the IRS will contact only my office and not him, or that he'll end up paying me for something that he can answer himself. Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted January 10, 2012 Author Report Share Posted January 10, 2012 Okay, I with all of you who are skeptical as to whether the client is REALLY telling me the truth. I do agree there is the potential there for the client to act totally innocent and blame the preparer. It does strike me funny that they cannot retreive their paper work. I have instructed them what to do with filing a complaint against this preparer and do take the advice to not get involved. I never planned to get involved anyway. So, as Jainen pointed out, I will take care of them professionally and leave it at that. I have now completed the majority of the amendment because the IRS in this case is not 100% correct. They did disallow deductions for student loan interest that the clients "claim" they have the documentation for. If so, then they do not agree with all of the proposed changes. Now, I have given them an invoice for my services and if they are so grateful for getting them out of a jam they should have more than happy to pay me. Right???? We will see. Quote Link to comment Share on other sites More sharing options...
joanmcq Posted January 11, 2012 Report Share Posted January 11, 2012 You can always check e-services for the wage & income info to back up what you are putting on the return, including the student loan interest. I just did an e-services POA; I just started doing them online instead of faxing and it's great how quickly you can get the info. You do need the TP's date of birth and one tax year's AGI as on file to verify the signature. 1 Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted January 12, 2012 Author Report Share Posted January 12, 2012 Thanks Joan and I agree with you totally as I have utilized e-services in the past. Sometimes it has been a pain but overall it is better than trying to retreive the informaiton from the IRS agents. I wish our State had the same type of system. I am in NC and they do have a practicioner priority line and are generally helpful but I would like to be able to print off what they have for a client's tax account as well. Quote Link to comment Share on other sites More sharing options...
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