How to Detect if Your Tax Preparer is Under IRS Investigation

How to Detect if Your Tax Preparer is Under IRS Investigation

Finding out your tax preparer is being looked at by the IRS can be scary. But there are some signs you can watch out for to get ahead of any problems. This article will walk you through what to look for, and what to do if you suspect your preparer is under investigation.

Do Your Research Upfront

When picking someone to do your taxes, you want to find someone trustworthy. Here are some tips:

• Look for preparers with an established business and good reputation.
• Check credentials – make sure they are licensed in your state.
• Ask questions upfront about their processes and safeguards.
• Get references and read reviews.

Taking time to vet your preparer can help avoid issues down the line. The IRS also has tools to research preparers like the PTIN directory.

Watch for Red Flags

Even if you did your homework, problems can come up later. Here are some warning signs your preparer may be under investigation:

• You get a letter from the IRS about an error on your return.
• Your transcript doesn’t match the return you filed.
• You’re selected for an audit connected to your return.
• The preparer asks you to sign a blank return.
• They promise a big refund before looking at your documents.

Things like math errors do happen. But if you see a pattern of problems, it could indicate an issue.

Follow Up Right Away

If you suspect something is wrong, take action quickly:

1. Contact the preparer and ask for an explanation in writing.
2. Consult a trusted tax pro – get a second opinion on your return.
3. Report issues to the IRS using Form 14157.
4. File a complaint with the state licensing board.
5. Talk to a tax attorney about your rights and options.

Moving fast helps limit further impact to you. And it shows the IRS you’re serious about getting the matter resolved.

Getting Your Money Back

If errors or fraud by a preparer cause you to owe more tax, you may be able to recover losses. Options include:

• Civil Suit – You may sue the preparer to recover your money. But this can be tough if they lack funds.
• IRS Refund – For some errors, the IRS can give you back penalties and interest paid.
• Preparer Penalties – Fines paid by the preparer to the IRS can reimburse harmed taxpayers.

Talk to a tax attorney to understand how to get the maximum refund. Protections vary based on the type of misconduct that occured.

When Your Preparer Faces Criminal Charges

In serious fraud cases, the IRS may pursue criminal prosecution. If this happens to your preparer, here are some steps to take:

1. Get a copy of the charges so you understand the specifics.
2. Consult an attorney – you may be asked to provide evidence.
3. Consider filing an amended return if yours contained fraud.
4. Stay on top of IRS correspondence – respond quickly.
5. Keep gathering proof of your losses from the preparer’s actions.

Having an attorney represent you can make this process much smoother. They can communicate with prosecutors on your behalf.

Beware of Preparer Misconduct

While most tax pros are ethical, bad apples exist. Protect yourself by knowing the warning signs of misconduct. If you suspect your preparer is under investigation, be proactive. The sooner you act, the better off you will be.

With some diligence on your part, you can avoid becoming the victim of an unscrupulous preparer. Do your research before hiring someone. And follow up at the first hint of trouble. This will help ensure you have a trusted tax pro in your corner.

References

[1] IRS Form 14157 – Outlines documents needed to report preparer misconduct.

[2] Form 14157-A – Used to report misconduct and file a complaint.

[3] PTIN Directory – Allows you to look up a preparer’s credentials.

[4] CNBC Article – Outlines red flags to watch out for.

[5] IRS Fact Sheet – Provides information on reporting suspected tax fraud.