From IRS-Reporting Fraud-Ethical

[taxea]

If you suspect a client is providing fraudulent information, you should report it to the IRS. See Publication 3857 to find out what may indicate fraudulent activity and where to report it.

Apparently the IRS does not consider this a violation of client privilege. taxea

[JohnH]

Wonder if the client's attorney will agree with the IRS, especially if you're mistaken and there isn't any provable fraud, when he files the defamation suit.

[erchess]

Supposing you are sued for defamation

because you reported alleged fraud to the IRS and the case was not proven, will your E & O Policy cover you or are you hung out to dry?

[JohnH]

It would probably cost you upwards of $25K in legal fees to find out for sure. That's the cost for suing the E&O carrier after you've lost the case to the former client and then finding out that the E&O carrier bails on you.

[Larmil]

If you suspect a client is providing fraudulent information, you should report it to the IRS. See Publication 3857 to find out what may indicate fraudulent activity and where to report it.

Apparently the IRS does not consider this a violation of client privilege. taxea

I think "should" and "may be" are the operable terms. You are dealing with CID here. If I think the taxpayer is providing fraudulent info I will disengage and advise to client to seek a tax attorney. I will also advise the taxpayer that that anything they told me is not "privileged". I am not an attorney - client privilege does not apply to me.

[ChEAr$]

And above all

I think "should" and "may be" are the operable terms. You are dealing with CID here. If I think the taxpayer is providing fraudulent info I will disengage and advise to client to seek a tax attorney. I will also advise the taxpayer that that anything they told me is not "privileged". I am not an attorney - client privilege does not apply to me.

I would not inform IRS in cases like this.

Advise taxea also not to do so.

[DaveO]

I agree with Larmil on this. I'll hand the client back their info long before I would ever think of reporting anything to the IRS. The IRS has never paid me to do anything for them. Unless and until I work for the service I will to the best of my ability represent the taxpayer's interest. If I suspect they are doing something illegal I'll represent my own interest and disengage.

[Uncle Sam]

Reporting Fraud to IRS

We are not cops for the IRS (yet).

If a tax preparer feels uncomfortable with client information or facts, it's always his/her option to disengage.

Just the other day, I had someone who wanted to file a joint return with her non-US citizen - who is presently in his foreign country.
She wanted to file a joint return, but didn't want his name on the refund check because of not being able to cash the check. No joint bank accounts exist.
It also created an e-file problem because I couldn't e-file without his signature.
The lady came back, I gave her back her W-2 (only item on the return) and she went on her way to get the return prepared somewhere else.

[taxea]

We may not be cops but aren't we good citizens. Would you listen to an armed robbery or murder being planned and not report it? taxea

[erchess]

Two Different Situations

If I am doing or discussing doing someone's taxes with them when I learn of potential tax related wrong doing by them I am going to tell them that I am not a lawyer and the conversation is not privileged, give them back their stuff and go my way or send them away depending on where we are. I will disclose only if they threaten me or my loved ones or if I am ordered by a court. Foe non tax related wrong doing I am going to do the same except that once separated from them I am going to the authorities if I think it will do any good. .

If it is clear that what I know did not come out of a client relationship then as anyone else would I am going to the proper authorities.

[ChEAr$]

All of this reminds me

I know of a teen age baby sitter who is not reporting her schedule c type income.

What's that phone number again?

[BHoffman]

Book 'em Danno

http://www.youtube.com/watch?v=QoXG14d0Oqk&feature=related

[luke]

How about this scenario? You report the "fraudulent" activity and IRS investigates but decides NOT to pursue for whatever reason - Now ex-client KNOWS who reported him and tells everyone he knows that YOU are working for the IRS. Your office will be VERY EMPTY next tax season?

[JohnH]

Absolutely. Your office will be empty next tax season even if he doesn't tell anyone, because when he wins the civil lawsuit against you he will have the sherrif seize everything you own to settle the judgement.

[Bucky]

how about this.

Had a client (not new) drop off her stuff with 2 kids ss numbers enclosed. Turns out they were 2 grandkids she wanted to claim because she has given her daughter money and daughter has 4 kids and only used 2 on her return. After finding out they never lived with her and she just wanted to cash in I told her she could not claim children. She called back and ask that I just return her stuff and would pay me for my time. I did and she did. It still bugs the hell out of me that she will probably walk out of some tax office with 5 or 6 grand she should not be getting. I wanted so bad to report it but hey look at our treasury secretary etc. I never thought you could govern morals plus the way the government is throwing away money she will probably put all hers back into the economy.