Incompetent Preparer

[Burke]

Just had an ex-client come in, who has been using other preparer for last 3 years, got letter from IRS about errors on 2005 return. Idiot preparer did not show gross proceeds and basis on Sche D, but showed net gain in sales proceeds, zero in cost basis, for the figures to come out correctly. So IRS records for gross sales proceeds do not match and they tell TP he owes $3,000. Idiot preparer says they are right, send money, so he does! According to copies of tax returns I reviewed, preparer has also amended the last 3 years to make corrections (like forgetting to include W-2.) Can we report these people? This is not an individual doing taxes out of his basement, but a payroll/tax preparation business! BTW this business is the one who prepared the W-2, which he forgot to include.

[erchess]

It would be nice if

every preparer had to belong to a professional associaton that was serious about policing its members. Even if the process were only driven by complaints it would be an improvement over what we have now. The only comment I would have in defense of this firm is that leaving off a W-2 is not necessarily the preparer's fault. When my crystal ball is in the shop I have to rely on the client to give me those or I will leave them off.

[Burke]

Normally I would agree. But this firm (read preparer) does the TP's Sub-S Corp, does the W-2's, (which for some reason have the employer listed as the payroll service, which is also the same business this preparer works for -- or owns) and then does the TP's personal return. He may even do the guys books. No excuse for leaving it off.

[erchess]

wow

Well with no one policing our business, this sort of thing is going to happen. I don't know about the rules where you are but here in NC anyone regardless of education can call himself an Accountant or a Tax Professional or Tax Preparer, etc.

[Kong]

Burke

By pointing out these mistakes to client sooner then later your client will come to the conclusion that two events are happening with his current payroll service.

1. Either this business is over burdened with work and they are not paying attention to detail or.

2. Payroll service individual is not very bright.

Lets hope that this client is smart enough to take his business somewhere else (your place).

[Snaggletooth]

Don't Report

This is incredible, but there are firms like this in every town. I personally think it to be a mistake to report these people, for any number of reasons. Firstly, after blowing the whistle, your involvement doesn't stop there. IRS will be using you to gather evidence so they won't have to gather this ammunition by themselves. They won't get involved if it means their people are going to more trouble than it's worth. From what you've told me, they would not be pursuing much money, only incompetence -- thus they're even less likely to be interested.

Secondly, you will be associated with the IRS in your local business community. No one will want to bring you their work.

[JG EA]

Perhaps some of these are explainable. Have you never made a mistake? For instance perhaps the preparer put in the net amount on D just to see the results or more likely was working with the client's figures and didn't have source material. So, the result would have been correct. When the IRS letter came perhaps the preparer still didn't have the source material and felt the client had to take the responsibility for lack of paperwork.


Perhaps Erchess is right and the amended returns are the client's fault. Even if the preparer's company did the payroll I know from experience that if the client writes his own checks you can find out month's later that the payroll was all wrong and it has to be redone. I personally have done many amended payroll returns that were the taxpayer's fault and then if the taxes were already done then they would have to be amended also.

Also 'they have the employer listed as the payroll service' is actually a common practice. One I don't like but non-the-less common.

I agree with Snag " personally think it to be a mistake to report these people, for any number of reasons' and if you belong to a professional organization it is probably in the bylaws not to do so.

I worry about assuming that the preparer is an idiot. That may not be the case at all. I also really worry about wanting (in the same field) to turn in someone else. You do not know all the circumstances.

I say you should watch this client, what did this client tell the other one about you? Did he not leave you for 3 years?

[myerstaxes]

Reminds me of two new clients

I got a new client after the prior preparer did not handle his Vcoded W2 correctly...First he did not do a schedule D to report the stock transaction...Then when IRS could not match the income from the stock sale to the return, the client got a large bill...So the preparer amended the return, and the client owed something like $4000...mind you the income was already in his W2, and he paid taxes on it...Anyway, the IRS was still not satisfied, sent him a final notice (cause to them the basis was zero and they were assessing based on the the total sale proceeds) so of course they said he owed more than the $4000 that he had paid with the 1040X...I corrected the mess, wrote IRS a detailed explanation concerning Stock Options, and did a new 1040X (to get his $$$s back he had paid)...When I called him to tell him, I said, "What would you say if I told you, you were getting all your money back plus interest?"...He said if that were true, I could kiss you...To that I replied..."PUCKER UP"....LOL...

My next new client, had a bunch of over inflated stuff on his return, I will not bore you with the details...But he is being audited for two years...When he went to the preparer, she said..."WOW, how did I let you get away with this BIG refund?"...This looks like fraud!!!
Scared the man to death...

[taxxcpa]

Accountant?

Well with no one policing our business, this sort of thing is going to happen. I don't know about the rules where you are but here in NC anyone regardless of education can call himself an Accountant or a Tax Professional or Tax Preparer, etc.

In Texas you cannot call yourself an accountant or auditor unless you are a licensed Public Accountant or CPA & the last non-CPA license was granted in 1947.

I don't think this rule was enforced until recently, but now they are cracking down on people who call themselves Public Accountants or even just 'accountants.'

Anyone can claim to be a tax professional or tax expert or tax preparer whether they know a 1040 from a can of WD--40

[gkaiseril]

Well with no one policing our business, this sort of thing is going to happen. I don't know about the rules where you are but here in NC anyone regardless of education can call himself an Accountant or a Tax Professional or Tax Preparer, etc.

The IRS does some work, but they are reluctant to go after every mistake. In Chicago a few years ago, the IRS put a preparer in the Federal Metropolitan Lockup and to court for inflating refunds. It took years of bad returns for them to decide this man started at refund and then generate expenses and dependents as needed.

A number of preparers I know have had a sample of their returns pulled and reviewed by the IRS when one of their clients has been audited just a QC check by the IRS.

Congress and the IRS are trying to get mandatory annual training for tax preparers. At least one of the large tax preparation firms require annual training for rehiring or passing a test.

For some tax preparers this is their only job, like an attorney or doctor. And this makes removing the person from the profession a very touchy and complex action. How many bad attornies, dentists, and doctors are still practicing in your state?

[Burke]

This is incredible, but there are firms like this in every town. I personally think it to be a mistake to report these people, for any number of reasons. From what you've told me, they would not be pursuing much money, only incompetence -- thus they're even less likely to be interested.Secondly, you will be associated with the IRS in your local business community. No one will want to bring you their work.

I agree completely. I've never reported anybody for anything, although I might consider it if it were outright fraud I could prove. But you are right. Not worth the time and energy, plus I don't want this client back. He is a young kid whose corporate books last I saw consisted of a checkbook. Have to hand it to him, though. He makes good money.

[myerstaxes]

Based on my IRS experience

Based on my experience as a Revenue Agent, Analyst and Revenue Agent manager...I can tell you that Preparer projects are instituted by IRS..This usually happens when one is caught grossly inflating deductions, or fabricating deductions that do not exist or the client is not entitled too...They usually ferret them out for themselves...The project is hard on the clients though, because they call in as many returns as they need to, that a particular preparer has prepared...But necessary to build the case...Some are from informants...Most I have seen are not, but based on the examiner's suspicions...Not pretty, but in most cases necessary to get them shut down...
I had a young lady come in to get her taxes done...As I reviewed the prior year return, I asked her did she change positions with her company...She said no, why? I asked about the 2106 on her return and her mileage and travel...She said she had none...She did have a whopping refund the year before due to the 2106...She cried when I told her what the preparer had done...Turns out later I found out, that the IRS had him on their radar, and he was under investigation...

[Burke]

Qualification of unenrolled tax preparers has been on the IRS and Congress' radar for several years. NATP is an advocate and is in on the hearings, committee discussions, and lobbys for a realistic law governing professionalism in the industry. It's coming, and it will include continuing education. Some form of a bill has been introduced every year, and it should be passed within the next few years if not sooner.