The vast majority of Certified Public Accountants (CPAs) are highly ethical and competent professionals dedicated to serving their clients diligently. However, unfortunately, there are rare instances where a CPA may engage in misconduct, negligence, or even outright fraud. When such situations arise, it's crucial for taxpayers to know how to report these issues to the Internal Revenue Service (IRS). This lengthy guide will walk you through the process, step by step, ensuring you have the information you need to take appropriate action.
Reporting a CPA to the IRS: A Comprehensive Step-by-Step Guide
Have you ever felt a knot in your stomach after reviewing your tax return, a nagging feeling that something just isn't right? Perhaps you've noticed unusual deductions, unexplained changes, or even a complete lack of communication from your tax preparer. If your gut is telling you something is amiss with your CPA, then you're in the right place. Your vigilance is key to maintaining the integrity of our tax system and protecting yourself from potential harm.
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| How To Report A Cpa To The Irs |
Step 1: Recognize and Document the Misconduct
The first and most critical step is to clearly identify the nature of the misconduct and gather all supporting evidence. Without concrete details and documentation, your complaint may not be actionable.
Sub-heading 1.1: What Constitutes CPA Misconduct?
Before you jump to conclusions, understand what the IRS considers reportable misconduct. This isn't just about a simple mathematical error (though repeated errors could be a sign of negligence). We're talking about more serious issues, such as:
- Fraudulent Activities:
- Falsifying income, deductions, or credits: This could involve inventing deductions you don't qualify for, underreporting income, or claiming credits that are not applicable to boost your refund.
- Directing your refund to their own account: A CPA should never have your refund deposited into their personal or business account.
- Filing returns without your consent or knowledge: This is a serious breach of trust and potentially identity theft.
- Altering your return after you've signed it: If the return you signed differs from what was filed with the IRS, that's a major red flag.
- Unethical Practices:
- Refusing to provide you with a copy of your tax return: You are legally entitled to a copy of your filed return.
- Failing to sign your tax return as the paid preparer or include their Preparer Tax Identification Number (PTIN): All paid preparers are required to sign returns and include their PTIN. A "ghost preparer" who refuses to do so is highly suspect.
- Basing fees on a percentage of your refund: This is generally prohibited and can incentivize unethical practices.
- Promising unusually large refunds: Be wary of anyone promising "too good to be true" refunds.
- Improperly using another individual's PTIN.
- Gross Negligence:
- Repeated and significant errors: While isolated mistakes can happen, a pattern of substantial errors indicates a lack of due care.
- Failure to exercise due diligence: Not asking sufficient questions to verify information or failing to understand your financial situation adequately.
Sub-heading 1.2: Gather Your Evidence
Once you've identified the specific issue(s), begin collecting every piece of evidence that supports your claim. The more comprehensive your documentation, the stronger your case will be. This may include:
- Copies of your tax returns: Both the one you believe was correct and any altered versions.
- Correspondence with the CPA: Emails, letters, and notes from phone calls (with dates and times).
- Bank statements: Especially if a refund was misdirected.
- Receipts and financial documents: That contradict the information on the filed return.
- Advertisements or business cards: From the CPA.
- Contracts or service agreements: You had with the CPA.
- Form 8879, IRS e-file Signature Authorization: This form authorizes your preparer to e-file your return.
- Any other relevant documents that shed light on the misconduct.
Important Note: Do not send original documents to the IRS. Always make copies and keep the originals for your records.
Step 2: Choose the Right IRS Form
The IRS has specific forms for reporting tax preparer misconduct. The form you use depends on the nature of your complaint.
QuickTip: Treat each section as a mini-guide.
Sub-heading 2.1: IRS Form 14157, Complaint: Tax Return Preparer
This form is used for general complaints about a tax return preparer, covering issues like:
- Failure to sign returns or include a PTIN.
- Refusal to provide you with a copy of your return.
- Charging excessive fees or basing fees on a percentage of the refund.
- Misleading advertising.
- Failure to retain copies of returns.
Sub-heading 2.2: IRS Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit
This form is specifically designed for reporting fraud or misconduct that has directly impacted your tax return or refund. This is the form to use if:
- Your tax return was filed or altered without your consent.
- Your refund was misdirected or stolen.
- The preparer included false information (income, deductions, credits) on your return without your knowledge.
You may need to file both forms depending on the severity and nature of the misconduct. For instance, if your preparer filed a fraudulent return and also refused to provide you with a copy, you might consider submitting both.
Step 3: Complete the Forms Accurately and Thoroughly
Filling out these forms correctly is paramount. Any missing information or inaccuracies could delay the investigation of your complaint.
Sub-heading 3.1: Obtain the Forms
You can obtain these forms in several ways:
- Download from the IRS website: Visit IRS.gov and search for "Form 14157" and "Form 14157-A."
- Call the IRS: You can request the forms be mailed to you by calling the IRS toll-free number.
- Local IRS office: Visit a Taxpayer Assistance Center (TAC) if one is convenient.
Sub-heading 3.2: Read the Instructions Carefully
Before you start filling anything out, read the instructions provided with each form. They contain crucial information on what details are required and how to properly complete the form.
QuickTip: A short pause boosts comprehension.
Sub-heading 3.3: Provide Detailed Information
When completing the forms, be as specific as possible.
- Your Information: Fill in your name, address, and contact details accurately.
- Preparer's Information: Include the CPA's full name, business name (if applicable), address, phone number(s), and their Preparer Tax Identification Number (PTIN) or Electronic Filing Identification Number (EFIN), if you have it. You can often find their PTIN on a copy of a previously filed return.
- Describe the Complaint: This is where you lay out the facts.
- Clearly and concisely explain the alleged misconduct.
- Provide specific dates and details. For example, "On [Date], CPA [Name] filed my 2023 tax return with an inflated Schedule C expense for 'marketing' of $X, which I did not authorize and have no documentation for."
- Reference the supporting documents you are attaching.
- If you are filing Form 14157-A, you will need to sign it under penalties of perjury. This means you are affirming that the information provided is true and accurate to the best of your knowledge.
Step 4: Attach Supporting Documentation
As mentioned in Step 1, your complaint's strength relies heavily on the evidence you provide.
Sub-heading 4.1: Organize Your Documents
Before attaching, organize your supporting documents in a clear and logical manner. You might consider:
- Numbering or labeling each document to correspond with your description of the misconduct in the form.
- Creating a simple table of contents if you have a large volume of documents.
Sub-heading 4.2: What to Attach
- Copies of the original and altered tax returns.
- Copies of all relevant communications (emails, letters).
- Copies of bank statements showing misdirected refunds.
- Any other evidence you collected in Step 1.
Step 5: Submit Your Complaint
Once you have completed the forms and gathered all supporting documentation, it's time to submit your complaint to the IRS.
Sub-heading 5.1: Submission Methods
- Mail: The forms provide specific mailing addresses for submission. It is highly recommended to use certified mail with a return receipt requested, or a trackable delivery service. This provides proof of mailing and delivery.
- Fax: Some forms may also provide a fax number. If you choose this method, ensure you receive a confirmation of transmission.
- Online (if available for the specific form): The IRS is increasingly moving towards online submissions for various forms. Check the latest instructions for the specific form you are using to see if an online submission option is available.
Sub-heading 5.2: Keep a Copy for Your Records
Before sending, make a complete copy of the entire complaint package (forms and all attachments) for your own records. This is crucial for future reference and if you need to follow up.
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Step 6: What to Expect After Reporting
Reporting a CPA to the IRS is not an instant process. The IRS will review your complaint, which can take time.
Tip: Break long posts into short reading sessions.
Sub-heading 6.1: IRS Review and Potential Actions
- The IRS will review the information you provided.
- They may contact you for further details or clarification.
- The IRS Office of Professional Responsibility (OPR) is responsible for overseeing the conduct of tax practitioners, including CPAs. They will investigate complaints related to Circular 230 violations (regulations governing practice before the IRS).
- Potential outcomes for the CPA can range from:
- Private reprimand or cautionary letter
- Censure (a public reprimand)
- Suspension from practicing before the IRS
- Disbarment from practicing before the IRS (most severe)
- Monetary penalties
- In cases of serious fraud, criminal prosecution may also be pursued.
Sub-heading 6.2: Your Responsibility as a Taxpayer
- You are ultimately responsible for the accuracy of your tax return, even if a preparer filled it out. This means that if the CPA's misconduct led to an underpayment of your taxes, you may still be liable for the additional tax, penalties, and interest.
- File an amended return: If the CPA's actions resulted in an incorrect tax return, you should consider filing an amended return (Form 1040-X, Amended U.S. Individual Income Tax Return) to correct the errors. This demonstrates your effort to comply with tax laws and may mitigate potential penalties.
- Cooperate with the IRS: If the IRS contacts you for more information, respond promptly and fully.
Step 7: Consider Other Avenues for Reporting
While the IRS handles tax law violations, other organizations oversee CPAs.
Sub-heading 7.1: State Board of Accountancy
CPAs are licensed at the state level. If you believe your CPA violated professional ethics or state regulations, you can file a complaint with your state's Board of Accountancy. They have the authority to:
- Investigate ethical violations.
- Impose disciplinary actions, including suspension or revocation of the CPA's license.
Sub-heading 7.2: Treasury Inspector General for Tax Administration (TIGTA)
For extremely serious issues, such as allegations of IRS employee misconduct related to your case, or theft of IRS tax refunds by a preparer, you might consider reporting to TIGTA.
Sub-heading 7.3: Local Law Enforcement (in cases of fraud/identity theft)
If you believe the CPA committed criminal fraud or identity theft (e.g., filing a return without your consent using your SSN), you should also file a police report with your local law enforcement agency.
Frequently Asked Questions (FAQs)
Here are 10 related FAQs to further assist you:
How to identify a fraudulent tax preparer?
You should be wary of preparers who: don't sign your return, promise unusually large refunds, charge fees based on a percentage of your refund, refuse to provide you with a copy of your return, or use a pay stub instead of a W-2 to e-file.
QuickTip: Pause when something clicks.
How to ensure my CPA is legitimate?
Verify their credentials: Check if they have a valid Preparer Tax Identification Number (PTIN). For CPAs, verify their license with your state's Board of Accountancy. The IRS also has a "Directory of Federal Tax Return Preparers with Credentials and Select Qualifications."
How to get a copy of my tax return if my preparer refuses?
You can request a tax transcript from the IRS for free. This will show most line items from your filed return. You can also request a copy of the actual tax return from the IRS, though there may be a fee.
How to amend a tax return after reporting a CPA?
File Form 1040-X, Amended U.S. Individual Income Tax Return. Clearly explain the changes and attach any necessary supporting documents. It's often advisable to do this after reporting the CPA, but the IRS encourages taxpayers to correct errors promptly.
How to protect myself from tax preparer fraud in the future?
Always review your return thoroughly before signing. Ensure your refund goes directly to your bank account, not the preparer's. Keep good records, and choose a reputable preparer with valid credentials and a good track record.
How to know if the IRS is investigating my complaint?
The IRS may contact you for more information. However, due to taxpayer confidentiality laws, they generally cannot disclose details about the investigation's progress or outcomes concerning the preparer.
How to report a CPA anonymously?
While Form 14157 allows you to choose not to provide your identifying information, providing your contact details is generally recommended as it allows the IRS to follow up for more information, which can strengthen the investigation. For whistleblowers seeking an award, Form 211 requires identification.
How to get my money back if my CPA stole my refund?
File Form 14157-A with the IRS. Also, report the incident to your local police. The IRS may provide relief to victims of preparer misconduct, including adjusting your account to reflect the correct refund and potentially issuing an additional refund.
How to find out what penalties a CPA might face?
Penalties for preparers vary depending on the severity of the misconduct. They can range from monetary fines to suspension or disbarment from practicing before the IRS. For criminal offenses, jail time is also a possibility.
How to seek legal advice if I suspect CPA misconduct?
Consult with a tax attorney or another independent tax professional. They can advise you on your rights, help you navigate the reporting process, and represent you if needed, especially if the misconduct has led to significant tax implications or legal issues for you.
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