IRS Minefields: Tax Professionals Boxed In

The Taxpayer’s Declaration or Preparer’s Declaration: Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.

Although the tax compliance rate in the United States is extremely, the IRS has to find more ways to blame the professional and further expose the professional to lawsuits and higher malpractice insurance costs. The IRS is creating a perception that the preparer is responsible for the content and not the taxpayer.

If a Preparer does not adhere to a “more likely than not” standard, which has only recently been defined as greater than 50% likely the IRS will agree, they will be exposed to monetary fines, criminal charges and/or possible disbarment. When have you ever been able to get the IRS on the same page 50% of the time with regard to tax positions? Sounds like government attacking the “deep pockets” professional since often the taxpayers in these positions cannot pay the deficiencies once the IRS is knocking on the door.

Let’s take it a step further: A client finds out that a preparer is negligent according to the IRS. What’s next? Must we get an attorney and go to court to determine who is more negligent, the taxpayer or his client? How can any professional be put in that position when representing a client?
The Accounting profession has ethics requiring us to represent the interest of our clients. We do not attest to our client’s representations, unless we are engaged to audit. We are responsible to prepare the tax return correctly, not police our clients.