Tax Machine Blog™

TIGTA Report – IRS needs to use tax preparer penalties more often, consistently

Or why you might want an attorney (instead of an aggressive accountant) to represent you during your audit.



TIGTA reviewed 98 out of 2,345 cases showing penalties totaling $9.35 million from 2009 through 2011. In eight of the cases, the immediate supervisors didn’t properly approve $19,000 in preparer penalty assessments as required by law. No Section 6694 penalty can be assessed unless an initial determination is personally approved in writing by an immediate supervisor.

Such failures could potentially doom IRS efforts to litigate penalty assessments in court. When the IRS was notified of this issue, it initiated immediate corrective actions that emphasize the need to properly approve, in writing, penalty assessments for paid tax return preparers.
IRS to Crack Down on Tax Return Preparers | AccountingWEB


So it’s possible that if you are using the same Accountant to defend you in an audit as you used to prepare your return, that accountant has himself to look out for as well.

Most of the time, an audit just involves the IRS asking for some documentation to back up your numbers.

But sometimes, you might have been audited in the first place because of an aggressive stance taken by your accountant. There’s nothing wrong with an aggressive stance as long as you can back up that stance when the time comes.

However, if your accountant encouraged you to inflate numbers, or take an unreasonable stance, your accountant could have some stiff penalties. And this creates a conflict of interest you should try to avoid. If your audit involves more than providing proof of the numbers on your return to the IRS, consider retaining a neutral party, such as a tax attorney to handle it.