Do I have any legal recourse against a tax preparer who lied on my tax return to get me more money, even though I was not aware?

Asked almost 2 years ago - Napa, CA

I now owe the IRS $8500 for two years worth of faulty taxes prepared by a man who supposedly worked for the IRS and told me that he knew of several tax cuts that most people don't. I even told him I didn't save receipts and he told me it didn't matter. He charged me $250 a return, because he was some supposed tax expert. I naively trusted him and signed on the dotted line. The IRS consultant who I spoke with said that it was my fault for signing and trusting him, even though I was completely bamboozled by this criminal. I am a public school employee and on top of my other debts, this is causing me to come very close to financial devastation. I know of 4 others who went to the same man, were told the same thing as I was, were audited, and now owe the IRS thousands.Anything that can be done?

Attorney answers (3)

  1. Curtis Lamar Harrington Jr

    Contributor Level 20

    11

    Lawyers agree

    1

    Answered . "and signed on the dotted line" = This is the key to this caper. Once you sign, you are swearing that what you signed is true. Its like signing a confession without looking at it -- never a good idea.

    IRS is fixing this by requiring all return preparers to be registered and receive education by 2013. No more hole-in-the-wall preparers who sign their name to the return without a PTIN #..

    Further, when it comes to the IRS, even intervening bad acts don't excuse the tax. Payroll companies who embezzle do not relieve the taxpayer from the debt.

    You can bring a civil suit against the preparer for fraud (he gave you advice that you relied upon to your detriment). However, a defense raised might be "did you appeal the IRS finding? What if preparer was right?

    And I also ask, (a) did you write a protest? (b) did you make an evidentiary showing that you were entitled to the deduction (assuming its not totally fraudulent on its face?, (c) did you ask for abatement of penalty? Did you close on the two years & agree with IRS? Did you re-file a 1040X at any time to rectify?

    Lastly, if the two filed returns created a cash refund in your favor, the real damage would be 8500 - this added refund amount. So, the actual damage (and actual out of pocket) should be less than the amount owing. [i.e. you banked the excess refund and can perhaps use it to repay]

    Hire a local tax attorney to evaluate your case.

    Consider, upon this tax attorney's advice, the advisability of (1)filing a police report for the fraudulent by the "man who supposedly worked for the IRS ", and (2) bringing a civil action against "man who supposedly worked for the IRS "

    Please remember to designate your question's BEST ANSWER.

    Please remember to designate your question's BEST ANSWER.

    Curt Harrington
    Certified Tax Specialist -- State Bar of California Board of Legal Specialization
    Electrical-Chemical-Mechanical Patent (Intellectual Property) Attorney
    (562) 594-9784
    http://patentax.com/curt/index.html

    Curt Harrington Patent & Tax Law Attorney Certified Tax Specialist by the California Board of Legal... more
  2. Bruce Allan Wilson

    Contributor Level 15

    3

    Lawyers agree

    Answered . Unfortunately, you are liable for the taxes owed because you received a refund you should not have.

    You might consider an Offer in Compromise if you cannot afford to pay the amount in full.

    BW

  3. Dana Whitney Atchley

    Contributor Level 14

    4

    Lawyers agree

    Answered . Unfortunately, since you signed the tax return you are responsible for paying the IRS the additional taxes. You may - and I stress "may" - be able to qualify for having the penalties waived if you can persuade the IRS that you legitimately relied on your return preparer; however, since you asked about the receipts that demonstrates that you had reason to believe they were necessary so it is very unlikely that you'll be able to get the penalties waived.

    You could try suing the preparer for the damages he caused, but again, you are very unlikely to get anything other than the $250 you paid him, and that's only if he has the money to pay you. Because you signed the return you are presumed to have reviewed the entire return yourself, and that will generally protect this person from liability to you for the unpaid taxes. Also, unless you sue him yourself in small claims court, it would be pointless to hire an attorney to sue him for you because it would almost certainly cost you much more in legal fees than any recovery you might get.

    Finally, in terms of dealing with the additional taxes you owe, you need to talk to the IRS now - before they file any notices of federal tax lien against you - about getting an installment payment plan. Since the amount you owe is most likely still below $10,000, you have a good chance of getting an installment plan that will allow you to pay the tax off over several years. Keep in mind that penalties and interest will continue to accrue until the taxes are paid in full (the current interest rate on unpaid taxes is 4%).

    Other than that, please contact the IRS Office of Professional Responsibility and report this individual to them. It may be cold comfort, but the IRS is very likely to go after him, definitely for very large penalties (which he cannot get rid of) and possibly for a criminal prosecution as well.

    Good luck.

    www.newyorktaxcounsel.com

    My answer does not constitute legal advice and may not be relied upon by anyone for any purpose and does not... more

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