Last week I met with a client who had recommended us to one of their friends. I had written about this case when I first met with them. Upon review of the past tax returns, we believe that blatant fraud was incorporated into the preparation of both the business and personal returns.
As I pointed out all of the areas of concern to both parties, they expressed mild concern, took their papers back and said they were going to talk to their attorney.
My true concern was that their prior preparer mysteriously stopped doing taxes mid season. And that there was heavy use of the EIC on people whose at home business grossed over $200,000 a year. I believe the IRS has this preparer under investigation and stopped him from practicing any longer.
It seems that they went to someone else. The new preparer stated that they could see where I would get the fraud concern. But instead of addressing the past in any way, or even questioning the clients on their participation in the events. The tax preparer completed the personal return; the corporate return had been already prepared by the original party.
So the new method of dealing with Fraud is to start new companies and hope that it goes away. But then “Fraud” has no statue of limitations and the IRS can go back to your date of birth if necessary. I don’t know if I could live with that “Sword of Damocles” hanging over my head. Or even one of my clients.
We encourage client to do the right thing, if not we have to question whether we are taking on unknown risk by associating ourselves with potential criminals.