Tax Preparer Defense Attorney

Protect your practice with careful planning and dedicated advocacy. The tax preparer defense attorney at Tax Relief Counsel can shield you against legal challenges, keeping your reputation and livelihood intact. A proactive defense today means peace of mind tomorrow.

Tax Preparer Defense Lawyer in Washington, DC

Tax Preparer Defense

Due to the COVID-19 pandemic backlog, the Internal Revenue Service (IRS) is searching for more efficient methods of identifying taxpayers suspected of fraud. One approach is to concentrate on tax preparers. By analyzing tax preparers’ filings, the IRS can identify instances of tax fraud and evasion as well as target tax preparers who assist taxpayers in filing fraudulent tax returns.

The IRS is using statistical analysis to find tax preparers and accountants who may be committing fraud. By looking at their tax filings in a statistical way, the IRS can detect patterns that suggest fraud. The IRS can then conduct specific audits and investigations on these tax preparers and potentially impose civil or criminal penalties as appropriate.

If you’re under investigation from the IRS, contact our tax preparer defense lawyer for a free virtual consultation and learn more about how we can help protect your reputation and livelihood. We serve all states.

Red Flags for Tax Preparer Fraud

The IRS searches for red flags to identify potential tax preparer fraud when analyzing taxpayers’ returns. However, these red flags do not always indicate fraud and require further examination. The IRS pays special attention to patterns of red flags in multiple returns filed by a particular tax preparer or company. Certain examples of red flags for the IRS are taken into consideration, such as:

  • Cash Contributions to Charities: Tax fraud is frequently committed by individuals who falsely claim cash donations made to charities as deductions. The Internal Revenue Code (IRC) permits tax deductions for cash donations, but there is a modest limit that taxpayers can claim. Given the absence of proper documentation, many taxpayers choose to claim this deduction as a way of lowering their tax liability.
    Taxpayers and tax preparers should not assume that fraudulent cash contribution deductions will go unnoticed by the IRS. When a tax preparer or firm submits multiple tax returns that claim deductions for cash contributions, there is a higher chance of the IRS investigating.
  • Earned Income Tax Credits: Fraudulent use of the Earned Income Tax Credit is a common type of fraud that can result in trouble with the IRS for both taxpayers and tax preparers. This involves falsely claiming the credit and manipulating the income data of taxpayers to illegitimately increase their credit amount. The IRS instructs taxpayers to be cautious and identify any potential fraudulent activity regarding Earned Income Tax Credits claimed by their clients. If the provided information seems incomplete, inconsistent, or incorrect, taxpayers should ask further questions, record the answers, and decide whether the responses make sense. If taxpayers are unsure about the credibility of the client or uncomfortable with the responses, they should refuse to prepare the return as a precautionary measure.
  • Education Credits: Education credits are susceptible to fraud similar to cash contributions and the Earned Income Tax Credit. To claim education credits, substantiating documentation must be obtained by taxpayers. Failure to do so can result in taxpayers being deemed complicit if their clients’ claims are untrue. Tax preparers who consistently file returns claiming education credits, especially in the same amount, may be inferred to be committing fraud for their clients.
  • Failure to Report Gross Receipts: All businesses must report their gross receipts to the IRS, including those received in cash, credit, checks, and cryptocurrency. Failure to report these receipts is a typical form of small business tax fraud, and tax preparers are also responsible for ensuring their clients submit accurate returns to prevent any fraudulent activity.
    The IRS can detect businesses’ failure to report taxable income through different methods, such as comparing their gross receipts and expenses or requesting information about their cryptocurrency transactions from exchanges. If a tax preparer is aware of or should be aware of inaccuracies in a business’s reported gross receipts, they can be held responsible.
  • Kickbacks Between Taxpayers and Tax Preparers: Tax fraud investigations may be initiated when a tax preparer and a taxpayer have an agreement to illegally increase the taxpayer’s refund or decrease their tax liability by paying the preparer. Both the tax preparer and the taxpayer may face criminal charges for this transaction.
  • Repeatedly Claiming Losses: Filing tax returns with repeated losses every year can raise suspicion with the IRS. A tax preparer who regularly files such returns for clients may face an audit or investigation into their practices. If a tax preparer cannot provide sufficient proof from their clients to support these annual loss claims, they may face civil or criminal enforcement action.
  • Residential Energy Credits: Taxpayers and tax preparers should be aware that claiming residential energy credits without proper documentation can lead to fraud. If tax preparers offer to claim these credits for their clients using insufficient documentation, they may face liability if the IRS decides to audit or investigate.
  • Suspicious Dependents: The IRS considers dependents to be “suspicious” in certain situations. These situations include when there are discrepancies between the last names of the taxpayer and claimed dependents when Social Security numbers are repeatedly used, and when there are differences in the tax returns of the taxpayer and claimed dependents. It is the responsibility of tax preparers to address any concerns before filing their clients’ tax returns, and if they intentionally assist their clients in making false statements to the IRS, they can face criminal charges.
  • Underreporting Taxable Income: Tax preparers can be held accountable for both civil and criminal liability if they assist their clients in underreporting taxable income, regardless of the type of income. This includes wages and salary, independent contractor income, gig economy income, and income from self-managed investment accounts such as cryptocurrency. If an IRS audit or investigation uncovers that a tax preparer contributed to or ignored their clients’ underreporting of income, they can be subject to criminal penalties according to the IRC.

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Possible Tax Preparer Penalties

Tax preparers shoulder a significant responsibility in ensuring accurate and compliant tax filings for their clients. However, the complex nature of tax law means that even the most diligent preparers can sometimes face penalties under various provisions of the Internal Revenue Code.

Here are some civil penalties for various tax-preparation-related infractions.

Accuracy-Related Penalties

Tax preparers may face repercussions if they understate a taxpayer’s liability due to negligence, substantial understatement of income tax, or disregard of rules or regulations.

Failure to Furnish Copies to Taxpayers

Preparers must provide clients with complete and accurate copies of their tax returns. Failure to do so can result in penalties under IRC § 6695(a).

Failure to Sign Returns

Tax preparers are required to formally sign the tax returns they prepare. If they don’t, they can face certain penalties unless they disclose the reason for non-signature per IRC § 6695(b).

Failure to Retain Records

Preparers must keep copies of all tax returns and records for a specified period. Neglecting to abide by this regulation can result in penalties under IRC § 6695(d).

Failure to Provide Information to the IRS

Preparers must provide any information IRS officials request in connection with investigations of tax return preparation. The Internal Revenue Code outlines prospective penalties for non-compliance.

Failure to Comply with Due Diligence Requirements

Tax preparers must comply with due diligence requirements when preparing certain tax returns, such as those utilizing the Earned Income Tax Credit (EITC). The penalties for not doing so are listed in IRC § 6695(g).

Tax preparers can legally be punished for various offenses related to tax fraud, evasion, or misconduct. If you’re facing criminal charges, it’s crucial to seek legal counsel from the seasoned tax lawyer at Tax Relief Counsel to protect your rights and mount a vigorous defense.

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Understanding the Tax Preparer Audit Process

Tax preparers shoulder a significant responsibility in ensuring accurate and compliant tax filings for their clients. However, the complex nature of tax law meansThe process of auditing tax preparers is designed to assess the accuracy and compliance of tax returns prepared by tax professionals. Here’s an overview of the key stages and communications from the IRS.

Audit Letter

The IRS initiates the audit process by sending a letter of notification to the tax preparer. This notice informs them of the audit and requests documentation related to the tax returns under review.

Review Notice

The next letter serves as a notice of an impending review of the tax preparer’s practices and procedures. It may include requests for additional information or clarification regarding specific returns.

Penalty Letter

If the IRS identifies errors or omissions in the tax returns, it may issue a letter notifying the preparer of the potential penalties for non-compliance. These penalties can vary depending on the nature of the violation in question.

30-Day Non-Filer Letter

In cases where the tax preparer fails to respond to audit requests or address compliance issues, the IRS may send a notice giving them 30 days to rectify the situation before further action is taken.

Notice of Proposed Penalty

If the IRS determines that penalties are warranted, the agency will issue a notice detailing the penalties assessed and the reasons for their imposition.

Interim Letter

This letter provides an interim update on the status of the audit. It may request additional information or clarification from the tax preparer.

Notice of Deficiency

If the IRS identifies significant discrepancies or non-compliance during the audit process, it may issue a notice of deficiency, alerting the tax preparer to the additional taxes owed.

Further Action

The IRS’s Office of Professional Responsibility (OPR) may become involved for more serious infractions or violations of professional standards. This could result in disciplinary actions against the tax preparer, including fines or the suspension or revocation of their tax identification number (PTIN).

Throughout the audit process, tax preparers have the opportunity to respond to IRS inquiries, provide documentation, and address any issues raised. It’s essential to cooperate to the best of your ability and seek reliable legal counsel to protect your rights.

How Our Tax Attorney Can Help You

The capable team of tax law professionals at Tax Relief Counsel can assist you in several ways, including the following:

  • Representation:

    Attorney Ramy Shabana can provide skilled legal representation if you’re facing an IRS audit, investigation, or civil or criminal charges related to your services.

  • Risk Assessment:

    Our team will thoroughly evaluate your situation to identify potential risks and liabilities, help you understand the consequences, and develop strategies to mitigate them.

  • Compliance:

    We can ensure compliance with all applicable tax laws and regulations and offer advice on best practices to avoid future legal issues.

  • Negotiation:

    We’ll handle discussions with the tax authorities on your behalf, aiming to resolve disputes and minimize penalties while achieving a favorable outcome.

  • Litigation Defense:

    If necessary, we defend you in court against civil or criminal charges, providing vigorous advocacy to protect your rights and interests.

  • Professional Support:

    We offer ongoing support and guidance to address your questions and concerns and provide peace of mind during this challenging time.

Don’t go into an audit situation without a trustworthy tax attorney on your side. Reach out to Tax Relief Counsel today to learn more about how we can help.


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Tax Relief Counsel?



What is a tax return preparer?

According to the law, a tax return preparer is defined as any person, partnership, or corporation who is compensated for preparing all or a significant portion of a tax return or refund claim under the Internal Revenue Code or state tax provisions. They may engage in abusive practices by claiming exaggerated expenses, creating false deductions, or using too many exemptions. Unfortunately, clients may be unaware of these actions.

Does the IRS audit tax return preparers?

Yes, every tax return preparer receives a distinctive Preparer Tax Identification Number (PTIN) from the IRS, which he or she must include on every tax return they prepare. The IRS uses its computers to keep track of each return filed by the preparer, comparing it against the existing averages for all other preparers.

The computer will keep track of the percentage of taxpayers who get a refund and those who receive refundable credits. When a return preparer’s percentages stand out as being notably higher than other preparers, the computer will notify the IRS about the PTIN with the unexpected history. This could lead to an audit or investigation and may require assistance from a credible tax preparer defense lawyer in Washington, DC.

What are 4 due diligence requirements for tax return purposes?

The due diligence rules are explained in the treasury regulations. These rules have four requirements that a tax preparer must fulfill to avoid a penalty. The penalty is applied to each filed tax return.
The four basic due diligence requirements include:

  1.  Acquire and demonstrate a working knowledge of each of the refundable credits;
  2. Complete the Due Diligence Check List, Form 8867;
  3. Compute the credits and keep your computation worksheets;
  4. Ask relevant questions and write down the client’s answers as well as request relevant supporting documents and keep a copy of the records for a minimum of three years.

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Tax Relief Counsel frequently represents tax preparers facing IRS investigations and will have the knowledge and resources that you need to secure the best possible outcome.