A client – who I will never work for again – owes roughly $15k for '24 and now $24 for '25. She told me that she didn't pay '24 and waited for this year to have 'enough' due to ask for an offer in compromise, to get it all wrapped into one and forgiven. The problem here is that she in no way qualifies for it: I know she has $20k in the bank, $20k at home AND at least $1 mil in equity (one is free & clear). Knowing that, as a preparer, do I have some obligation to notify the IRS, either as a TP or anonymously? Or am I just in a moral quandary…and a little bit of anger at cheaters? TYIA
Posted by MrsCDV
20 Comments
Requestion an OIC that won’t be granted isn’t fraud.
Fire the client, document everything to cover your own ass, and walk away. You are a tax preparer, not an unpaid IRS informant. Let her try hiding a million in clear equity from the federal government, that is a problem that will spectacularly solve itself. (Obligatory note: this isn’t legal or tax advice, just common sense).
The biggest fear all self employed accountants have is losing a client and not being able to pay your bills. The fear is real but it is overstated by a lot. I remember one year I lost four of my biggest clients at the time and it terrified me. But I wound up making a bit more money when I viewed things over the course of a year. You need to follow your conscience as far as retaining g any client goes and also you need to reread the statement you sign to as you sign anyone’s tax return. And consider whether you can sign that in that client’s case. All practitioners need to have what I call a “client performance standard.” I know I can’t retain a client if I couldn’t trust them to give me the truth when I ask them a question.
Just fire the client and move on.
You should have standard language in your retention letter that says you will cease to work with them in the event of stated or suspected fraud and will not take fraudulent positions on their behalf
Id fire and move on.
So am I right , the conversation is “sorry you don’t qualify so I can’t help you with that process is there anything else you’d like me to do?”
No obligation to inform but you can’t help them do it. I’d just fire the client. However they’ll probably be found out. Offers in compromise isn’t like the risk of being audited they’re slow and scrutinized.
OIC acceptance is low. The IRS is not dumb. They will do the research and find out on their own that she has assets/money. Applying for an OIC is not fraud. Let her navigate this on her own.
No duty. No moral quandary. You’re not participating in the Offer in Compromise process at all, so why are you even worried about this? Just fire the client and move on.
I understand everyone telling you to fire the client. That should be a no brainer.
What I don’t understand is the prevailing position of simply saying nothing. If someone was embezzling from work, would you report it? If someone was stealing from an individual or business by fraud would you remain silent? Where is the moral line that you’re not willing to cross? At some point silence becomes complicity. Where’s your moral line?
Just disengage? Anyone can apply for OIC, regardless of financial situation. The IRS won’t accept it if she doesn’t qualify. Nothing you need to be worried about.
The irs will figure out she doesn’t qualify even if she lies on the form. They lookup properties.
Won’t the irs know and decline it? Like she’s going ask and they will say no? She’s not lying? Or does she want you to ask on her behalf?
As an IRS agent, we’d certainly thank you for reporting this to us but we definitely wouldn’t expect you to.
Why would you need to notify the IRS? Your job was to prepare the tax returns, not to ensure she pays what is owed. If she doesn’t qualify for an OIC, then her little scheme will fail and she’ll end up paying the taxes.
What are you going to report? She hasn’t done anything yet and you don’t know if she ever will.
I’m not a tax person but many years ago I had my own tax issues. I worked with the IRS problem resolution office and they suggested to me an offer and compromise when I told them I’d like it all to go away. Despite me owning real estate and having money in the bank the IRS wrote the offer and compromise and I signed it. My tax bill was drastically reduced and I never had to deal with it again.
I do not wish the hell I went through dealing with it all on anyone
Is being a snitch part of your job? No? Nobody likes a snitch.
I usually advise them that our conversation is not protected & if questioned by law enforcement I have to answer honestly. I also advise them on the penalties and potential charges they could face for their actions. I then tell them that based on the information you just provided to me I can no longer in good faith continue to work with you. Any work I have done, I will not be able to support any documents or statements that they provided me unless they are from a third party that will provide the IRS the same information.