20 Dec Tax Practitioner Fraud and Incompetence US Treasury Circular 230
Lately I’ve been getting deluged with cases involving blatant US Treasury Circular 230 violators of regulations governing practice before the Internal Revenue Service. The perpetrators it seems come from all walks of life, some are unregulated tax return preparers while others carry multiple licenses, designations and/or degrees. The accumulated data however indicates that the most egregious violators originate from one of two different camps. On one hand they are older practitioners close to retirement that have found themselves overwhelmed professionally, personally or both and on the other hand they are punk kids with law degrees usually in their 30’s or so that have sold themselves to the devil for the almighty dollar. The former I consider incompetent and usually pity, the later I consider fraudulent and eat for lunch. Both wind up having their licenses reprimanded or tragically revoked. Nevertheless the cases I’ve been working lately have certainly proven to be remarkable in magnitude and scope.
One recent file in particular was exceedingly inane involving a disabled veteran who was charged a very large sum of money to be told after 8 months of ‘research’ that he did not qualify for the first time home buyer tax credit. I almost fell out of my chair when being briefed on the matter. The ‘tax relief specialist’ managing the file was so brazen she sent out an invoice for services rendered with a cover letter demanding payment and threatening litigation not realizing that this very document implicates her incompetence and will result in license revocation.
You see the first time home buyer credit is NOT THAT COMPLICATED. Assessing whether a taxpayer qualifies for this credit is accomplished by asking a few simple questions. I tend to render my analysis in these regards complimentary.
To a certain extent her ‘manager’ is to blame. He too was dumb enough to sign the letter in question putting his license at risk as well. The most damning aspect of his contribution is the fact that he is ‘leading’ a team of people that behave professionally with gross neglect for ethical standards. Perhaps he was duped and did not take the time to read and understand what he signed. Either way he behaved either fraudulently or incompetently and at the very least deserves reprimand if not license revocation.
Why is this worth blogging about?
It’s been shown with statistical significance that the most personal relationship outside of marriage (or with a life partner) is usually between you and your tax adviser. Trust, discretion and confidentiality are paramount as well as knowledge of the tax code and general business acumen. Fraud and incompetence trample upon that relationship and reflect poorly on the whole tax practitioner industry. It is sickening.
If you have a long term relationship with an experienced tax adviser, great! Consider yourself blessed, but don’t sit back on your laurels. Understand that many people, particularly those that are aging can get overwhelmed and are usually too proud to seek help before unilateral incompetence overwhelmingly ensues. Not that these people generally want to or try to behave badly. When overwhelmed they tend to handle the work load less efficiently and balls get dropped as it were.
The usual signs of a deteriorating relationship with your long standing tax adviser that may or may not be overwhelmed manifest subtly with small unrecognizable indiscretions like failing to return a phone call or email here or there. If not held in check these signs can become exponentially more pronounced as time passes to the point where you might find yourself suddenly in serious tax trouble. This happens A LOT.
Once you get into tax trouble involving public disclosure via tax lien that is when these children with law degrees materialize out of the woodwork selling ‘tax relief’ packages. Or as I like to refer to it, snake oil. Here is a simple rule of thumb, be weary of anyone that is overtly soliciting you with a ‘tax relief’ package for sale. Why? With the IRS cracking down on fraudulent, incompetent tax payers AND tax practitioners alike, those of us that are good at untangling complicated tax matters tend to be working enough files as it is and have no time or desire for overt solicitation. Also every single tax problem that I have encountered along my journey has proven to have its own unique components meaning that it is impossible for any one ‘tax relief package’ to cover all your individual or business tax resolution needs.
The advice I offer is:
1. Engage someone who is reasonable and charges by the hour for actual services rendered and who is willing to put in writing a detailed statement of services rendered BEFORE expecting any payment whatsoever.
2. Take ownership of your tax problems and learn the implications of proposed strategies in pursuit of achieving tax compliance.
3. Simply throwing money at these type of problems without direct performance accountability usually makes the hole deeper.