CPA Tax Attorney - Federal Lawyer

CPA Tax Attorney

IRS Defense Counsel for Certified Public Accountants (CPAs) Facing Federal Scrutiny

Alina Veneziano
Attorney Alina Veneziano
CPA Tax Attorney Team Lead
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Nick Oberheiden
Attorney Nick Oberheiden
CPA Tax Attorney Team Lead
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The Internal Revenue Service (IRS) is cracking down on CPAs who facilitate tax evasion and tax fraud. Not only is the IRS targeting CPAs with tax preparer penalties, but the IRS’s Criminal Investigation division (IRS CI) is also pursuing criminal investigations against accountants and other tax preparers in many cases. In all cases, facing scrutiny from the IRS or IRS CI is an extremely high-stakes matter, and targeted CPAs need to engage experienced defense counsel promptly.

Our tax lawyers defend CPAs against tax preparer penalties and during IRS CI investigations nationwide. If you are a tax professional facing scrutiny from the IRS or IRS CI, a CPA tax lawyer at Oberheiden P.C. can help you avoid unnecessary consequences. Not only do we have extensive experience representing clients in IRS enforcement matters, but many of the CPA tax attorneys and consultants on our defense team also have prior experience at IRS CI and the U.S. Department of Justice (DOJ).

Understanding the Risks CPAs Face During IRS Audits and Investigations

When pursuing audits and investigations targeting CPAs and other tax preparers, government agencies such as the IRS and IRS CI target a wide range of allegations. Even if a tax preparer’s mistake is inadvertent, the mistake can lead to substantial penalties—which are based on the nature and scope of the mistake as well as the number of tax years and total tax liability involved. If the IRS or IRS CI alleges that a CPA intentionally facilitated a taxpayer’s tax evasion or tax fraud, this can lead to criminal charges; and, in these cases, fines and federal prison time are both on the table.

Our CPA tax lawyers specialize in defending certified public accountants and other tax preparers against all types of allegations of legal issues with tax laws. This includes (but is not limited to):

Understatement of a Taxpayer’s Liability

Certified public accountants can face penalties for understating a taxpayer’s liability in two primary scenarios. Under Section 6694(a) of the Internal Revenue Code, CPAs can face a penalty of $1,000 or 50% of their income for preparing the return at issue (whichever is greater) if the understatement is due to an “unreasonable position.” Under Section 6694(b) of tax law, CPAs can face a penalty of $5,000 or 75% (whichever is greater) if the understatement is due to “willful or reckless” conduct.

Aiding and Abetting Understatement of Tax Liability

While taking an unreasonable position or engaging in willful or reckless conduct can trigger civil tax preparer penalties, CPAs who are accused of intentionally aiding and abetting their clients’ understatements of liability can face criminal prosecution by the DOJ. In federal aiding and abetting cases, CPAs can face not only criminal fines under the Internal Revenue Code, but also fines and prison time for conspiracy, attempt, and other federal crimes.

Promoting Abusive Tax Shelters

Allegations of promoting abusive tax shelters can also expose CPAs to both civil and criminal penalties. This includes (but is not limited to) promoting the use of abusive business credits, micro-captive insurance arrangements, monetized installment sales, syndicated conservation easements, and use of the U.S.-Malta tax treaty. As in other cases, a key factor in cases involving alleged abusive tax shelters for business finances is whether the IRS is alleging negligent, reckless, or intentional misconduct—with the latter creating exposure to criminal prosecution.

Failure to Meet Due Diligence Requirements

When providing federal tax planning and preparation services, CPAs have a duty to conduct sufficient due diligence to allow for informed decision-making about the tax positions they recommend. Failure to conduct adequate due diligence is a common allegation in IRS audits and investigations. In these cases, having documentation of sufficient due diligence can be essential to executing a successful defense by your tax lawyer; however, CPAs must also be careful not to inadvertently disclose records that could increase their exposure to civil or criminal penalties.

Recordkeeping and Signature Violations

Certified public accountants who provide federal tax preparation services also have various obligations related to recordkeeping and serving as a signatory on their clients’ returns. Failure to meet these obligations (or the apparent failure to meet these obligations) is a common issue in IRS (and IRS CI) inquiries targeting CPAs and other tax preparers as well. Even when there are no substantive tax-related issues involved, recordkeeping and signature violations can still expose CPAs and other tax preparers to substantial fines under the Internal Revenue Code.

Unauthorized Use or Disclosure of Taxpayer Information

The IRS takes unauthorized use and disclosure of taxpayers’ information very seriously. Inadvertent disclosures can expose CPAs to civil monetary penalties of up to $50,000 per year. When accused of knowingly or recklessly using or disclosing taxpayers’ information without authorization, CPAs can face up to a year of federal imprisonment in addition to financial liability.

Making False or Fraudulent Statements to the IRS (or IRS CI)

When communicating with the IRS (or IRS CI), CPAs have an obligation not to make false or fraudulent statements. This applies when communicating on behalf of taxpayers and when communicating in connection with a tax preparer audit or investigation. Making false or fraudulent statements to federal agents is a federal offense that carries up to a $250,000 fine and five years of federal imprisonment in most cases.

Put our highly experienced team on your side

Dr. Nick Oberheiden
Dr. Nick Oberheiden

Founder

Attorney-at-Law

Lynette S. Byrd
Lynette S. Byrd

Former DOJ Trial Attorney

Partner

Brian J. Kuester
Brian J. Kuester

Former U.S. Attorney

Amanda Marshall
Amanda Marshall

Former U.S. Attorney

Local Counsel

Joe Brown
Joe Brown

Former U.S. Attorney

Local Counsel

John W. Sellers
John W. Sellers

Former Senior DOJ Trial Attorney

Linda Julin McNamara
Linda Julin McNamara

Federal Appeals Attorney

Aaron L. Wiley
Aaron L. Wiley

Former DOJ attorney

Local Counsel

Roger Bach
Roger Bach

Former Special Agent (DOJ)

Chris Quick
Chris J. Quick

Former Special Agent (FBI & IRS-CI)

Michael S. Koslow
Michael S. Koslow

Former Supervisory Special Agent (DOD-OIG)

Ray Yuen
Ray Yuen

Former Supervisory Special Agent (FBI)

Common Issues in Federal CPA Audits and Investigations

We have recently seen the IRS and IRS CI target a number of specific issues in CPA audits and investigations. While these are by no means the only issues that can trigger scrutiny for accountants and tax preparers, they are currently among the most common. These issues include:

  • Cryptocurrency-related income tax reporting and payment violations
  • Paycheck Protection Program (PPP), Economic Injury Disaster Loan (EIDL), and Employee Retention Credit (ERC) fraud
  • Promoting abusive tax shelters for corporations and high-net-worth individual taxpayers
  • Offshore account disclosure violations (FATCA and FBAR violations)
  • Receiving compensation for knowingly preparing false returns and facilitating federal tax evasion and tax fraud

Again, these are just examples. There are numerous issues that can lead to federal scrutiny of CPAs’ practices—all of which can potentially create exposure to civil or criminal penalties. At Oberheiden P.C., our CPA tax attorneys rely on extensive experience to defend accountants and other tax preparers against all types of allegations, working diligently to help our clients avoid penalties when possible and mitigate their exposure when necessary.

FAQs: IRS Audits and Investigations Targeting CPAs

How Often Does the IRS Target CPAs for Preparing False or Fraudulent Tax Returns?

The IRS routinely targets CPAs for preparing false and fraudulent tax returns. While tax preparer fraud has long been high on the list of the IRS’s enforcement priorities, it rose even higher on the list as a result of the widespread PPP, EIDL, and ERC fraud during (and after) the COVID-19 pandemic. The IRS’s Criminal Investigation division and the U.S. Department of Justice have prosecuted numerous tax preparers for assisting with the preparation of fraudulent PPP and EIDL applications, ERC claims, and PPP loan forgiveness certifications. However, this represents just a fraction of the IRS and DOJ’s total caseload involving alleged statutory and regulatory violations by CPAs.

What Defenses Can CPAs Assert During IRS Audits and Investigations?

Depending on the specific circumstances involved, CPAs may be able to assert a variety of defenses during IRS audits and investigations. Some examples of potential defenses include:

  • Having a “reasonable basis” for the position taken
  • Having “substantial authority” for the position taken
  • Adequate due diligence
  • Good-faith reliance on a taxpayer’s representations
  • Good-faith reliance on the advice of tax counsel

What Is a ‘Reasonable Basis’ According to the IRS?

Under the federal Treasury Regulations, it is a defense to CPA liability if, “a return position is reasonably based on one or more of the authorities set forth in Treas. Reg. 1.6662-4(d)(3)(iii) (taking into account the relevance and persuasiveness of the authorities, and subsequent developments), the return position will generally satisfy the reasonable basis standard.” This is known as the “reasonable basis” defense.

What Qualifies as ‘Substantial Authority’ According to the IRS?

While the “reasonable basis” defense is available in cases involving miscalculation of a taxpayer’s liability, the “substantial authority” defense applies when a taxpayer’s position is not disclosed. As the IRS explains, “[t]he substantial authority standard is less stringent than the more likely than not standard (the standard is met when there is a greater than 50 percent likelihood of the position being upheld), but more stringent than the reasonable basis standard as defined in Treas. Reg. 1.6662-3(b)(3).”

Should I Engage a CPA Tax Lawyer if I Have Received a Notice or Letter from the IRS?

Yes, if you are a certified public accountant and you have received a notice or letter from the IRS indicating that penalties are being imposed, you should engage a CPA tax attorney as soon as possible. An experienced CPA tax lawyer will be able to advise you, communicate with the IRS on your behalf, and take all steps necessary to protect you (and your CPA license and tax preparer credentials) to the fullest extent possible.


Schedule a Complimentary Consultation with a Senior CPA Tax Attorney at Oberheiden P.C.

If you need to know more about how to deal effectively with IRS (or IRS CI) scrutiny as a certified public accountant, we encourage you to contact us promptly. Call 888-680-1745 or contact us online to schedule a complimentary consultation with a senior CPA tax attorney at Oberheiden P.C. today.

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