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New IRS Guidance Outlines the Procedures that Apply When a Taxpayer "Whistle Blows" on their Return Preparer

By Anthony P. Daddino on March 22, 2107

The IRS Small Business/Self-Employed Division issued a memorandum to all examination and collection personnel setting forth procedures that apply when a taxpayer alleges return preparer misconduct. The memorandum narrates a cautionary tale for unscrupulous preparers and serves as an important reminder to conscientious preparers to better communicate with clients so as to avoid misunderstandings.

The memorandum enhances existing procedures set forth in the Internal Revenue Manual. It identifies signing and “ghost” preparers, defined as a preparer whose information does not appear on the processed tax return. The memorandum sets forth several categories of misconduct, including the unauthorized filing of tax return, the alteration of return information, and the misdirection of refund deposits. The memorandum provides step-by-step instructions to taxpayers for reporting misconduct, which generally include the preparation of a complaint (IRS Form 14157) with supporting affidavit (IRS Form 14157-A), a copy of the preparer-filed return as well as a “correct” return, and, where the allegations involve preparer theft of refund monies, an official report by a law enforcement agency to whom the misconduct was reported. Fortunately, the memorandum also includes numerous examples of circumstances that a taxpayer may believe is preparer misconduct but, from the IRS perspective, is not reportable misconduct under these procedures. A copy of the IRS memorandum may be reviewed here: https://www.irs.gov/pub/foia/ig/spder/sbse-25-0117-0005-redacted.pdf.

For additional information on these procedures, or any other tax topic, contact Anthony Daddino at (214) 749-2464 or adadddino@meadowscollier.com.