Originally Posted By tax_monster:
I find it interesting that the OP simply took the word of the customer that he "absolutely" informed prior tax preparers of the proper relatoinship and used that to start his own little investigation and ratted out to the IRS. People who depend on the EIC know pretty well who qualifies as a dependent for EIC purposes and who doesn't, so who is to say the customer told the truth in prior years?
Did the OP get any of the prior preparers to admit that they knew these dependents were cousins, and not qualifying EIC dependents, or did he just make that assumption?
The OP had good intentions but he screwed up. He will likely lose his job and probably get sued by the customer. It's going to be a harsh lesson for a fresh out-of-school tax "expert."
As an Accountant for 27 years I sort of have to go with this and the other poster about following the chain of command.
Whenever I found errors (deliberate or not) I always let the client know first and what action would need to be taken. For companies I worked for I would always inform my CEO of what needed to be done and if they didn't take the action required or authorize me to do it, then I would say then I have no choice but to do it. You have to protect your professional standing.
I don't have that much experience with the IRS but what I do know is they will investigate this to see what the correct facts are - they don't just take someone's word that a mistake has been made or something is fraudulent. If after the investigation they determine that amended returns have to be done and the client owes them a lot of money, and the client cannot afford to pay, they will often settle for a lesser amount or work out a payment plan. So the client is not going to lose his house. Normally the Company doing the tax return is liable for penalties and interest if any are charged.
However, if the OP didn't inform his employers of his intention to inform the IRS first
, they will be mighty pissed off and so will the client.
I don't particularly like the Accounting field - I've seen all levels of Accountants from Chartered down to Bookkeepers do some very shady/illegal stuff in my time. As the OP found out - a lot of them either don't care or want to cover up their "mistakes" any way they can.