I graduated with a Bachelor's in Accounting last August, but haven't had any luck finding a job. So, I took a seasonal tax preparer / office manager position with a national tax prep service. This past week, while doing a client's taxes, I discovered a HUGE mistake where the taxpayer has wrongfully received about $40,000+ in refunds over the last seven years, through no real fault of his own, but because of inept tax preparers. He's been a client of ours for 7 years.

As part of the interview process, we have the clients fill out a data sheet, which includes their personal information and information about dependents. The dependent info includes the relationship of the dependent to the taxpayer. The client is in his late 20's, and is claiming his two cousins as dependents. The kids are about 8 and 9. Their parents are both incarcerated. In the past, the client had also claimed his mom, the children's aunt, due to her being unemployed. This year, however, he's not claiming her, as she moved out on her own. His mom has legal custody of her niece and nephew, but they live with her son, the client. The client was upfront about them being his cousins.

For those of you who aren't well-versed in tax law, there are some refundable credits (Child Tax Credit / Additional Child Tax Credit / Earned Income Tax Credit) for which nieces and nephews are qualifying relatives, but cousins are not. Cousins can be claimed as dependents for exemptions, though.

Our computer software allows us to keep notes, which are important for demonstrating due diligence, especially when EITC is involved. Our software also populates much of the information from returning client's prior year returns. As I started entering his dependent information, the fields populated as "nephew" and "niece" from last years return. I asked the client if he had told last year's preparer that they were his niece and nephew, without telling him why. He and his Mom, who was sitting there, assured me that they had always said they were his cousins. When I looked into the notes, I found that the preparers recorded them as niece and nephew. Apparently, the preparer the first year can't read a court order for custody and realize that the son of a person's aunt is the person's cousin, not their uncle. And, it appears the following year's preparers simply hit enter when the relationship field appeared without reading it, which caused them to be claimed as niece and nephew every year.

The client's refund this year was just over $700, which is what he'd had withheld, after his Head of Household Standard Deduction ($8,700) and 3 personal exemptions ($11,400) reduced his Adjusted Gross Income to zero. The previous seven years, he had gotten back in excess of $7,000 every year, due to ACTC and EITC.

When I discovered it, I let our Help Desk know. Their response was "Fortunately for us...unfortunately for the IRS they only catch 1 in 1000 of these." Later that evening, I spoke to my Team Leader, whose name was on the returns for two of the prior years, and let her know what I found, giving her a head's up that she could end up in a lot of trouble. She was genuinely worried. The following morning, I talked to one of the guys who works for me, whose name was also on at least one of the returns. He acted nonchalant about it at the time, but apparently bitched to my Regional Manager. I also spoke to my Operations Director (the Regional Manager's boss), who basically said it was no big deal, as the IRS would likely never catch it. When I talked to the Regional Manager a little later, she didn't seem to care, either.

So, since no one else in the company seems to think it's a big deal that incompetent, untrained, employees didn't do their due diligence and caused the IRS to throw away more than $40,000, I decided to blow the whistle and tell the IRS. I called the Inspector General's office on Thursday, who told me to send them an e-mail with the details. The next day, I got a reply from them with instructions on what IRS form to use for filing my complaint. That paperwork went out, via USPS Priority Mail, this morning.


TL;DR: I work as a tax preparer and found that fellow employees fucked up and a client got over $40,000 in refunds to which he wasn't entitled. When I told my bosses, they tried to sweep it under the rug. So, I dropped a dime to the IRS.

So will he have to pay it back?

Jesus



So much for mind your own business.



Some poor bastards life is about to be turned upside down.

 

My employer offers an Accuracy Guarantee, which means my employer will have to pay any penalties and fines associated with misfiled returns where the client provided correct information that the preparer incorrectly entered.

And, even if there was no such guarantee, he did sign the return. He should have read it and noticed that the dependents' relationships were incorrectly labeled.

I don't know about the whole EITC stuff, but I thought if you provided for more than 50 percent of someones care/living expenses, you could claim them as a dependent...

Isn't the tax prep company liable for this?

I'd hate to see the guy get burned for this.


ETA I saw the new post above. So what kinds of fines and charges are there for the IRS to impose on the business? Conspiracy to commit fraud?

If it's a big name tax preparer, they usually give you an audit free clause. IDK if that would apply here, but sounds like tax preparer screwed up. Not sure if client will have to pay back monies, but it will shurely result in a lawsuit of some sort if he does.

Might I remind you that that money was yours and mine (if you pay taxes). So he has to pay it back I could care less!





 

I wouldnt say poor if he got a bonus 40k.

The hate will be epic on all counts.  

The cocksucker lied and cheated the system out of a lot of money. The employees helped. This does not piss you off? Jesus, no wonder why the country is fucked

Hmm, so I guess I should not be claiming all of my firearms as dependents since I care for them

lol,



bless your heart.



 

And the OP better get his resume together.  Not saying he's wrong to stand on principle, but that whistleblowing is going to have consequences.

Well, I guess following your conscience is a good thing, but better hit the help wanted ads just to cover that angle.

Who is going to be more screwed...the client or the tax preparing firm? The firm,right?

There are for tests which must be met to claim a person as a Qualifying Relative:
1) Not a Qualifying Child Test
2) Member of Household Test
3) Gross Income Test (they have to earn <$3,800 of their own)
4) Support test (Tax payer has to provide more than half their support)

Cousins may be claimed for dependent exemptions ($3,800 / person deducted from AGI), but not for CTC/ACTC/EITC.

That's fucking boss, man.



Good work.

^^^^



Lying to rob you and I of our money, basically.
 

I would be worried about the repercussions if I where you....not saying your wrong but....I would be worried.

Trust me, I am all over the help wanted ads. As I said, I've been looking for an accounting job since August, with no luck. This job only lasts through April 15th, anyways; so I'm not worried about the boss deciding to let me go.

No shit.

Screw the government,  screw the taxpayers, mind your own business, don't invite the man into your life... the possibilities are endless.

Posted Via AR15.Com Mobile

I was with you right up until the tattle-telling part.   Seriously, wtf dude?

Beyond that, I think CoC would frown on what I really want to say right now.

Whichever way it goes... will not be what was intended!

Thanks.

Being a former Army NCO, my integrity is worth a hell of a lot more than the $10 an hour I get paid to do taxes for ghetto goblins.

If they fired him for that then the company would have a new world of shit to deal with.  And with the wistleblower laws any fraud or monies the IRS finds and reclaims the wistleblower gets a percentage of it for a reward.





 

Hopefully your company has some sort of "We fucked your shit up" policy and the dude doesn't get totally wrecked when the IRS comes knocking

While I have disdain for the IRS, I think you did the right thing. Even if you looked the other way, your name is on the return so now you would have to worry for the rest of your life if the IRS finds it.

If the IRS audits his return and compares it to last year's, they will discover the inconsistencies. When they look into it, they will find out that I know about it. If I don't say something, and allow it to be swept under the rug, I would be just as guilty of tax fraud and lack of due diligence as the prior year's preparers. That would result in a fine and loss of my right to practice before the IRS. Should I be convicted of tax fraud, I'd never work as an accountant.

Toss in some incompetent drone employees and corrupt management.



"This place has got everything!"

The way I read it, he prepared it the right way this year... but made it a point to tell the IRS about it being prepped the wrong way the previous two.

15% of any penalties or fines for cases involving less than $2,000,000.

The company more than likely has E&O insurance, but the premium is gonna go up.

If I willfully withheld information that I had from the IRS about tax fraud, I am just as guilty and would be subject to life-altering punishments.

Yeah. I got nothin'.

If someone on this website posted that they did some unkosher tax thing, would you be lawfully required to report it to the IRS?

That's all I really read.

Holy shit.

meh its just till the 15th. however firing a whistle blower is bad news for the company doing the firing. Doubly so since you ratted them out to the IRS..

Dont ever fuck with the IRS.

"through no real fault of his own"  

"So, I dropped a dime to the IRS"

No. But, if you can't understand the difference between reading something on the internet, posted by a random stranger, and signing your name to a tax document and then willfully trying to hide information from the IRS, I don't think we can discuss this on the same intellectual level.

Ever gotten a power washer for free?

Good on you for reporting it.

GOOD FOR YOU!!!!!!!!!!!!!!!!!!!!!!!!!


IF EVERYONE WOULD STEP UP AND DO THE SAME, WE might NOT BE IN THE SITUATION WE ARE IN.

I don't think so since he is not the tax preparer.

The person setting up the return is all over that documentation. if it is fucked up they will have to deal with it and there are specific laws they have to follow in regards to due diligence.

Holy freaking understatement Batman.

I'm gonna go with those.

Sure, sucks that the treasury is out $40k, but they'll just print that tomorrow.

Rights right, and wrongs wrong..I think you did the right thing. That said, I'd be pissed if I had to cough up $40k to Uncle Sugar if I thought I was in the clear after filing what I believed was an accurate return.