Wednesday, October 6, 2010

REGULATION DOES NOT PREVENT FRAUD

Regulating "unenrolled" tax preparers, while a good idea which I support, will not prevent tax fraud. Regulating CPAs does not prevent tax fraud.

Here is an example of the tax advice given by a CPA from a recent blog post by a tax attorney (highlights are mine) -

Recently we represented a New York night club owner who was undergoing a state tax audit. After analyzing the taxpayers Z-tapes and bank statements we determined that it had failed to report upwards of $1,000,000 in gross receipts in 2006, 2007 and 2008.

When I called the taxpayer’s New York CPA preparer to alert him to the underreporting he said that he was aware of it and called us idiots for recommending that the taxpayer voluntarily amend its S corporation and individual tax returns to correct the underreporting. Here’s was his justification:

Nobody reports all of their cash receipts. That’s the way we do things in New York.

Believe it or not, the taxpayer, on the advice of this crooked preparer, fired us and hired a New York tax attorney to represent it.

Presumably, this tax attorney agrees with the CPA preparer that it is no crime to intentionally underreport cash receipts
.”

It also appears that regulating attorneys does not prevent tax fraud either.

“Nuff said!

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