I see that a CPA drew a fraud penalty.
There is something you don’t see every day.
The CPA is Curtis Ankerberg. He practices in Oregon, which means that I
could not have met him. I however am certain that I have met his acolytes.
He graduated in 1994 and did the CPA firm route until 2005, when he went
out on his own.
Good for him.
The IRS pulled his personal 2012, 2013 and 2014 returns.
Should be easy for a practicing CPA.
During those years he prepared 50 to over 70 individual returns for
clients. It doesn’t sound like a lot, but those are just individual returns. It
does not include business returns or any accounting he may also have done.
He maintained an office-in-home, which meant that the IRS examiner came
to his house. The audit started off on a bad foot. The auditor added up his 1099s
for one year and found that the sum exceeded what Ankerberg had reported as
income. Needless to say, the auditor immediately recorded a write-up.
Comment: Folks, if you want to chum the waters for an IRA auditor, this is a good way to do so. I am – if anything – surprised that the IRS computers did not catch this before the auditor even showed up.
Emboldened, the auditor now presented a list of documents he wanted to
review.
Our CPA said sure, but he never followed up. He was creative with his
excuses, though:
· He had
cataract surgery coming up.
· He was
awaiting the outcome of a complaint he filed with the Treasury Inspector
General for Tax Administration.
· He lost
his records.
· The
auditor was messing around with one of the years, as the CPA had already agreed
he had underreported income.
· He had not
attached necessary forms to his tax returns because to attach them was a “red
flag.”
· He had
bank statements but he could not turn them over because he could not see well.
Alrighty then.
That last one cost him and big.
If the IRS wants your bank statements, they will get your bank statements.
You can play it nice and provide copies yourself, or you can stick it to the
man and have the IRS subpoena them from the bank. The latter may give you a
momentary rush of I-am-a-bad-dude, but you have hacked off an auditor.
What is the first reason that comes to mind if one refuses to provide
bank statements?
Exactly.
The IRS agent poured over those bank statements like they were winning
lottery tickets. Our CPA had again underreported income. In each year.
Can you feel the penalty coming? Oh, it is going to be a biggun.
What more can a disgruntled agent do?
The agent disallowed the following expenses:
· Insurance
· Taxes and
licenses
· Office
expenses
· Repairs
and maintenance
· Utilities
· Interest
· Vehicle
expenses
· Office in
home
· And others
This is not fatal. Just provide the documents.
Which Ankerberg did not do.
Our CPA is before the Tax Court explaining how he got into this mess. I
imagine the conversation as follows:
“Your honor,” he said, “I had serious medical issues, and those issues
constitute reasonable cause. I had cataract surgery, and before then I was
really a mess. This auditor caught me at a bad time.”
“Really?” asked the Court. “We
are curious then how you prepared all those tax returns for all those clients.”
“Braille,” replied our CPA.
“You continued to drive a car,” continued the Court.
“Self-driving,” explained our CPA. “It is a Google car.”
“Interesting,” noted the Court. “How about that 2014 return, the one
after your cataract surgery?”
“Phantom blindness,” offered the CPA generously.
“Let us see. Too little income. Too many deductions. A tax professional
who knew the tax ropes. Someone who never provided bank statements or other
documentation requested by the auditor. What does this sound like? Let us
think… let us think...”
“Aha! We remember now: they sound like badges of fraud.”
Bam!
BTW the fraud penalty is 75%.
Just provide the bank statements, Barney.
