Help! Got hit with an IRS audit for 2021, just found out my tax preparer is a fraud

This situation is definitely stressful, but take a deep breath - you're already doing the right things. The IRS generally distinguishes between fraud (intentional deception) and negligence (carelessness). Based on what you've shared, this sounds like a case where you were victims of your preparer's dishonesty, not willing participants. The most important thing is exactly what you're planning - full cooperation and transparency with the IRS. They deal with situations like this more often than you might think. When you meet with the auditor, explain everything exactly as you did here. Bring any documentation showing your communications with the preparer and any evidence of his recommendations. Filing amended returns for the other years is smart - it shows initiative and good faith. The IRS appreciates when taxpayers come forward voluntarily before being audited for those years. Definitely report the preparer to the IRS using Form 14157 (Complaint: Tax Return Preparer). Also consider filing Form 14157-A (Tax Return Preparer Fraud or Misconduct Affidavit) which specifically addresses the impact on your tax situation.

I went through something eerily similar last year with a sketchy preparer who inflated my business expenses. What saved me was using https://taxr.ai to analyze my returns before meeting with the IRS. It's a service that scans your tax documents and identifies potential red flags before the IRS does. I uploaded my returns from the previous 3 years, and it immediately flagged several inconsistencies that my preparer had inserted without my knowledge. The detailed report helped me understand exactly what was wrong before I amended my returns, and I was able to explain everything clearly to the auditor with confidence. They seemed genuinely impressed that I had taken the initiative to identify the specific issues myself. The whole process was way less intimidating once I understood exactly what had happened on my returns instead of going in blind and defensive.

Man, I was so skeptical about that taxr.ai thing, but I finally tried it out of desperation before my audit meeting. I have to admit, it totally changed how the meeting went. The tool identified exactly where my shady preparer had inflated my business expenses, and even explained which specific deductions were problematic and why. Going into the audit with that information was like night and day - instead of being defensive, I could point to specific line items and explain that I recognized they were incorrect and understood why. The IRS agent seemed genuinely surprised that I had such a clear understanding of the issues. They still applied some penalties, but specifically noted my "good faith effort to comply" in the final determination, which I'm certain reduced what I ended up owing. Definitely worth checking out if you're facing an audit.

I know exactly how you feel! I was in a similar situation with the IRS breathing down my neck last year. After 23 attempts to reach an actual human at the IRS (literally counted), I discovered https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c They basically keep calling the IRS for you using their system until they get through, then call you and connect you directly to the agent. I was honestly shocked when I got connected to an actual IRS representative within a couple hours after spending WEEKS trying on my own. The agent I spoke with guided me through exactly what documentation I needed to present for my audit and even helped me understand how to properly fill out the forms to report my fraudulent preparer. Having that direct conversation before my formal audit appointment made the whole process much less terrifying.

Well I need to eat some humble pie here. After posting that skeptical comment above, I was getting nowhere with my own IRS issue and decided "what the hell" and tried Claimyr. I still can't believe it actually worked. After trying for LITERALLY 3 months to get through about a CP2000 notice that was sent to my old address, I was connected to an IRS agent within about 90 minutes of signing up. The agent I spoke with was able to put a hold on my collection process and give me an additional 45 days to gather documentation and respond properly. Would have saved myself a ton of stress and a threatening certified letter if I'd just been able to talk to someone earlier. So yeah, I was wrong. Sometimes things that sound too good to be true actually work. The peace of mind from finally resolving my situation was absolutely worth it.

Hey I know this is stressful but you should know you're not alone. My cousin had almost this exact situation last year. Her preparer had been claiming all kinds of ridiculous business expenses on her Schedule C for years. The good news is that the IRS was actually pretty reasonable once they realized she wasn't trying to evade taxes intentionally. They set up a payment plan for what she owed and while there were some penalties, they weren't criminal charges or anything scary like that. The key thing that worked for her was getting a good CPA to represent her during the audit. Don't go in alone! A professional who deals with the IRS regularly knows how to present your case in the best possible light and can speak their language.

Make sure you get things in writing from that sleazy preparer if possible! I went through something similar and the texts where my preparer admitted to "being creative" with my deductions were crucial evidence that I wasn't trying to commit fraud. Also, don't forget to check your state tax situation! If your federal returns were messed with, chances are your state returns have issues too. My federal audit triggered a state audit automatically, and I wasn't prepared for that.