Legal implications if I refuse to sign our business tax return due to suspected tax fraud?

Thanks for the advice. I'm wondering if I should approach my partner with a professional mediator or accountant before taking any drastic steps? Also, if I do find concrete evidence of fraud, am I legally required to report it somewhere or can I just dissolve the partnership?

Bringing in a neutral third-party professional is an excellent approach. A mediator or independent accountant can create a non-confrontational environment to discuss these concerns and potentially help your partner understand the risks they're creating for both of you. If you find concrete evidence of fraud, you have options but no simple ones. You're not legally required to report your partner to the IRS, but continuing in the partnership knowing about fraudulent activity puts you at risk. Dissolving the partnership doesn't erase past liability for improper filings. The cleanest approach is usually to correct any improper filings through amended returns, which may mean additional taxes, interest, and possibly penalties, but far less severe than the consequences of fraud charges.

How does this service actually work? Do they have real tax professionals reviewing your documents or is it just some AI scanning for keywords? I've been hearing about a lot of these tax tools lately but I'm skeptical about trusting something that important to automation.

I'm curious - does using this service establish any kind of paper trail that could protect you if there was an actual audit? Like can you show the IRS you were trying to do the right thing by using their analysis?

The service uses a combination of AI and tax professionals. It initially scans your documents to identify potential issues using technology, but then you can get expert review from their team of tax specialists who provide personalized feedback on the flagged concerns. Yes, using the service does create documentation that shows you were actively seeking to verify compliance. While it doesn't grant immunity during an audit, it can demonstrate good faith efforts to comply with tax laws, which can sometimes help regarding penalty reductions. The documentation they provide clearly identifies problematic areas and their recommendations for correction, which is exactly what I needed to approach my partner with solid evidence.

I don't get it - how does this actually help? The IRS phone lines are deliberately impossible to get through. Are you saying this service somehow jumps the queue or something?

Sounds like BS to me. The IRS is designed to be unreachable. I've literally spent 6+ hours on hold before being disconnected. If this actually worked, everyone would be using it. What's the catch? Do they charge an arm and a leg for this "service"?

It's not queue-jumping in an unethical way - they've developed a system that navigates the complicated IRS phone menus and waits on hold for you. When they finally reach a real person, you get a call back and are connected directly to the agent. It saves you the hours of waiting on hold yourself. The catch is simply that they've figured out the most efficient paths through the IRS phone system and automated the waiting process. And no, it's actually quite reasonable cost-wise considering the time it saves. For me, getting direct information from an IRS agent about partnership liability was crucial for making an informed decision, rather than relying on potentially biased advice from people who might have different interests than my own.

This seems extreme. Wouldn't it be better to just have an honest conversation first before going all spy mode on your business partner? Maybe there are legitimate explanations for the expenses OP is questioning.

An honest conversation is absolutely worth trying, but documentation isn't being a spy - it's being prudent. If there are legitimate explanations, great! No harm done. But if there's actual fraud happening, a conversation won't protect you legally when the IRS comes knocking. You don't need to be secretive about it. You can directly say, "I've noticed these specific issues that concern me, and I'd like to understand them before signing our tax documents." Then document the explanation. Partnerships require trust, but they also require verification, especially when it comes to tax compliance where both parties share liability.

I definitely considered that possibility, which is why I've been hesitant to make accusations. I do have a basic understanding of business accounting - I handle about half of our bookkeeping normally. What concerns me isn't creative accounting or aggressive deductions - it's things like expenses with altered receipts (literally different ink and handwriting changing amounts) and several cash payments to "contractors" that I've never heard of with no corresponding work I can identify. I'm planning to talk to an independent CPA this week before confronting my partner again. I genuinely hope there are explanations I'm missing, but some of this stuff seems really blatant.

@OP altered receipts is a HUGE red flag. That's not aggressive tax strategy, that's straight-up fraud. Document everything before approaching your partner - you might need it later. If I were you I'd be looking for a lawyer not just a CPA.