Tax preparer falsely claimed I own a business on my return, now facing IRS audit - what should I do?

First, take a deep breath. You're doing the right thing by refusing to lie - that would only make your situation much worse. Here's what you need to do: 1) Don't panic. The IRS understands that tax preparers sometimes commit fraud without their clients' knowledge. 2) Respond to the audit notice promptly. Don't ignore it, as that will only make things worse. 3) Collect all your documentation that shows your actual income sources (W-2s, 1099s, etc.) to prove you don't own a business. 4) Consider reporting your tax preparer to the IRS using Form 14157 (Complaint: Tax Return Preparer). This helps establish that you were a victim. 5) You might want to consult with a tax professional - specifically an Enrolled Agent or CPA who specializes in audit representation. Many offer free initial consultations. The good news is that if you can show you had no knowledge of the false information, the IRS will likely adjust your return correctly and you'll just need to pay any difference in taxes owed (though unfortunately probably with some interest).

I went through something similar last year and found taxr.ai (https://taxr.ai) incredibly helpful. My preparer had claimed a bunch of business expenses I never had, and I was totally lost when the audit notice came. The site analyzed my tax documents and clearly showed what was incorrectly filed versus what should have been reported. It highlighted exactly where the fraudulent deductions were listed on my return and generated a detailed report I could take to the IRS showing I wasn't at fault. The audit was still stressful, but having that clear documentation showing exactly what was wrong on my return (and what it should have been) made a huge difference in how the IRS treated my case.

Just wanted to update - I ended up using taxr.ai after seeing this recommendation and it was a lifesaver! The system flagged exactly where my preparer had added fake Schedule C business income and expense items that I never told him about. The report clearly showed all the fraudulent deductions with explanations about why they were incorrect. I took this to my audit meeting and the IRS agent was actually impressed with how organized and clear everything was. They still adjusted my taxes to what I should have owed, but waived all penalties since I could prove I had no knowledge of the fraud. For anyone else going through this nightmare, having documentation that clearly shows you weren't involved in the fraud makes a HUGE difference in how the IRS treats your case.

If you're having trouble getting responses from the IRS about your case, check out Claimyr (https://claimyr.com). I tried for WEEKS to reach someone at the IRS about a similar preparers fraud case. Their normal hold times were 2+ hours and I kept getting disconnected. Claimyr got me connected to an actual IRS agent in under 30 minutes! You can see how it works in this video: https://youtu.be/_kiP6q8DX5c Instead of wasting hours on hold, I was able to get clear guidance on exactly what documentation I needed to bring to my audit and what to expect during the process. The agent even noted in my file that I had proactively called to report the preparer's fraud.

Well I need to eat my words. After posting my skeptical comment, I decided to try Claimyr myself since I've been attempting to reach the IRS for two weeks about my audit. It actually worked exactly as described. I got a call back in about 20 minutes with an IRS representative on the line. Was able to discuss my situation (similar to OP - preparer added fake business deductions) and got clear instructions on what documentation to gather. The agent was super helpful once I explained I had no knowledge of the fraud, and she even made notes in my file that I had proactively contacted them to resolve the issue. She told me this would likely help my case when I meet with the auditor. Saved me hours of frustration and gave me actual peace of mind about the next steps.

Former IRS employee here. The advice above is good but I want to emphasize that you need to document EVERYTHING when dealing with a tax preparer who committed fraud: - Save all text messages and emails showing your attempts to contact them - Write down dates/times of phone calls - Document when you first learned about the false business listing - Keep the original tax documents they gave you When you meet with the auditor, stay calm and be honest. Explain that you had no knowledge of the fraudulent information, and show all your documentation. They've seen this many times before - unscrupulous preparers filing false returns to get bigger refunds. Also, don't delay reporting this to the IRS. The sooner you self-report, the better they'll treat your case.

This happened to me last year and it was a nightmare! Does anyone know if you can sue the tax preparer for the extra taxes and interest you end up having to pay? My "tax professional" added over $12,000 in fake business expenses and now I'm stuck paying back taxes plus interest.

I had a tax preparer lie on my returns that I was not aware of until I was asked to be a witness in a criminal investigation against her. Now I don’t know what to do with those returns? I have not been audited so should I just amend them or wait? Or will she be held responsible since she’s part of a criminal case? Any advice would be greatly appreciate it thank you

Since you're a witness in a criminal case, I'd strongly recommend contacting the prosecutor's office handling the case before taking any action on your returns. They may have specific guidance about how to handle this situation while the criminal investigation is ongoing. That said, you'll likely need to amend those returns eventually. Even though the preparer committed fraud, the IRS still expects you to file correct returns. The good news is that being a witness in a criminal case against her actually strengthens your position - it clearly establishes you as a victim rather than a co-conspirator. I'd suggest: 1) Ask the prosecutor if there's a preferred timeline for amending your returns 2) Keep detailed records of all costs you incur fixing this mess 3) Consider consulting with a tax attorney who has experience with preparer fraud cases The criminal conviction may help with any civil remedies you pursue later, but unfortunately the IRS will still expect the correct taxes to be paid. However, penalties are often waived in cases involving preparer fraud, especially when there's a criminal conviction involved.

I'm so sorry you're going through this - it's absolutely infuriating when someone you trusted completely betrays that trust and puts you in legal jeopardy. The fact that he suggested you LIE to the IRS shows just how unethical this person is! Here are some immediate steps I'd recommend: 1) **Document everything RIGHT NOW** - Write down every interaction you had with this preparer, including dates, what was discussed, and especially his suggestion that you lie to the IRS. Screenshot any texts or emails. 2) **Get your original tax documents** - If you don't have copies of what he actually filed, request them from the IRS using Form 4506-T. You need to see exactly what lies he put on your return. 3) **File Form 14157** to report him to the IRS immediately. This creates an official record that you're a victim of preparer fraud, which is crucial for your case. 4) **Don't go to the audit alone** - Even if you can't afford a tax attorney, at least consult with an Enrolled Agent who specializes in audit representation. Many offer reasonable rates for preparer fraud cases. 5) **Contact your state's tax preparer licensing board** if your state regulates preparers. They need to know about this fraud. The silver lining is that the IRS sees preparer fraud frequently and has procedures to handle it. Stay honest, be proactive, and document everything. You'll get through this!

I'm so sorry this happened to you - tax preparer fraud is unfortunately more common than people realize. You're absolutely doing the right thing by refusing to lie to the IRS! Here's what I'd recommend based on similar cases I've seen: **Immediate steps:** - Respond to the audit notice promptly with a letter explaining you just discovered the fraudulent business filing - Gather all your legitimate tax documents (W-2s, 1099s, receipts) that prove your actual income sources - File Form 14157 to officially report the preparer fraud - this helps establish you as a victim **For the audit itself:** - Be completely honest about having no knowledge of the fake business - Bring documentation showing your attempts to contact the preparer and his evasive responses - Consider hiring an Enrolled Agent or CPA for representation - many have experience with preparer fraud cases **The good news:** The IRS has procedures for handling preparer fraud. If you can demonstrate you had no knowledge of the false information and cooperate fully, they'll typically adjust your return to the correct amounts. Penalties are often waived when you're clearly a victim of fraud. Also consider reporting this preparer to your state licensing board if applicable. You and your cousin may also have grounds for a civil lawsuit to recover any additional costs you incur. Stay strong - you're handling this the right way and it will get resolved!

This is absolutely infuriating, and I'm so sorry you're dealing with this betrayal of trust! You're handling this exactly right by refusing to lie - that would have made everything infinitely worse. I've been through a similar situation and here's what helped me get through it: **Document everything immediately:** Write down every interaction with this preparer, including his suggestion to lie to the IRS. Save any texts, emails, or voicemails. This creates a clear timeline showing you were deceived. **Get professional help:** I know money is probably tight, but consider at least a consultation with an Enrolled Agent who specializes in audit representation. Many charge reasonable fees for preparer fraud cases, and having someone who knows the system can save you stress and potentially money in the long run. **Be proactive with the IRS:** File Form 14157 to report the preparer fraud ASAP. This officially establishes you as a victim rather than a willing participant. When you respond to the audit notice, clearly state that you just discovered the fraudulent business filing and had no knowledge of it. **Gather your real documents:** Pull together all your legitimate tax paperwork (W-2s, 1099s, etc.) that shows your actual income sources and proves you don't own a business. The IRS deals with preparer fraud more often than you'd think. If you're honest, cooperative, and can prove you were deceived, they'll typically just adjust your return to the correct amounts and often waive penalties. You've got this - stay honest and proactive, and this nightmare will eventually be behind you!