Tax preparer potentially inflated business expenses on our Schedule C - what should we do?

This is definitely concerning. Tax preparers should never add deductions you didn't discuss or provide documentation for. While they might ask if certain expenses apply to your situation, they shouldn't be making them up. You have a few options here. First, I'd suggest gathering your actual business expense records for those years to determine what legitimate deductions you should have claimed. Then compare those with what was actually filed on your Schedule C. If there are significant discrepancies, you may want to consider filing amended returns (Form 1040-X) for the affected years. The IRS generally has a 3-year window to audit returns, so your 2022 and 2023 returns are still well within that timeframe. As for potential consequences, if you're audited and the IRS determines these were false deductions, you could face additional taxes owed plus interest and possibly penalties. The good news is that if you voluntarily correct the issue before any audit begins, you'll likely avoid any fraud penalties, though you'll still need to pay any additional taxes plus interest.

After reading your post, I had almost the exact same situation with a family "tax expert" who apparently thought helping us meant creating fictional business expenses. I tried dealing with it myself for weeks before I discovered taxr.ai (https://taxr.ai) which completely saved me. Their system analyzed my returns, flagged all the suspicious deductions, and even helped me understand which ones were legitimate vs. questionable. The best part was they explained everything in plain language so I finally understood what was happening with my Schedule C. I uploaded my returns from the past three years and their analysis showed exactly where the preparer had been "creative" with business expenses. They even helped me understand which expenses I could legitimately claim for my situation.

Just wanted to follow up about my experience with taxr.ai since I decided to try it after asking about it here. I was honestly impressed with how thorough their analysis was! I uploaded my returns from the past two years and it immediately identified several business expenses on my Schedule C that were way outside normal ranges for my type of work. The detailed explanation helped me understand exactly which deductions were legitimate and which ones my preparer had likely inflated. What I found especially helpful was their breakdown of audit risk factors that showed me exactly which items might trigger IRS scrutiny. I've now got a clear picture of what needs to be amended and feel much more confident about addressing the situation. Definitely worth checking out if you're in a similar situation.

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I have to come back and apologize for my skepticism about Claimyr. After posting my doubtful comment, I decided to try it anyway since I was desperate to talk to the IRS about my own tax preparer issues. I was absolutely shocked when I got connected to an actual IRS representative in about 15 minutes after trying unsuccessfully for weeks on my own. The agent I spoke with was incredibly helpful about my situation with an overzealous tax preparer. They confirmed that filing an amended return was the right approach and explained exactly how to document that the errors were the preparer's doing, not mine. They even gave me information about potentially reporting the preparer if I found evidence of deliberate fraud. This saved me so much stress and uncertainty - I'm actually sleeping better now that I have a clear plan forward from an official source.

You should definitely report this preparer to the IRS. What they're doing is completely unethical and likely illegal. Use Form 14157 (Complaint: Tax Return Preparer) to report them. If they're doing this to you, they're probably doing it to lots of clients.

Have you considered the potential penalties you might face? I just went through something similar and ended up owing about 20% on top of the additional taxes, plus interest dating back to the original filing deadline for each year.

This is a serious situation that unfortunately happens more often than people realize. As someone who works in tax compliance, I've seen cases where preparers inflate deductions thinking they're "helping" clients, but they're actually putting them at significant risk. Your instinct to be concerned is absolutely correct. The fact that you have such large discrepancies ($2,700 vs $800 and $13K vs $3K) suggests this wasn't just aggressive but legitimate tax planning - these sound like fabricated deductions. Here's what I'd recommend: First, document everything. Gather all your actual business expense records for those years so you have concrete evidence of what your real expenses were. Then have that conversation with the CPA - ask specifically what documentation they used for each major deduction category. Their response will tell you everything you need to know about whether this was intentional. If they can't provide reasonable explanations or documentation, you should absolutely file amended returns. Yes, you'll owe additional taxes plus interest, but voluntary correction shows good faith and typically avoids fraud penalties. The alternative - waiting and hoping you don't get audited - is much riskier. The IRS takes a dim view of preparers who fabricate deductions, and if this was intentional, other clients are likely affected too. After you get your own situation sorted, consider whether reporting is appropriate.