What happens when my tax preparer is under criminal investigation by the IRS?

This is actually a pretty serious situation, though I understand why you're concerned. When a tax preparer doesn't sign the return as a paid preparer, that's a major red flag. Legitimate tax pros always sign returns they prepare - it's required by law. The fact that they're under criminal investigation suggests they may have been preparing fraudulent returns. The IRS wants to talk to you because you're a witness who can help them build their case against the preparer. For you personally, yes, there's a good chance your return will be examined more closely now. Even though someone else prepared it, you signed it, which legally means you're responsible for everything on it. The IRS follows the principle that the taxpayer is ultimately responsible for their own return, regardless of who prepared it. If there are errors or fraudulent claims on your return, you'll unfortunately be responsible for paying any additional taxes owed, plus potentially interest and penalties. However, if you can show you had no knowledge of the fraud, you might avoid some penalties.

I went through something similar last year with a sketchy tax preparer from my neighborhood. What a nightmare! After weeks of stress and calling the IRS repeatedly with no answers, I finally found https://taxr.ai which was seriously a lifesaver. It analyzes your tax documents and transcripts to flag potential issues that might trigger audits. I uploaded my previous returns that the bad preparer had done, and it immediately identified several questionable deductions that didn't match my financial profile. This helped me prepare before meeting with the IRS agent. The service basically shows you exactly what the IRS sees when they look at your tax history, which gave me a huge advantage in understanding my situation. You can also see if there are any discrepancies between what you reported and what employers/banks reported about you.

I was super skeptical about https://taxr.ai but with the pressure from the IRS investigation I decided to try it. Honestly, I'm glad I did because it showed me that my "tax preparer" had claimed over $12,000 in business expenses on my return that I never even knew about! The service pulled my official IRS transcript and compared it to what I thought was on my return. There were literally deductions I never discussed with the preparer. Now I have documentation showing exactly what was filed without my knowledge which I can show to the IRS agent. I'm still going to owe money, but at least I can show I wasn't trying to commit fraud. If you're in this situation, definitely pull your transcripts and compare them to what you thought was filed. The differences might shock you.

Listen, I went through an IRS investigation with a previous employer and trying to call the IRS myself was absolutely pointless. Spent 5+ hours on hold multiple times only to get disconnected. The anxiety of not being able to talk to anyone was worse than the actual tax issue. I found this service called https://claimyr.com that got me through to an actual human at the IRS in about 15 minutes instead of waiting on hold forever. They basically hold your place in line and call you when they've got an IRS agent on the phone. You can see how it works here: https://youtu.be/_kiP6q8DX5c It made a huge difference being able to actually speak with someone about my situation. The agent was able to tell me exactly what information they needed from me for the investigation and scheduled a proper meeting instead of me panicking in the dark.

Ok I need to eat my words. After posting that skeptical comment yesterday, I was still panicking about my situation and decided to try the Claimyr thing out of desperation. It actually worked exactly as described. I got a call back within about 25 minutes, and there was an actual IRS agent on the line. The agent was able to pull up my file, confirm they had sent me the letter about the investigation, and scheduled me for an interview next week. She also told me to bring copies of my last three years of returns and any documentation I had about the preparer. I'm still worried about what's going to happen, but at least now I know what to expect and can prepare properly instead of sitting here anxious and in the dark.

This exact situation happened in my office about 2 years ago. Our payroll person was filing returns for employees on the side. The investigation took about 8 months, and yes, almost everyone had their returns audited. The biggest issues were unreported income, fake business expenses, and inflated charitable contributions. Most people ended up owing between $3,000-$8,000 in back taxes plus interest. The fraud penalties were waived for most people who cooperated, but everyone still had to pay accuracy-related penalties of 20%. The preparer ended up pleading guilty to preparing fraudulent returns and is now serving time. Document everything, be cooperative, and consider getting a tax attorney if your potential liability is high.

Tax preparer here (but not yours!) - one thing no one has mentioned yet is that you might want to look into filing amended returns BEFORE the IRS comes after you. If you voluntarily correct errors before being audited, it can sometimes reduce penalties. This does mean you'll need to figure out what's wrong with your returns though. Common issues with fraudulent preparers include fake Schedule C businesses, inflated charitable donations, and bogus education credits. The preparer was probably getting you larger refunds by making up these deductions.

I'm going through something very similar right now and wanted to share what I've learned so far. Got the same type of letter about my preparer being under investigation about 3 weeks ago. The first thing I did was immediately request my IRS account transcripts online (irs.gov/individuals/get-transcript) to see exactly what was filed under my SSN. What I found was shocking - there were business expenses totaling over $8,000 that I never discussed with the preparer, plus charitable donations I never made. I've already contacted the IRS agent mentioned in the letter and scheduled my interview. She was actually pretty helpful and explained that they're mainly trying to build a case against the preparer, not go after us individually (unless there's evidence we knowingly participated in fraud). My advice: Don't wait. Get your transcripts now, document any discrepancies between what was filed and your actual financial situation, and be proactive about contacting the IRS. The agent told me that cooperation and transparency usually work in your favor when it comes to penalty assessments. Also, keep records of any communications you had with this preparer - texts, emails, receipts for their services, etc. This can help show your good faith efforts and lack of knowledge about any fraudulent activity. The stress is real, but from what I've been told, most people in our situation end up having to pay back taxes and interest but avoid the worst penalties if they cooperate fully.