Name: Ethics for Enrolled Agents and CPAs: Best Practices & Client Boundaries
Uploaded: 2025-08-06T18:17:01.969Z
Duration: 2 h 8 s
Description: Ethics for Enrolled Agents and CPAs: Best Practices & Client Boundaries

Transcript for "Ethics for Enrolled Agents and CPAs: Best Practices & Client Boundaries": Welcome, everybody. Today, we're gonna be learning about Circular two thirty ethics, and this is a topic that even though we have to learn about it every year, it has not changed very much over, you know, the last decade. So we're gonna learn about it with a little bit of a twist and have some fun with it. So about me, my name is Angelene Wierzbic. I, work at Lawler and Wykowski. I've been here for twenty years. My specialty is I assist taxpayers who have IRS issues at our office in Buffalo, New York, and I also teach for the American Society of Tax Problem Solvers and CPA Academy. And in my spare time, I'm kind of artistic. I like reading and painting and photography and things. So just some housekeeping. Our our agenda. We're gonna go through housekeeping, and then we're gonna work through, you know, some of the Circular two thirty issues with tax preparation, some of the preparer penalty impacts that kind of align with Circular two thirty, and also how it impacts resolution cases, and we're gonna wrap our story up and have some key takeaways. For housekeeping, it's important that, you know where you're gonna put your questions. You can converse with other webinar attendees through the chat. We are gonna be launching polls throughout the two hour class, and there's a poll tab and you're going to be instructed by me when the polls begin. And you're going to click the answer button and then the text for the, the text will change once the answer is submitted. If you have content related questions or tech issues, go to the q and a and our moderators will keep an eye on that and help you through. And as far as documents, they are gonna they're gonna pop up in the documents tab, which is over on the side of your menu. So for best practices for the webcast, webcast will stream the audio exclusively through your computer speakers, so we recommend using Chrome or Safari. Don't have any VPNs, ad blockers, or firewall, or use incognito mode, because that can disrupt your learning. And, also, when the event is wrapping up, you're gonna be prompted to take a short survey. So please complete it, and we really enjoy your feedback and like to hear what your thoughts are on things. As for CPE and continuing education credits, you're going to be receiving two credits if you attend this full class or and, in order to do so, you're gonna have to answer the polling questions. At a minimum, you have to answer one poll, but we'd appreciate you answering all the polls, and I tried to make them interactive for you. And as far as credit hours, you're gonna get credit for every fifteen minutes that you are in this webinar. Your certificates will be sent to email to you to the email that you provided during your registration within forty eight hours. And make sure to check your junk or spam mail, sometimes they end up in there. And if you have any troubleshooting, go to tax pro training at Intuit. So just a disclaimer, this session is educational in nature and should not be construed as tax advice. The information presented is believed to be accurate, but is based on recent on very recent legislation that is changing with agency guidance. We have no obligations, to update attendees, and we encourage that you monitor authoritative guidance for updates. Every, client situation is unique, and tax professionals should carefully consider the facts and circumstances of each client in applying the law. And that's actually the cool thing with doing some of resolution and things. Every case is different, so learn as you go and have different experiences. So before we start in here, when I started putting this class together, I looked at, you know, what is ethics? And our ethics are based off a lot of our morals and, ultimately, our morals are from our upbringing. And I looked at some, you know, some research and things and psychologist Lawrence Kohlberg talked about the theory of moral development. So all our morals are established by age nine. So, hopefully, we have good ethics from having good morals. And to kind of bring this together, I thought it would be fun to step back into our nine year old selves to bring out some of our ethics and do this with a story. So we're gonna talk about the troubling tax tale or the troubling tales of Mr. Malpractice. So as far as CPE goes, this is the first time I have used a book to teach CPE, and I hope you enjoy the story, and it connects you with your youthful self. And all of the morals that we learned back there are kind of implicated in our daily professional decisions. And when I was young, I loved reading, so this is why we're kinda nerding out over here. So once upon a time, there was a newly licensed CPA named Mr. Malpractice. After five years in college and the pressure of an upcoming student loan payments, he took a leap into practicing by opening the firm with one of his colleagues, miss I Made It Oops. They started the firm of I made it oops in malpractice after taking some working capital from a bank loan to purchase a building, furnishing furnishings, and cover up start or cover start up costs. The two prepared and opened the doors during the beginning of the tax season. It was a quiet start, but the excitement mounted in the office as they heard the first jingle of the bell on the door as their first client walked in. Mister malpractice jumped up from his desk to greet his new arrival. As they sat down, the client introduced himself. Good afternoon. My name is mister Shifty. My wife, miss Blamlesh, couldn't make it because she's picking up the kids from soccer, but I'd like you to do our taxes. We have two kids who live with us, but I also wanna claim my niece and nephew who live down the road. My sister has no income since she's on social assistance. The kid's father doesn't file, so it's all good. Right? Someone's gotta claim them. Right? Here's everyone's name, Social Security number, and dates of birth. Other than that, all I got is this w two. I have a favor to ask when you prepare my return. You see, I got this w two for the cash I earned, but I don't think I should have to pay the government any taxes. I did have some withholding, but I think it's against the constitution to tax people. So I want you to prepare my return, not claiming any wages, and get my withholding back. And, hey, if you get back some of those child tax credits from my sister's kids, I'll split the extra refund $50.50. You might as well take your fees right out of there while you're at it too. After thinking about the request and the pile of upcoming student loan bills, mister malpractice agreed. He shrugged and thought to himself, well, the customer is always right. He put the return together or put together the return as mister Shifty requested, ignoring the w two income, including the withholding and picking up the child tax credit. He entered the bank account for oops and malpractice for direct deposit of his fees and 50% of the child tax credit out of the refund. Malpractice printed out the eighty eight seventy nine form and had Shifty sign for himself and forge Blame Lesh's signature. Nice meeting you. Come by and pick up your return tomorrow, malpractice said as he shook Shifty's hand and escorted him to the door. So this is our first poll. What would you have done if you were in Malpractices situation? Would you prepare the return as shift you requested? Would you prepare the return but include the w two? Or would you prepare the return and leave off the sister's kids? Or would you educate, apologize, and send Shifty on his way without preparing the return if he would not comply with tax rules? We will give you a minute here for everybody to get their answers in. I'm seeing them come in. Alright. We got some good answers. So what I would do in this case is I would recommend that we educate, apologize, and send Shifty on his way without preparing the preparing the return if he would not comply with tax rules. And as we go through this, we're gonna learn why that is the best option in this case. So if you look back, we have the scenario where malpractice has this moral dilemma because he is taking this, the customer's always right, which is good business. Right? But this isn't always the right path for us as practitioners, and there are some very large problems with doing a yes in this case. And one of the issues is male practice has to adhere by Circular two thirty. And in section 10.8, it defines a tax preparer and return preparation in application of of rules for other to other individuals. It talks about any individual who, for compensation, prepares or assists with the preparation of all or substantially all of a tax return or claim for refund is subject to the duties and restrictions relating to practice. So malpractice here, because he put together the return and was compensated, does have to follow these Circular two thirty ethics. So now that we know that he has to follow these ethics and, you know, follow some of the rules, what sort of problems do you see? How many problems do we see with malpractices issue with malpractices return that he put together? We're gonna talk about seven of them. So as I was, you know, putting together this, you know, story in this scenario and thinking about, you know, what malpractice should have done and what we should be looking at as practitioners, we have a lot of questions here. First off, we have to look at who can Shifty actually claim? Is there really any issue with the w two? What about the child tax credit? And has malpractice actually prepared a bad return? Can malpractice share the refund? And what about that eighty eight seventy nine form? And was the electronic filing handling handled properly? So let's delve deeper into some of the issues that are here. So when it comes to the kids, who can Shifty actually claim? Now if his two kids are living with him and his wife, they can potentially claim them if they're providing all the support, but we there's also a hang up. We should have proof of whether he can claim that, proof to show that the kids live there. Also, the niece and nephew, do they meet the qualifying child requirements? They actually don't because they don't live with the taxpayer more than 50% of the year. Shifty came out and said they live down the street with his sister, and she's getting social assistance, and Shifty's not supporting them from the situation that we've been provided. And did malpractice have knowledge that they didn't meet these requirements? We have knowledge based on the narrative. So the trouble with that knowledge is if malpractice knew, he should have taken the time to research and see whether these kids could be claimed and what rules and obligations he had to follow. And, basically, in some of these scenarios, going against the rules can be deemed as willful or blatant disregard, especially when there's positions being no being used that are, you know, false. And the scariest part is if we're a practitioner and we slip up and do something like this, there is exposure to some pretty serious penalties, and we're gonna look at that. And one of the things that, you know, as I was putting this together, you start to realize there are a ton of ties between circular two thirty and all of the pract or an a lot of the, practitioner penalties that are in the code. So we're gonna look at how some of these interplay together. So those credits, do you see any issues with the preparation of the child tax credit? Well, we talked about the kids and they really didn't verify that the kids lived in the home. And in addition, he's claiming additional dependents that he may not have been entitled to. And there's no indications here that malpractice did the due diligence requirements of the eighty eight sixty seven form because he was only provided the Social Security number and the date of birth and the names for the children. So he doesn't have any proof that they reside in the home or have any connection between Shifty and Blameless in these kids that are being claimed. So this is where the preparer penalties come into play. So there is some exposure here to a sixty six ninety five g, and it's failure to be diligent in determining eligibility for certain tax benefits. And these are the little preparer penalties that, you know, often people, you know, are apt to slip up on, and we're gonna look at the sixty six ninety five ones. Any person or tax preparer with respect to a return or claim for refund fails to comply with due diligence requirements imposed by the IRS with regards to determining eligibility for head of household or other credits shall pay a penalty. So anytime you are dealing with a return where there is a child tax credit, an American opportunity credit, head of household, earned income tax credit, we have to have documentation and proof, and this is a hot button area for fraudulent filings. So this is something the IRS is really been pinpointing and getting aggressive with reviewing for and they're looking for preparers to monitor and collect proof. We recently had a case in our office where we had a preparer that didn't do this and, you know, had to go it went through a court process, got in trouble, and, you know, we're helping monitor the situation and make sure that she is doing due diligence going forward. But the penalties can are per exposure, per return. So, potentially, if you've got a case where you've got a head of household person with that has child tax credit and one of the kids is and another kid that's that's college age where they have the American Opportunity Credit, there could be a situation where you've got multiples of that $635 fine for for the head of household and not doing diligent due diligence. For the child tax credit and not doing due diligence. For the American Opportunity Credit and not doing due diligence. And one of the things that changed recently is they took away the limitations on these penalties. So you have to be able to provide the information and prove and make reasonable inquiries and keep your records on these items for three years. So now let's go to the second issue, the mysterious w two. So did we really have a w two error? Now the the taxpayer, you know, just blatantly said, hey. They paid me cash. So cash is a form of compensation. We all know that. Right? And in this scenario, there really wasn't an error in the w two. Shifty is just making a frivolous argument by saying, hey. You know what? This is my cash in income. That's not constitutional and it can't be taxed. So before we go into, you know, some of the the items with Circular two thirty, I just wanna bring up, you know, not so much with w twos, but often we find, taxpayers that may have run across errors with ten ninety nines. If you do have a client that has this type situation, they should contact the previous, like, employer or the company that they were working for as a subcontractor and ask them to amend. And if they don't amend, when you prepare the return, include the amount, put a disclosure statement in there, and reverse the amount. So that way it's you know, you're disclosing that the form is in there, but the form was erroneously, prepared and include your information to support the fact that your taxpayer didn't have that income and also that, you know, they they sent out to the previous employer and asked them to amend. Now in Circular two thirty on 10.21, we have a situation where we have knowledge of the client's omissions. So if a practitioner is remain retained by a climate client with respect to an IRS matter who knows that the client has not complied with the law or made an error or omission on any return, document, affidavit, or other paper which the client submitted or executed under must advise the client promptly of the noncompliance error or omission. The practitioner must advise the client of the consequences of such noncompliance error or omission. So let's step back into our story. In this case, what should have happened when Shifty brought up about this w two, malpractice should have informed him that this was income, first off, and that in by reporting it this way, you're omitting the income, and it's also potentially bringing up a frivolous argument that we're gonna talk about. And all and if the IRS looks at this, you're subject to penalties, and you're also gonna owe the tax on that income as well. And if you've never run into a frivolous arguments, these are those things like taxes are illegal. They're not founded in the constitution. Those type things that we know are inherently wrong, are subject to a $5,000 fine. So there's a few things. So under the frivolous tax submission, under sixty seven zero two, we have frivolous tax returns, and they're subject to a $5,000 penalty. If a person files what seems to be a tax return but doesn't have the proper information, or on its face indicates an assessment that's incorrect or based upon a a sit position or a situation that the IRS considers a frivolous argument. And if you're not sure, there are a list of frivolous arguments on the IRS website and some of the things that we should watch out for as practitioners. So there's frivolous returns, but you can also be subject to penalties with other frivolous submissions. So if a person, especially, like, in the resolution world, if they might be subject to a penalty of $5,000, if they make frivolous arguments, or their actions are for the purpose of delaying or impeding the tax administration. So things like the collection due process appeal or requesting an installment agreement or an offer in compromise or requesting help from the taxpayer advocate's office, When you do those things, it actually tolls the collection statute and it stops the IRS from collecting while they review the submissions and determine whether your taxpayer, you know, qualifies for the installment agreement, and accepts or rejects the payment plan or, you know, determines whether they're gonna accept or reject an offer and compromise, for example. So that whole time that those are pending, the collection statute tolls. So what they're doing here is if you are putting one of those things out there just to stop the IRS from collecting, that's that delaying and or impeding the tax administration. And in these situations, both the taxpayer and sometimes practitioners who are, you know, making these doing these things can be subject to a $5,000 penalty. So if you're in the world of resolution, make sure you have a, you know, good financials, have everything wrapped up before you make one of these these, submissions. And, also, you know, don't do them just to, you know, prevent the IRS from collecting from your client. Have a have a legitimate reason for doing these. So here's our second poll. Do you think malpractice asked it properly? And our options are, yes, he is obligated to follow all of Shifty's wishes, or, no, he has to adhere with ethical standards and rules regardless of Shifty's wishes. So I'll have a couple minutes to think about that and see some answers coming in. Good. Good. We're all getting this one. Happy to see this. Alright. And what we have here is we have to adhere with ethical standards and rules regardless of Shifty's wishes. So, unfortunately, even though in the world, a lot of times, you know, there's this customer's always right aspect of things, we have to protect ourselves as practitioners and make sure that we are following ethics and not being pressured by clients to do things that, you know, go against the ethics that we're supposed to follow. So let's talk about this return that was prepared. Has he actually filed a proper return? Have things been omitted? Are there things claimed that shouldn't have been? Are there questionable items? So let's, you know, back up and look at each one of these questions. Has he file prepared a proper return? Well, he filed a return, but is it proper? Probably not because we've got omission errors. He left the w two income out. Are there things claimed that shouldn't have been? We've got these kids that are the nieces and nephews that really don't live with them. So we've got some issues with things being claimed that should not have been either. Are there questionable items? There are, you know, there's the issue with the w two. There's the kids. I mean, there's a couple questionable things here. But what is a little bit frightening with this is these are the things that the IRS looks at as potential badges of fraud. So some of the badges of fraud are if the taxpayer omits a specific item while other similar ones are included. Leaving off entire income sources, that's an issue that we have here. We've left off all the w two income. Now we've got a scenario where we've got Shifty and Blameless living with one w two that's not claimed, and they're supporting four children plus themselves. How can we explain their lifestyle? They are they have no income coming in and a bunch of dependents. Also, if you're dealing with resolution cases or having to provide financials with taxpayer concealing bank accounts, having multiple sets of records. So if your taxpayer, you know, is keeping, you know, books that aren't contemporaneous with their QuickBooks, that could potentially be an issue for them, including questionable items. Those kids are definitely a questionable item in this case. Failure to file returns for multiple years when the taxpayer has income. This is something that the IRS with some of the new employees that are coming in. This is an area that they are starting to really look at is taxpayers who have failed to file for many years and have income income. So if you are in the realm of representation or if you have taxpayers where you have eighty eight twenty ones or power of attorneys out that you get notices and they haven't filed in a number of years, the IRS is, you know, reaching out to a bunch of people, especially people that are higher income over the $400,000. And that's something that's going to be happening, for a good time now. They're trying to, you know, deal with some of that tax gap issues. If the taxpayer is cashing checks at other banks besides their bank that they normally work with or using check cashing services. So they, you know, in that case, if they're not putting it in the bank or using the bank that they normally do, The IRS is looking you know, they potentially have other sources of income out there that may not have been reported. Or if they're claiming fake deductions, we've got those kids in Shifty's case, or if there's false entries. So the IRS has its own badges of fraud, and that's what we looked at. And the tax court also has it has badges of fraud. Some of them are similar, like keeping double sets of records, so that's that having more than one set of books, making false entries or alterations, false invoices or documentation, destroying books or records, concealing income or assets, and failing to cooperate with authorities are some of the tax court badges of fraud. Now just be aware if you step back and you look at these, a lot of these have to do with either not producing the information or giving, fake records or providing things incorrectly to the court. Whereas the IRS badges of fraud are a little bit more lenient. They're more, they're not so much based on a physic on so much the actions of the taxpayer, but some things that may be perceived versus what is actually happening. Also, more tax court badges of fraud providing face fake doc or false documentation, false testimony, or offering implausible or inconsistent explanation. So there are a few of these issues going on as well with Shifty's case. So let's talk about due diligence, and this is in the circular two thirty and ten twenty two. We have the due diligence as to accuracy. So when we are preparing returns or approving or filing tax returns or documents or affidavits to the IRS, we're supposed to follow the rules of deal due diligence. So we're supposed to determine that the things that we are providing them, whether they be verbal or written, are correct. And the cool thing with due diligence is if you are overseeing other people in your office, you can rely on their work product. If you prepared, if you have engaged them and supervised them, train them, and also evaluate them. So if you're kind of monitoring and, overseeing other people who prepare things that you're signing off on, your their due your due diligence, does expand over that. So in our case, where due diligent kind of fell apart for malpractices, in reality, he didn't prepare the returns with care because he disregarded fundamental tax rules. And he knew what he did was not correct because he sat and kind of did it, but so he ultimately willfully took these improper actions to keep Shifty happy. And it could be said that he recklessly prepared the returns. So let's look at our standards for tax preparation and these are in Circular two thirty and they're in ten thirty four. When it comes to tax returns, documents, affidavits, and other paperwork, we can't willfully, recklessly, or through incompetence sign a return, which he did, or claim for refund where the practitioner should have known it contained a position that lacks reasonable basis or is unreasonable position without substantial authority. And we're gonna talk about substantial authority in a few moments and also reasonable basis. And, also, we can, you know, deal with the fact that there was a willful attempt to understate the liability and disregard the rules. In our case, Shifty didn't want to claim his income. So malpractice basically said, hey. You know what? That's fine. I'll file the return the way that you want. And we can't advise a client to take these positions either. So if they're looking at taking something improper, we have to be the ones to advise them, hey. That's not what you should do. This is the rules behind it. This is the position that you should be taking. No positions on documents, papers, or affidavits that are frivolous, so that's that unconstitutional issue that shift you raised, or done to delay or impede the IRS. So there's four standards of review. We talked, in that last section, one of the ones that was brought up was substantial authority. So the basis of substantial authority is the laws and the facts are applied to the circumstances. And the authorities so the so the laws and the rules and the cases and things that have come before have been reviewed for the things that are are in the taxpayer's favor and the things that are against. And there's a good position, but it's not as strong as an over 50%. So, basically, in this case, you have to look at, you know, the laws and the rules and the facts, weigh them, and then if there's, you know, a decent chance of something working, but it's not over 50%, you can take that position. Now reasonable basis for disclosure purposes is that a law may possibly apply, and it's more than an arguable position. And then there are frivolous positions, which are completely contrary to the law and contrary to the court disreminations. And there is a more likely than not position sometimes that we have to take, and that's where there is an over 50% chance of approval. And this one's not so much on our tax prep stuff, but more or less when it pertains to items that deal with tax shelter. So most of the time we're dealing with that substantial authority. So do you think malpractice met the standards of substantial authority? And this is our poll number three, and our options are yes or no. Alright. I see your answers coming in. That's great. That's great. Most of the people are getting it here. Alright. Awesome job, everyone. Okay. So here, I in this position, I do not see where he met substantial authority, and we're gonna go through why he did need substantial authority. So one of the things with substantial authority is you have to look at the law and the facts and the circumstances. So let's do that for some of these positions. So if you look under the US code under section 61, it talks about gross income. And gross income under a one is compensation for services including fees, commissions, fringe benefits, and similar items. So based off the situation with Shifty, he was being compensated for his services. He just didn't wanna pay tax on it because he said he was being paid in cash for where he was working. Now the other position on the return that's an issue is the dependents. So if we look at one fifty two in the code, dependents have to meet a relationship test. So that's we're okay with because Shifty Shifty and Blameless were claiming their kids, and then we also have a niece nephew relationship with the other kids. But then this is where it gets a little rocky. They have to reside with the taxpayer more than half a year. Shifty and Blameless's kids do, but not the niece and the nephew. And they have to meet the requirements, and they also have to meet the support test. So who was supporting the niece and the nephew? These guys should not have been included on the return at all. And you have and what should have happened is malpractice should have looked at the code, looked at the authorities that are for the positions he took, seen if there were ones against the positions that he took, which clearly based off the law, he took two bad positions. And if there was a strong argument for him to take the positions that they are, but not over fifth not necessarily over 50%, he could have. But given the situation, we've got two absolutely contrary to law positions that he's taken here. So let's talk about these bad choices that he made. Now we're dealing with potentially a bad tax return. So there may be some preparer penalty exposure. So if we look at sixty six ninety four a, we've got an understatement due to an unreasonable position. So this is when a preparer prepares a return or claim for refund, which any part of the understatement, including a position which they knew or should have known, was an unreasonable position, so lacking substantial authority. So by taking these positions that are completely contrary to the law in regards to the gross income, and also, you know, not having the substantial authority for the niece and the nephew. He's got a little bit of exposure here. There is an exposure potentially for a penalty of the greater of a thousand dollars or half of the money that he made from preparing the return. Now how bad were malpractices actions? So that's the act that's the preparer penalty when, you know, a bad decision is made. But if there's also with that this willful and reckless aspect in what the preparer did, the penalties are significantly increased. They go up to fifth, $5,000 or 75% of the revenue that they got from repairing the return. And willful or reckless conduct is conduct by a tax preparer which willfully attempts to understate the liability or reckless intentional disregard of the rules. We've got a situation where Shifty has put him in a position where he's done a return to understate the liability willfully, and he disregarded the rules behind income and some of the ones behind claiming the kids. So even if, bail practice had Shifty come in and, you know, tell him what he wanted to do, and he didn't prepare the return but guided Shifty too, for example. He could still have a prepare related penalty for that too. And that's regarding aiding and abetting the understatement of liability. So even if Shifty came in and malpractice said, yeah. Sure. You're right, but I'm not gonna do your return. He could have exposure. So these are any person who aids and assists in or advise with respect to the preparation or presentation of a portion of return, affidavit, or claim for other document, which is used in connection with revenue laws that the person knows it will result in the understatement of the liability could be subject to a thousand dollar penalty. So even if Shifty or if malpractice just agreed with Shifty and sent him on his way, he could still be subject to a penalty. That's why it's important that we as practitioners, if we're put in this position where a taxpayer wants to take a contrary, a a contrary stance to law, that we let them know what is right and what is wrong and, you know, guide them to do the proper thing. And if they don't, at least we've informed them what they should have done. Some other other areas where there might be potential exposure, and we are dealing with criminal aspects. So these are the 72 sevens. If there was a fraudulent return statement or other document. So if a person willfully delivers and discloses the IRS any list account or document that is fraudulent or false could be subject to a fine of $10,000 or a year in prison. So that's something that could potentially be looked at and in order to better understand this, we have to look at fraudulent and false statement. So these are things that are signed under the penalties of perjury. Now for those of you who prepare taxes, what's down at the bottom of the first page of your ten forty? Under the penalties of perjury, I declare. So Shifty potentially has exposure to this 72.06 penalty by signing the return. And also this 72.06 isn't just for the person who signs, It's for all it has that aspect of aiding and assisting. So the preparer can also get stuck into this, this scenario because of the fraudulent return aspect of it. And this also applies to a few other things, fraudulent bonds, permits, and entries or removal or concealment of you know, this is gonna be more or less with resolution, hiding assets with the intent to defraud the government or concealing property, withholding, or destroying records, and these have hefty hefty fines. It's up to 25 or 250,000 and potentially three years in prison. And the difference with these is the prior ones were misdemeanor. This one is a felony. So other issues with the return. We've got this aspect of sharing the wealth. So Shifty is, you know, acting like a great guy. He's offering to share part of his refund. Then malpractice comes in and deposits it into the business bank account. Are there potential issues or exposure from these actions? So just on a side note, the IRS releases dirty dozen dozen, things that, you know, practitioners should be looking for, taxpayers should be looking for. And one of the things under unscrupulous preparers is they're charging fees based on the size of the refund, which in this case was Shifty's suggestion, not malpractices. And the also, if the taxpayer is unwilling to sign, they, you know, these might be like a ghost preparer, So they warn taxpayers out there to be be aware that these are people are out there and that you shouldn't sign a blank or an incomplete return. But let's get into Circular two thirty. There's a few aspects, that kinda come into play here. First off, under ten thirty one, 10 practitioners aren't supposed to negotiate any checks or refunds even whether it be through actually getting the refund on behalf of the client or electronically depositing it, in, you know, with ask with an aspect, you know, with further federal federal refunds. And to give this teeth, we have another $66.95 penalty, and it's for negotiation of the check. Any preparer who endorses or negotiates, whether it be directly or through an agent, any check made with respect to taxes imposed imposed, imposes issued to the taxpayers, may be subject to a $635 fine, and there's no limitation on that. So just be aware, you know, even if your if even if your tax return tells you, you know, take my fees out of the direct deposit, you don't wanna do that. So we've got some other exposure here. Under ten twenty seven in Circular two thirty, there's this there's an aspect on contingency fees. So practitioners aren't supposed to charge contingencies fees except for in very limited situations. So if there's an audit of an original return or an amendment or claim for refund or abatement of penalties or if there's a judicial approved proceeding. So a contingency fee is, if a certain action happens, your fee is gonna be based upon this. So for instance, if you're looking at an abatement case, you know, if the IRS abates the $10,000 penalty, we will take 10%. That might be a contingencies contingency fees scenario. Where in here, we have a contingency fee basically set up. If malpractice gets back the additional child tax credit for the two kids, Shifty is going to give him 50%. So there was a contingency fee aspect to this, and it's also in regards to preparing a tax return. So there should that shouldn't have been done. In addition, what about the $88.79 form? There are some potential issues there. We don't have blameless actually, Shifty's wife coming in and signing. We also don't have knowledge if there's tacit consent, and I'm gonna talk about tacit consent in a moment. And on top of it, what happened? Male practice said here, sign the eighty eight seventy nine, and when you come well, then come back and pick up your return. So he didn't give a shifty a copy of the completed return when he signed the eighty eight seventy nine. So if you've never heard of TASK that consent, it's in the IRM. And these are this is kind of like a silent approval between two taxpayers that are married that one can sign on behalf of the other. Now this is based off of things that they've done in the past and things that are included on the return is kind of what the IRS might look at in these tasks that consent things. So if the spouse was required to file, in this case, she wasn't. If they've filed jointly in the past, did the spouse provide, you know, their income information? Did the spouse get benefits? Were there other signatures in the past in the same manner where they would file jointly and she had signed, but it's just not this time? Are there gains or losses, or is there any other reason that they must file jointly like a divorce decree or immigration? So this is basically that silent approval and what's gonna happen is they look at, you know, kind of the history of things that have gone on. Now with malpractice, this isn't a situation where they've been coming to mal practice for years. He knows both of them, and, you know, this is what they you know, he understands or has talked to Blaine Lesch and she said, you know, it's okay if Shifty signs for me. There's no no knowledge of that. And then on top of it, we didn't give the return when they signed. So here's another $66.95 penalty that we're exposure exposed to failure to fire to furnish a copy of of the return. And this is supposed to be given to them at the time that they are signing the return, or before they sign the return. And this is based on, you know, sixty one zero seven a gives is the law and sixty six ninety five a gives the penalty of the teeth to, you know, charge the taxpayer up to or charge the practitioner $60 fine per instance. And these ones are capped at $331,500. So do you think malpractice should have allowed Shifty to sign for blameless? Got a yes, no question here. Alright. Everybody answer your polls. See the answers coming in. This is great. Great. You're all getting it. Alright. Awesome. Okay. In this scenario, especially with malpractice not knowing or meeting with Blame Lesh or having any of the background, he really should not have left Sifties sign for his wife. And that's gonna come into play in a little bit. So the big thing that we looked at here kind of was those preparation pitfalls of those $66.95 penalties. So if you're preparing returns, be aware that you have to provide a copy at the time that the taxpayer signs. You have to sign the return. You have to include your PTIN, and you also have to keep either copies of returns or a list of the of the taxpayers in the returns that you've prepared, for three years. If they're make sure that you're, you know, filing correct information information returns. So it's not just necessarily the income tax returns, it's also your ten ninety nines and things. And the bigger penalties, watch out for the negotiation of taxpayer refund checks and also do your due diligence with the child tax credit, American opportunity credit, head of household, and earned income tax credit. So let's get back into the story. So months after mister Shifty and miss Blameless was return was filed, Shifty comes stomping in the door with an IRS notice in his hand. What did you go do wrong? I gave you everything. Why are they charging me money? He exclaimed. Malpractice read the letter from the IRS. It was a CP 2,000 filled with adjustments. The IRS removed the dependency of the niece and the nephew, added the wages, and removed a portion of the child tax credits relating to the niece and the nephew. For those of you who are, you know, I'm just gonna do a stop aside from the story. If you've never got gotten the CP 2,000, this is an, a correspondence audit form that the IRS sends out because they check the tax returns against their records, their wage and income records. And if they find discrepancies, they will issue a CP 2,000 to make a correction, and it's basically an audit that's been opened on Shifty in this case. So Shifty watched intently as malpractice read the notice. As soon as malpractice looked up, Shifty started yelling, you better fix this. You tell the IRS that w two is garbage, and I'm not paying tax on that. And what right do they have to take away my credits? I prepared this letter to the IRS and I, about what I think about that extra tax. It'll help you answer the IRS, but I think it's better coming from my CPA. So let's look at Shifty's letter here. Dear IRS, as an American, I ain't paying no taxes. I don't say see nothing in the constitution of this United States about paying taxes. My CPA malpractice said I was right too. I followed his advice. The w two for my cash wages shouldn't have been sent to me at all. I told my employer not to send me no more of those. Mister lion shifty. That's a great letter, isn't it? Alright. Malpractice stuck out his hand to shake with Shifty. Fine. I guess you're right in the I have this all under control for you. He walked Shifty out the door, went back to his desk, and drafted a response to the IRS. He based his letter on Shifty's response. He wrote his client has a firm belief that he does not have to pay taxes. After reading the rules on dependency, he realized maybe Shifty should not have claimed his sister kids, but in good business the customer is always right. So let's take a look at this this understatement issue, so this audit issue. So the IRS issues those CP 2,000 letters with proposed changes to the returns. The two issues that we're dealing with here is did Shifty Shifty didn't have the right to claim his sister's kids, and the w two income shouldn't have been taxed. And, unfortunately, as far as the kids go, right now, malpractice, after the fact, is looking to see if there's substantial authority, and he's still taking the position against what is there when it comes to those kids. Now would you have submitted that gem of a letter that Shifty prepared? We got a yes or no here. I'm hoping everybody gets this one right. Looks like you guys are doing great. Alright. Alright. I'm glad you're getting it. So let's take a minute and talk about that, you know, letter that Shifty put together. So the basis of Shifty's letter is, in fact, a frivolous argument. So on top of exposure for a $5,000 fine for taking a frivolous position on the return, now you have a secondary document where you are making claims about the constitutionality of wages and putting together more frivolous arguments. So there is exposure to potentially another $5,000 penalty under $67.00 2. So definitely, this should not have, you know, sent out that letter, but, you know, malpractice is just digging a hole and we'll see we'll see how much further he's gonna dig. So now we've got a request for proof. In response to the letter, the IRS requested proof that the children reside with Shifty. Malpractice called him. Do you have records showing your sister's kids live with you? Shifty responded, just try telling them at the IRS. They have no, they have no right to nothing dealing with those kids. But a buddy of mine works at the kids school in the office. He can get me a letterhead so I can make a letter they live with me. So malpractice follows Shifty's wishes asserting client privilege. Now there's more trouble. A little over a month later, a livid Shifty called malpractice. You are my CPA. You're supposed to deal with the IRS. They sent an a letter again with the same garbage and they want money, Shifty exclaimed. Malpractice sit back sat back listening while Shifty continued to yell. After five minutes, Shifty calmed enough for malpractice to speak. He recommended Shifty email over the notice so he could view it and respond. Malpractice opened the email. It included a CP thirty two nineteen notice of deficiency from the IRS. Malpractice reviewed the form. The IRS didn't make any changes from the CP 2,000 request. No wonder Shifty is mad, Malpractice thought to himself. I'm not sure what I can do with this, but I'll keep trying for him. After reading the notice a few times, he decided I have a great idea. I'll prepare and sign this tax court petition form. How hard can it be? After a lot of confusion on how the form gets filled up, he decided that he needed some help. Malpractice remembered he had a friend who was an attorney. He informed Shifty of his plan to bring in help from and called the attorney. The attorney, miss Disreputable, informed malpractice, just so you know, I didn't retire from law. I got disbarred. Nobody wants to work with me anymore. He told her, it doesn't matter to me as long as we can get the IRS to leave Shifty alone. Miss Disreputable studied the letters malpractice prepared. She said, I don't know taxes, but I agree with your argument that cash wages shouldn't be taxed. Everyone earns cash under the table. Why does the government need to know? I'll help you, but only if you can pay me with cash. Malpractice dug cash from his wallet and prepared the tax court and she prepared the tax court petition. She signed his counsel and told Malpractice to sign as the practice or the petitioner and send a copy of his power of attorney with it. Disreputable contacted Shifty to bring all his tax documents again. She told him, this is in case the IRS asked for anything during tax court. She reviewed the evidence Shifty provided for the case. At her instruction, he gave all of her originals to her. She turned the documents over to malpractice as the two prepared for trial. So after taking a lot of bad actions, malpractice finally did a couple things right here. So first off, if we look at Circular two thirty and ten thirty five, there's this aspect of competence. So a practitioner either has to possess the necessary competence to engage in practice before the IRS, and competence requires the appropriate knowledge, level of skill, thoroughness, and preparation for what the practitioner is engaged to do. Now just like, you know, all the changes and everything that's out there, the IRS realizes that we don't know everything as practitioners, neither do any of their staff. Nobody knows everything. So they built into here an aspect for us to be able to become competent. So practitioners can become competent by doing various things. They can do studying, like CPE webinars, like you're doing, or consulting with experts to assist them with the matter. So in this case, malpractice consulted and brought in an expert. So he did something right there. And, also, Circular two thirty defines practice of law. So nothing in Circular two thirty should be construed as authorizing non bar members to practice law. So as a CPA, he can't, you know, pretend to be an attorney, sign as an attorney. And he didn't sign as the tax court petition as counsel. So he's good. He got two of them right. Right? But he made an oops on asking for help. And the reason being is he asked for assistance from a disbarred suspend or the disbarred attorney. So anyone who is disbarred, suspended, or in some cases, former IRS employees, there are limitations on what they can do. So as practitioners, we can't accept assistance from disbarred or suspended practitioners. So just be aware, if you are in an office and you're hiring in, a CPA or an e EA, make sure they're or an attorney, make sure that they are not disbarred or suspended or anything like that because we could potentially have this violation if, you know, they come in and lie to us. So always double check always double check people that have, you know, their, their designations. If there is a former IRS employee, who worked on the same case while they were working at the IRS, they can't do that. Or if they assist a person on a case where they worked on with a different issue within a year of leaving the IRS, they cannot do that either. And if they're working for, like, a big firm that is handling a case that they had previously worked on or had contact with when they were the IRS, they have that person has to be isolated from all the matters regarding that case. So let's talk about delay, and this is in Circular two thirty. It's in ten twenty three. We are supposed to prompt have a prompt disposition of pending matters. So we can't unreasonably delay matters before the IRS. Now let's take a step back. We've got positions on a return that's been audited, and we know the positions are incorrect. So should there really have been a tax court petition filed to argue that these positions are correct? They're not. We have frigul frivolous tax arguments in unreasonable positions. So what well, practice has done with this reputives this reputable's help is just delayed the inevitable case of Shifty having to pay tax on his income and not be able to claim those two kids. So do you think malpractice has delayed this case? You know my opinion, but I wanna know yours. Do you think it's a yes or a no? Alright. I think I got my own answer right this time. See a lot of you are you all have the same have the same feeling about, you know, him going to court. Alright. I'll give everybody a minute. Alright. So there's some more issues with this tax court petition. We're still taste, worst we still got malpractice taking the wrong stance. We've got this frivolous argument. Shifty keeps pushing on him, and malpractice is continuing to let him perpetuate it. Now the bad thing is with the IRS, the, you know, under sixty seven zero two, they have that ability to find $5,000. Now in order to keep these frivolous arguments out of the court, they take them very serious and the penalties are extremely increased. So under sixty six seventy three a for tax court proceedings, if it appears to the court that the proceedings were started or continued with the basis to delay or the taxpayers got a position that's frivolous or groundless and the taxpayer refute or the taxpayer unreasonably failed to pursue administrative remedies, the tax court can impose a $25,000 fine. Now the administrative remedies, if you're dealing with audits or dealing with resolution, it's important to look at that aspect too. Our goal and the IRS's goal on their their end too is to try and deal with whatever the issue is at the lowest level possible. And we have to kind of go up the ladder as we're dealing with things and use what other whatever administrative levels are there. So if you've got an audit and you don't agree with the auditor, talk to the auditor's manager. Look at any any ways to appeal with your when they issue the thirty day letter or the CP 2,000 if you don't agree. Or if you're dealing with a collection case, if you're dealing with a revenue officer, you know, go to the manager, work your way through the IRS system before you jump the gun, ignore the issue, and go right to tax court. So now we got the judge involved. Malpractice received a letter address from the court. He excitedly opened it, hoping the judge approved the removal of the tax for Shifty. Instead, it was an unpleasant surprise. The judge sent a letter penalizing malpractice 25,000 for making frivolous arguments and using the and using the court case to delay the IRS from assessing the tax. Malpractice called disreputable and read the letter to her. She told them, the penalty is real. So now we've got a situation where Shifty's arguments have caused, you know, malpractice to get penalized. So the response to Shifty, a few days later, Shifty called angry as ever. He received a response letter from IRS chief counsel. It stated that the petition is being used to delay assessment and is founded on the frivolous argument that tax that cash wages are not subject to taxes. It also requested the judge discharge the case. Besides the IRS response, a letter came from the judge penalizing Shifty and Blameless for the frivolous argument too. Shifty was irate on the phone. I'm gonna make you pay the fine and the money the IRS wants. If you don't, I'll report you to every government organization out there. In fear, malpractice tried to reason with Shifty telling them, I owe the same penalty too. Let's not be hazy and start calling everyone. I'm not gonna pay it, but I'll try to deal with it as long as you don't report me. Shifty agreed reluctantly. Months later, Shifty received an IRS notice showing additional taxes due. That malpractice is a big fat liar, he thought to himself. I'll show him. He paused and smiled an evil grin. He grabbed his phone, searched the IRS website, and discovered how he could report a bad preparer and found that he could fill out papers as a whistleblower, then the IRS might give him reward money too. Oh, I see if he's a great guy. Right? So let's look at what can happen from Shifty's whistleblowing actions. So these type complaints expose malpractice to the Office of Professional Responsibility or OPR. Malpractice in this case has made a handful of mistakes, and we've looked at throughout the process places where he's exposed himself to prepare penalties by not following the Circular two thirty ethics. So what's gonna happen is if OPR picks up this case where Shifty Whistleblue, they're gonna investigate, and they're gonna determine if they're gonna pursue it. And they can either look at doing certain things. They can look at doing proceedings to sanction. So saying so the censure so they can do sanctions, which are censoring, suspending, or disbarring. So, a censure is just a public reprimand. You know, it goes out. It's public. The people can see that, you know, malpractice was since, censored by OPR. He can be suspended, which is a short term period that he can't practice, or he can be disbarred, which is a long term ban, against practice. And there's potentially monetary penalties. And in lieu of a sense sensor censure or suspension or disbarment, they can also potentially, look at criminal referrals too. And so he's opened up a huge can of worms if OPR picks this case up. Now we got another plot twist coming, everyone. Meanwhile, after the after getting the mail and finding an IRS letter, Blameless asks Shifty what was what is going on. He instructed her that I have it under control. Hearing those words alarmed her. After digging in Shifty's office, she found a copy of the tax return. She decided to visit malpractice to ask him what happened and why her name is on an IRS letter. She explained to malpractice, I'm a stay at home mom. I don't work. Shifty controls all the family finances since he has the job. He gives me a credit card to charge the groceries and necessary things for the kids. Besides packing his lunch and watching him leave for work each day, I have no idea what shift he does or earns at work, he keeps that all to himself. In discussing the problems with malpractice, she remembered watching a TV commercial which led her to read an IRS booklet on innocent spouse. Blameless started weekly. Hey. I have an I have an idea. I'm not sure if it will work. And if my husband ever found out, he would be so mad. She proceeded to ask about her eligibility for innocent spouse. After googling, malpractice decided it may be a good option. She seemed to meet the requirements. He agreed to secretly prepare and submit the innocent spouse claim for her. Now if you've ever done an innocent spouse claim, as soon as the IRS processes it, this is what happens. They send a they let the other spouse know that there was an innocent spouse claim filed. So with his power of attorney, malpractice was notified by the IRS that they the IRS received and was processing blameless's innocent spouse claim. He also got another letter which was a cause for concern. The IRS sent a letter to Shifty to provide a response to the innocent spouse request. Later that afternoon, a fuming Shifty stomped into his office and started to scream. Why did you help my wife betray me by filling out papers against me, and what gave you the right? You are my CPA. We are through. Give me all my papers. I'm taking them to my lawyer. Recognizing that he may be in trouble if the lawyer got involved, malpractice gathers his courage to say, no way. I'm not giving you a back a stitch of your paperwork. I'm holding it for good. All the letters, notices, and even your original w two. Too bad. I'm done being threatened. Good for malpractice standing up for himself, but there might be some problems with that too. So first off, was there a problem with him representing Blaine Loesch? And we have to look back to Circular two thirty for this. Under ten twenty nine, there's conflict of interest. So as a practitioner, we can't represent, if the represent is representation is gonna cause a conflicting interest. So conflicting interests are when one thing you when one thing you do to help another one party hurts the other one, or if there's limitations on what you can do to assist the parties because there is that other person involved, Or even if there is an aspect where we believe that there might be a conflict of interest arising or a or a situation where the representation is prohibited by law. If we find that there's a scenario where there may be conflict of interest, we can potentially still represent if we can get consent from everybody. So within thirty days of finding the actual conflict or a potential conflict, we have to get a waiver signed by all parties involved and that they agree to the same plan together and that they understand what is going on. So for instance, if you're dealing with a, you know, a another scenario is if you've got employers that owe, payroll taxes And the IRS is looking at one owner, and they're looking at the they're looking at two different owners. And the first owner is definitely guilty. He signed the checks and but the second person had nothing to do with the office work. You might have a scenario if you try representing them. The person not doing the office work has the right to kind of throw the other person under the table. But if the person who did the office work agrees to take the fall and everybody's kind of on the same plan, they sign the waiver, you could potentially look at having a conflict of interest waiver and representing both, but be very careful with those. So that big fat no we got from malpractice, can he actually keep all those records like he threatened? We have to look at Circular two thirty for that as well. Under ten twenty eight, we are required to return the taxpayers records that they need to, deal with their federal tax obligations. If there are fee risk disputes that doesn't waive the responsibility for us to have to return these, but if there's a contract and unpaid work product, so if you have a situation where the taxpayer signed that they're gonna pay you when they pick up their return, but they're refusing to pay you. We can hold the return that we prepared, but we have to give them their records in order to go forward with, you know, preparing their own return. Because of, like, that breach of contract aspect, we can keep keep our work product. So records are things that are either written or electronic and provided to the practitioner. They can be things that we've gotten during the process if we're representing the clients, things that we've gotten from the IRS, or things that existed before we started representing the client. So back to our story, we've got some more bad news going on. So months after malpractice and Shifty had a falling out, the mail carrier brought a certified, letter for signature. It was addressed to malpractice from the IRS Office of Professional Responsibility. He opened it stunned. Someone filed a complaint against him. As he read the letter, he started to shake and feel sick. I'm ruined. He trudged out of the office and began to cry. Malpractice reached out to Disreputable for help again. She read the document and instructed him he needed to prepare a response. They went through the list, item by item, denying the claims. While reviewing the letter, it dawned on Malpractice these problems all stem from Shifty's case. He had finally found the the piece of the puzzle that linked the allegations in the report. OPR responded to malpractice that he needed to provide the documentation to support his position that the claims in the complaint had no validity. With this reputable's guidance, he prepared a letter telling the LPR he has the records, but he did not feel it's in his best interest to comply with the request. The letter also stated, if you want the documents, IRS, you can send a summons. He thinks he's winning. Right? Now after all the trouble with the IRS, malpractice took it upon himself to do some marketing for the office. He put together a blog and a Facebook ad linking potential clients to it. The blog's headline read, IRS unlawfully attacks all citizens. Will you be their next victim? Without permission, he included Shifty's story, exposing his name and case information. He also ranted about the IRS and courts having a conspiracy to push him and his clients around by sending fines and OPR threats. I think malpractice is digging a little bit of a hole, don't you guys? Now let's go back to the innocent spouse situation. After the problem with Shifty's returns and OPR, finally, the mail had some good news. The IRS approved the innocent spouse claim for blameless. She was no longer required to pay the debts incurred by Shifty's bad acts. So let's talk about the Circular two thirty aspects between going on with this. So first off, as far as information goes, practitioners are required to respond to proper lawful request by the IRS unless we believe it is privileged. And our privilege as a CPA or an as a or an EA is nowhere near the privilege that an attorney has. And it there is not that confidentiality. And as far as anything being privileged, the the actual taxpayer has to deem that the records are privileged. It can't be anything that's used to prepare a return. And so these this privilege aspect of things, we have to submit what's in our possession, especially if we're a CPA in our or an attorney. And if we don't have the stuff, we're supposed to provide the IRS the name of the person who does have it. So in this situation, had Blameless not given or had, Disreputable not given the records to malpractice, he and he knew that she had them, he would have to tell the IRS, you have to go get them from disreputable. They also must provide the information regarding circular two thirty violations unless it is privileged. So in this case where we've got the suit circular two thirty violation and OPR is going after malpractice, he does have to include that information. And, ultimately, they have we cannot interfere with lawful IRS requests. So pro like I started saying a little bit earlier, privilege is a lot different for CPAs and EAs versus attorneys. When it comes to stuff that is privileged, it can't be information that is used to prepare the tax returns. So a taxpayer can't go into an audit and say, you know what? I'm not giving you any of my records that are privileged. It can't be used for anything that is tax advice unless it is something concerning a tax shelter. And if the IRS is looking at anything criminal, accountant privilege for CPAs and EAs completely goes out the door. So just be aware of that And just on a side note, if you are a practitioner and you're dealing with if you're a CPA or an EA and you're dealing with an audit where there's any aspects that might, you know, potentially go criminal, to protect your clients, get out of the situation and have them get an attorney. Because as a CPA or an EA, if we know information about it, we may have to potentially, be a witness for the IRS and testify against our client. And so the less we know, the better to protect our client. So if things don't smell right, sometimes it's better to bring to send the taxpayer to an attorney. Now we've also got this issue with solicitations. So malpractice, you know, after dealing with OPR, took it upon himself to, you know, go and tell them, go out and tell the world about everything that he experienced. So practitioners can't make public or private communications containing false, fraudulent, coercive, deceptive, or misleading statements or claims, cannot make oral solicitations if they violate federal tax law, and, any fees have to be, you know, advertised for fixed fee, fixed fee items, hourly rates, if you're using a range of fees or consultation fees, if those are advertised, those fees are kind of locked in place for thirty days since after the last ad. And you can't solicit to people after they tell you they don't wanna be solicited to anymore, and we also have to keep copies of our advertisements for three years from the last print or transmission. So if the you know, if it's of a TV ad, you have to keep a digital copy of it for three years. Now let's talk about this aspect of, you know, the ads and the flyers that malpractice was giving out. Those are strictly, you know, false claims. He's trying to scare people that the IRS is out there to get everybody. And on top of it, we've got another issue too with disclosure. He went out and he was, you know, sharing the information that was on Shifty's return and sharing the background and the story about Shifty's case. So under sixty seven thirteen, disclosure or use of information by preparers of return. Any preparer who discloses information furnished to them or in connection with the preparation of a return and uses the information for any purpose other than to prepare the return can be subject to a penalty of $250 per unauthorized disclosure or use of the information given to prepare the return. So we've got a case where Shifty's out there, you know, putting these flyer or sorry, mail practices out there putting these flyer with Shifty's tax information and Shifty's story, So we definitely have a potential exposure here for disclosure. Now there's also a criminal disclosure that we're gonna look at next, but there was a recent taxpayer advocates report, and it talked about, you know, where they look at criminal dispose disclosure, and very seldomly do they look towards criminal disco disclosure. It has to be very, very egregious. So, generally, what you're gonna be looking at is potentially a civil disclosure issue like we have here. But criminal comes into play when the taxpayer knowing or or when the practitioner knowingly and recklessly disclose information, by so any practitioner, you know, who prepares returns and discloses the return information, in a manner, besides for preparing returns as subject to the penalty. So, for instance, if this person, you know, for example, uploaded these tax the people's tax information on their Facebook or, you know, expose people's Social Security numbers. You know, where there's, you know, potentially, looking at a scenario that, you know, their identities can be stolen and fake returns can be filed under their names. So in these cases, it's a misdemeanor, but there's a fine of up to a thousand dollars and potential for a year in in prison. So this is why it's so very important for us as practitioners to protect our clients' data. And there's also an aspect, if it's not tax information, There is also a criminal disclosure relating to unauthorized disclosure of information by other persons. So it's unlawful for any person to whom the return information was disclosed to to print or publish it in a manner that's not provided by law. And these violations are a felony and subject to a fine of up to $5,000 and potentially five years in prison. So we've got kind of an egregious issue here, especially if, you know, malpractice was out there putting Shifty's name and social, and income information and story in in his marketing. There may be a criminal disclosure, So you just gotta kind of watch what we do as practitioners. So another problem that we potentially have here is incompetence or disreputable conduct. So let's take a look at Circular two thirty in section 10.51, is the definitions of incompetence and disreputable conduct, conduct. So if we, as a practitioner, are convicted of any criminal offense, especially if it is dealing with tax law, dishonesty, breach of trust, or a felony that renders us unfit to practice. In those cases, the IRS, office of professional responsibility can look at, you know, censure, disbarment, or suspension. The other thing is providing known false or misleading statements or information to the govern to government employees. This is a problem here with malpractice's case. He's providing false statements to the IRS and the government. Also, he's created misleading solicitations false solicitations. So we've got, unfortunately, some aspects of incompetence or disreputable conduct here. Failing to make tax returns or making one in violation of laws to avoid tax or participating in a way meant to avoid to evade tax being assessed or paid. That's an issue here in this case too. We've got this return that, you know, didn't include the w two with the intent to evade paying taxes on that income. And then, also, we continued to try and evade the tax being assessed by, you know, going in trying to file a tax court petition and fighting the audit. So there's some, you know, aspects of in as disreputable conduct there. Let's look at the next one. Assisting counseling or encouraging a client to violate or suggest to violate federal laws or suggesting an illegal plan. He's kinda been it wasn't him counseling or encouraging it, but he's been assisting Shifty and, you know, trying to violate federal tax law by making those frivolous claims. Failing to remit funds provided by the clients to pay the government. So make sure if your client leaves their checks or at your office to forward to the IRS, those are sent out right away because that's that's something that's important. Attempting to influence through through threat, false, accusions, duress, or bribery, disbarment or suspension from practice by any federal court or board. So if, you know, potentially, if an attorney is disbarred for by the Bar Association, are disbarred, they can also be disbarred, you know, through that as well. Knowingly work working with someone under suspension, disbarment, or ineligible. We've got that too. He's been working with this reputable who's been helping them all along. Let's keep going. We've got using abusive language, making false accusations, or publishing and circulating malicious or libelous information about the IRS. So how about that, you know, the IRS is out to get everybody. Let's look at Shifty's situation. It he's also, you know, exposed himself to incompetence because of that. Knowingly, recklessly, or incompetently giving false opinions or engaging in patterns of incompetence. Willfully failing to sign returns required by the IRS. Disclosure of taxpayer information or using a return in a matter not approved by the code. He used SHIPD's information in his solicitations, will fill file failure to file information returns, preparing and signing returns without a p 10, and representing a taxpayer without authorization. So, you know, another thing is, looking at sorry. Looking at false opinions or misstatements of facts or law, things that are, you know, unwarranted, illegal action. They're not following, you know, the the ordinary business care and prudence. These are the things where in order to be looked at for incompetence or disreputable conduct, there's gotta be a lot of times this willful, willful aspect of things. It's not just, you know, you make a mistake once and it slips your mind to sign a return. There's gotta be a pattern of these these issues showing that you know, incompetent actions. So some things OPR can do in this case, they can censure him. So that's basically just a public reprimand. And if they censure, that's gonna allow the taxpayer to continue practicing, but OPR is gonna keep an eye on them and make sure that they're following the rules and doing what they're supposed to do in the future. They can also look at suspending him. In that case, they're not able to practice during the length of their suspension, but once the suspension is lifted, they can go back into practicing. And they can also look at this barred. And in those cases, there's a minimum period of at least five years that he's unable to practice. And on top of any of these things, they can also include monetary penalties and fines. So there could also be those preparer penalties on top of one of these actions. So what do you think OPR should have done with malpractice? Should they have censured him, sanctioned him, disbarred him, or put him behind bars? See a bunch of answers coming in. Alright. Awesome. Awesome. Alright. Let's see what they did. So where are they now? Years after the issues with Shifty, Blameless decided she had enough. She moved away and started her own career. After seeing the IRS in action, she decided to get her EA and help people with tax issues, but not Shifty. She runs a successful practice and has plenty of free time to spend with her growing children. So good for her. After helping male practice, miss Disreputable decided she still loved the law. Determined to do things right, she stopped dabbling and went back to studying. In her spare time, she wrote a self help book about mending your ways and becoming a better professional under the pen name of Miss Reputable. It earned a position in Oprah's book club. After a decade of waiting, she was approved for reinstatement as an attorney. After years of litigation, malpractice was found guilty of criminal fraud relating to the return he prepared for Shifty. After having so much blatant disregard for the federal tax law, he was sentenced to the maximum three years in prison along with hundreds of thousands in restitution. He is serving his term and hopes to be out on good behavior. Things aren't all bad. He made friends with the former FTX founder, Sam Bankman Fried, who is serving time on, over his cryptocurrency fraud case. They trade investment cases or investment tips. So with piles of debt from his IRS issues, Shifty traded in his fedora for a more appropriate hat, a clown one. In an effort to make some extra money, he works at a local circus show. He's still looking for another representative to help him with his tax issue after getting malpractice in a heap of trouble. Practitioners beware. If you hear the honking nose on the phone or someone tries to pay their fee in balloon animals, it might be shifty. So the moral of the story that I want everybody to take out of here, I know we had some fun with this and I know this is a very serious topic for the most part, but, you know, we we had to play with it and and, you know, get some joy out of it. But the moral of the story is don't follow the rules. Don't let any clown point clients push you into doing something that are unethical. So we got some key takeaways here. As practitioners, we need to adhere to the Circular two thirty rules. Circular two thirty violations can lead to practitioner penalties or reprimand. Like, we've seen the pattern through the case, every time we looked at Circular two thirty, a lot of times there were items in the code that gave teeth to penalize for not following those through circular two thirty. And punishments for practitioners are often stricter than for the taxpayer. And, you know, trust your gut. Don't let your clients put you in a don't let a client put you in a bad position. It is much better if there's something that doesn't smell right to say, I'm sorry. I can't help you with that. But, you know, the and recommend, you know, another route for them or give them the right advice of what they should be doing. And if they do not want to do that, send them on their way. Don't risk your licenses for a bad bad actor. So here we've got a survey for you. It's it is, optional. It's gonna show up over in your chat. If you would like to give us some feedback with your experience with this course, we'd love to hear, you know, your thoughts on it. And if you're looking at taking other courses, we have an education resource center here, for, you know, product information, leadership training, industry news, and a bunch of, you know, great things, webinars, conferences, and important articles. And also, Tax Pro Center with some articles on what's trending in the accounting industry and the tax industry. And there's also an Intuit support community for accountants. You can get answers on your tax product questions from the Intuit accountants, and you can access and search directly through the program guides and resources. And you can explore the community with, of your, you know, post your products and workflow recommendations, you know, connect with experts on tax professionals like you. And, the links are don't work in the in the presentation here, but you should have a PowerPoint in your documentation if you wanted to look at any of those items for support or for further continuing education. And finally, I want to thank you for your time, as sitting here and spending the couple hours with me. I really hope you enjoyed the presentation. When I first started, you know, putting this together, you know, I it took quite a bit to, you know, bring in all the aspects I could of circular two thirty, but I think I tried to, you know, bring it in a fun way so that way if, you know, you know, if you do ever run into a shifty and have them walk into your office, you know what to do. But most importantly, just follow your gut and make those right ethical choices. And thank you so much, and everyone take care.