Tax Law

New IRS Weapon: Tax Professionals


New IRS rules that hold accountants, lawyers and others who prepare tax returns more accountable for client errors are changing the way some practice and may be driving a wedge between client and professional.

Tax professionals now at least arguably have more accountability than their clients for filing a problematic return under a new law that took effect in May, and this means many are asking for more documentation from clients–as well as heftier fees, the Wall Street Journal (sub. req.) reports. As a result, some clients are deciding to file questionable returns themselves, rather than ask a tax pro to do so.

That has happened, for instance, to Claudia Hill, who owns a tax-services firm in Cupertino, California. Plus, a new issue has arisen: to avoid disclosure issues, one client has asked her to “consult” on, rather than “prepare” his tax return. And that means still more work for her: “I have to figure out at what point advice I give about a return becomes ‘return preparation,’ ” she tells the newspaper.

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