How liable is a CPA for your tax return?
 

If a CPA gives what you believe to be incorrect or bad advice (claiming poker winnings incorrectly or not at all) and signs off on your incorrect tax return. Are you still liable if audited? or does the CPA take full responsibility?

What if the CPA lied and said that they were never told of the poker winnings?

These are seriously just hypothetical questions, don't get your panties in a bunch. I want to know how protected I am if I hire a CPA.

Re: How liable is a CPA for your tax return?
 

To my best legal knowledge on the subject, which is not much, you are still liable for interest if the return is wrong (I am unsure about any penalties). However, if you acted in good faith, you aren't going to jail if you trust your CPA on (for example) something being deductible that isn't.

In the end, the CPA signs off on the return, so as long as the return is incorrect with his signature on it, he is the one that's stuck with the criminal liability (if any.) The exception is if you conspire with him to defraud the government or otherwise act in bad faith.

Re: How liable is a CPA for your tax return?
 

Generally speaking, you are still liable for whatever is on your return. Just becuause you hire a CPA, does not mean that you are in the clear. However, as long as you act in good faith, you should be fine.

Re: How liable is a CPA for your tax return?
 

yeah in general evidence of good faith efforts are enough.

"Sorry mr. auditor, i didn't know. my CPA told me this was correct. How much do I owe? I'll get my checkbook"

Re: How liable is a CPA for your tax return?
 

You are ultimately responsible for all $$$$ aspects of your tax return.

If there is underreporting it wholly falls on you.

So can penalties unless your CPA gave you written advice to the contrary, or you can creatively come up with other reasonable cause.

Your CPA can be hit with preparer penalties if he prepares the return incorrectly and worse if its a pattern.

My buddy in CID (IRS Criminal Investigative Division) tells me that in big cases, the IRS doesn't normally like to go after the CPA because they don't want to give the main party the defense of "I relied on my accountant" who is also being prosecuted.

Re: How liable is a CPA for your tax return?
 

Any idea if you are less likely to get audited with a CPA signature? Maybe more -EV for IRS to audit a return with a professional preparation?

Re: How liable is a CPA for your tax return?
 

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Any idea if you are less likely to get audited with a CPA signature? Maybe more -EV for IRS to audit a return with a professional preparation?

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No, they audit returns based on the return itself, not who signed or prepared it. Certain items cause bells and whistles. CPA's tend to know what these are and can give you advice on how they should be handled before you file the return. We tell our clients that even when they are filing correctly there is always the chance to get audited. That's why we constantly remind them to keep proof of everything they claim on their return.