Long after April 15th, some taxpayers realize that they made a big mistake by not reporting certain income on the income tax return they filed. They then decide to participate in what is called the IRS Voluntary Disclosure Program. The program may seem unconventional but it is generally the right move in that the taxpayer will become tax compliant & have a greater chance of avoiding substantial civil penalties and eliminate the risk of criminal prosecution. Usually the next step for the taxpayer is to present an amended tax return. The question then arises, "Which tax preparer should I use to prepare the amended tax returns?" The original tax preparer, a new one, or a top tier CPA firm.
A New Tax Preparer
Even if you have developed a strong relationship with the original tax preparer, it is best to use a new, independent preparer for the amended return. If you retain the original tax preparer, there could potentially be a conflict of interest since the preparer filed an incomplete return in the first place and could be subject to IRS sanctions. When searching for a new tax preparer, make sure to: a) check the tax professional's references & b) confirm that the preparer has significant experience representing taxpayers facing similar IRS issues.
Top Tier CPA Firm Is Not Necessary
Top Tier CPA firms certainly have the technical and legal expertise, but they can be very expensive. Also, they are generally more geared towards very high-end corporate and individual taxpayers. If the tax liabilities are very significant in which millions of dollars as well as your liberty is at stake, then it may make sense to hire a top tier CPA firm to handle the matter.
Amended Return Increases Chances of Audit
All other things being equal, the chances of an amended return being audited are much higher; particularly if the additional liability is significant. The taxpayer should work closely with his or her new accountant to make sure that all the information is fully documented and in the proper format so that it will withstand the audit process, whether or not that comes to pass.
Negotiating Settlement
Once the additional liability has been calculated and penalties assessed, the taxpayer will have an opportunity to negotiate (directly or with the assistance of a professional) either a payment plan or an "Offer In Compromise" to fully satisfy the obligation. Please be aware that there are many tax settlement companies that offer these types of services & claim to reduce your tax debts to "pennies on the dollar." These are false claims and should not be trusted.
Ryan S. Himmel is the founder of BIDaWIZ - the online marketplace for trusted answers from licensed business professionals (i.e. CPAs, CFAs, CFPs & More).
Visit us at BIDaWIZ to ask tax questions and get reliable answers from licensed online tax experts that are CPAs.
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