While the vast majority of accountants are competent, there are more than a few bad apples.  If something fishy seems to be going on, i.e. the accountant’s story and the IRS notices don’t match, you may have a serious problem.  If so, seek a second opinion, an outside pair of eyes to look at your case.

Case study:  Taxpayer’s accountant was supposed to be handling his IRS examination, but wasn’t truthful and forthcoming about the case status.              

Self-employed taxpayer operates an investment advisory firm as an agent for a large insurance company.  He is categorized under a little known category called “statutory employee,” which allows deductions under Schedule C as if self-employed.  Taxpayer was audited by the IRS and the accountant told him he would handle the audit.  Taxpayer told Tom Ryder the Illinois Department of Revenue was threatening to file a lien against him, so he paid them to avoid a lien.  Being in the investment advisory business, a tax lien would be terrible for his business.  Tom Ryder said the accountant was not being forthcoming with regards to the status of his case.  He needed to act quickly to unwind the IRS adjustments and then obtain relief from Illinois. 

It turned out the taxpayer’s IRS audit was long over and the taxpayer had lost.  But the accountant hadn’t kept him accurately apprised regarding case status.  Perhaps the accountant was overwhelmed by the IRS examination.  But for whatever reason, it was obviously time to get a new accountant.  The taxpayer got a new accountant and submitted audit reconsideration documentation to reverse the IRS adjustments; this took several months.  The taxpayer then piggy-backed the IRS adjustments with Illinois Department of Revenue to obtain a refund.  The taxpayer reduced his taxes to the correct amount and gained peace of mind knowing the IRS examination was no longer hanging over his head.