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socrateaser, Lawyer
Category: Tax
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Experience:  Retired (mostly)
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What happens in the case of an IRS audit of a client serviced

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What happens in the case of an IRS audit of a client serviced by a public accountant, where the managing tax partner/ return signer has forced the staff accountant to ignore undeductible expenses and otherwise assist him in preparing a questionable return? Can the IRS proceed against the staff involved, or does the responsiblity lie with the reviewers and signers of the return?
The IRS can extend liability to any person who knowingly aids a taxpayer in evading his or her tax obligations. IRC § 7201. The issue for the government is whether or not an individual acted with knowledge that the tax return contained false statements.

However, such cases must be proved beyond all reasonable doubt, and the IRS does not prosecute persons for criminal tax evasion without a very good case, because the cost of prosecution is very expensive, and it doesn't usually make sense to bring criminal charges, since the goal is to collect taxes, and convicted criminals do not pay much in taxes, because they can't work for a living while sitting in jail (and, they lose their license if they are a professional, etc.).

So, the answer is "yes," the IRS could proceed against the staff -- but, it's not very likely. Usually, proceeding against the taxpayer is sufficient.

Hope this helps.
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