[CPA Dex]

I keep the books for a guy who makes about $1 mil. We use Quickbooks Online. I don’t do his corporate or individual tax return because it’s too complicated. Anyway, the guy runs all kinds of business expenses through the company, which is fine because I assumed his CPA would somehow tax him on his return. The amount totaled over $150k of personal expenditures. Just today I ran a report that shows what type of journal entries his CPA made per the tax return. What I found was that she closed out the entire $150k of personal expenses into fake business expenses. For example, $20k in advertising, $15k in travel, $15k meals, etc. This is totally bogus and I know he is the type of guy that would ask her to do this to get out of paying taxes.

I feel obligated to contact the IRS, mainly because I don’t want him to bring me down as a knowledgeable party. He probably would because he is shady and looks out only for himself. He has shareholders, and this is stealing from the other shareholders.

Please give me your advice on what you would do if you were me. I know I will lose my job, even if I do this anonymously, he will know it was me. I don’t want to lose any chances in not getting my CPA license. Thanks!

[Texas27]

Talk to an attorney, seek their advice on what you should do about resigning with no liability. Document EVERYTHING so you have proof you were not involved. Find a new job!

BEC - Feb 2012: 80
AUD - Feb 2012: 84
FAR - Apr 2012: 78
REG - May 2012: 90

Thanks Becker!

[kmwgrace]

Also make sure you get an up-to-date letter from your current boss documenting your hours so if this does go badly, at least you have that. Especially if you've met the hours requirements for your state – you can use that. Tell your boss that since you've met the requirement, you want to have the letter ready to go once you pass the exam. I agree 100% with Texas, definitely talk to an attorney and make sure you are protected from culpability.

I'm guessing there's no one else in your firm that you can trust to talk to about this? HR or some sort of hotline? If there is, I'd do that too. Thanks to SOX there are laws protecting whistleblowers now.

~ Kate... MTX!
CPA exam on hold while I homeschool my 6 year old!

[SMUT_Co]

File a form 3949-A with the IRS

https://www.irs.gov/individuals/article/0,,id=106778,00.html

FAR: Done
REG: Done
AUD: Done
BEC: Done

[CPA Dex]

I'm a contractor. It's a small company. Less than 10 employees. I'm the only accountant, but I have an assistant that helps me. I'm sure I will lose him as a client.

[Anonymous]

I hope your boss doesn't look at this website because it took me 10 seconds to figure out who you are.

(Hint: Your personal info is all over your profile…)

[CPA Dex]

🙂 I thought of that. He doesn't. I don't really care if he did though. I'm just trying to figure out the best approach. Contact him, the IRS, or his CPA.

[Anonymous]

I'd file the IRS form (anonymously if you wish) and terminate the business relationship immediately on your end. If the fraud is as blatent you think it appears to be (ie beyond a reasonable doubt they are being commiting tax fraud), there's no reason to speak to either of them. If you ever get a subpeona, you can prove you reported it to the IRS and your 100% in the clear. Seeking legal advice wouldn't hurt either, just to make sure you have no liability in this situation (I'm almost positive you don't unless he tries to throw you under the bus). The CPA is signing the returns not you, so their butt is on the line. Worst case he claims you knew about it and were complicit in the crime.

[mparker1904]

First of all I would make sure it was fraudulent before reporting. Have you seen his actual tax return to determine that those expenses were actually taken and deducted from taxable income? I have plenty of clients that prefer to include their personal information in their books, but when we do their tax return it is backed out as a book/tax difference or put as a distribution if it is a partnership. I would look into it further before jumping the gun.

Also this is not on you. The CPA is the one that signs the return and makes the computations for the return. I wouldn't jump out of the scope of your project, which seems to just be bookkeeping. This is on the CPA, not you. All you are doing is summarizing his data and doing bank reconciliations. You aren't taking responsibility for the return or the data.

BEC 76
AUD 86
REG 78
FAR 76 DONE!

[ledgermaven]

I had a client like that but he did let me put all his personal expenses to personal draws. It's just that there were so many of them that made me uncomfortable…that it would void the corporate shield. He ended up going out of business as I was figuring out how to leave.

One option is that you first email his cpa with your concerns and ask if this is their intent, and why you have concerns with it. This establishes a paper (electronic) trail that you were on the ball and noticed there are discrenpencies. Their response will confirm or resolve your concerns, “Oh I thought these were legitimate expenses…”. At best they will refile the taxes with amendments and a small penalty,

If the CPA says don't worry yourself over it…check with the board of accountancy for your state regarding complaints re professional misconduct. At this point you have not implicated your boss – he can still be ‘innocent' and your job could remain intact while the cpa takes the fall. If your are prepared for what might be a fast exit or a fast save, email your boss with the results of your talk with the CPA, saying,you hold to a high standard of conduct, and are protective of his interests in not being later hit with large penalties and fines, you wanted to bring it to his attention right away.

If he and the CPA have been doing this for years it probably will continue and you can leave voluntarily before filing complaints, etc. But you will have documented your position in case of future investigations, showing you: 1) caught the problem 2) acted professionally and with integrity 3) disassociated yourself from them in the event they refused to change.

It's a lose/”win” for you. The other shareholders will be thankful.

Best of luck

[Anonymous]

Relax. YOU are not doing anything wrong. Contact the other CPA and ask questions with a “normal” tone like: “for my own education, why are these expenses been classified as business expenses? “shouldn’t this be personal expenses? etc.. You may not have the whole story, e.i: agreement with other partners to split expenses, what part of his expenses are legitimate buss ones. DO NOT jump into conclusions and lose your job, put a colleague CPA in jeopardy and deal with IRS if you do not have all the facts.

If you see a bill for 20K spent in a resort in AZ playing gold with friend, it may be business it may not. Meals with the same bunch of friends, it may be business it may not. BE CARFUL and be ready to justified your accusations. The OTHER shareholders may be including their “business expenses” in their returns as well. I am an auditor and I have seen A LOT. BE CAUTIOUS stay away from IRS and DO NOT create unnecessary problems you and them do not need. UNLESS you completely sure and HAVE all facts and documentation to prove your “suspicious” do not ACUSE anyone of this type of crime.

Moreover DO NOT spread it out in the internet. THAT could make you lose your license YOU OUGHT your client CONFIDENTIALITY .

My 2cents

[Anonymous]

Another thing to protect yourself is this.

Does the accounting software keep an audit trail of who is doing what?

If you are entering honest information (and it shows your user information) and it is HIM who is doing the dishonest stuff, print a copy of the user logs FOR YOUR OWN PROTECTION. If trouble is brewing, you will be able to produce the audit trail showing you are not the one doing the funny business.

Also, I would highly recommending sending a message to a moderator to delete this thread, as it is a violation of client confidentiality.

[CPA Dex]

Thanks for all the advice. I sent an e-mail to Jeff as soon as I initiated this post to delete the thread. I don't think I'm in violation of client confidentiality though. I have over 10 accounting clients and have not revealed who the client is on this thread. I think I will play dumb and start by asking the CPA questions about it. Like what Certified Public Accountant recommended.

I've been trying to get ahold of the 1120 since last week. This is when I first noticed the CPA's journal entries. He has yet to bring me the 1120. Once I check that out, I will at least know if my accusation is accurate or not. Thanks again!

[Author]

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