Hiring a CPA is supposed to bring peace of mind. After all, taxes are complicated, and many taxpayers (be they individuals or small business owners) turn to professionals for accuracy, compliance, and the chance to minimize liability legally.
But what happens when your CPA claims deductions you never made — or worse, outright falsifies information on your tax return? Unfortunately, this does happen, and it can put you in a difficult and risky situation.
Let’s walk through what this means, how to protect yourself, and what steps you can take if you find yourself in this situation.
Red Flags in Tax Preparation
Here are some signs that a tax preparer may be engaging in questionable or fraudulent practices:
- Unexplained deductions: Reporting charitable contributions, mortgage interest, or business expenses you never claimed.
- Promising unusually large refunds: If it seems too good to be true, it probably is.
- Filing without review: You should always see your completed Form 1040 before it’s submitted to the IRS.
- Pressure to sign without explanation: Form 8879 (authorizing e-filing) must be signed knowingly and after reviewing your return.
In short: a reputable CPA or tax preparer will walk you through your return, explain line items, and make sure you understand and approve everything before submission.
Why This Matters: The Risks of False Deductions
Even if you didn’t know about the false deductions, you are legally responsible for the accuracy of your tax return once it’s signed and submitted. This means the risks include:
- IRS audits that may uncover discrepancies.
- Penalties and interest on underpaid taxes.
- Potential fraud allegations if the deductions appear intentional.
- Immigration concerns if you’re a foreign citizen working in the U.S.—tax fraud can have consequences beyond finances.
The Right Steps to Take
If you discover your CPA claimed false deductions:
- Stop working with that CPA
Never return to a tax preparer who falsifies information, even if they promise higher refunds. - Amend your return
File an amended return (Form 1040-X) with accurate information. This will correct the record and help you avoid penalties down the line. - Repay any excess refund
If you received a refund you weren’t entitled to, the IRS will expect repayment once your return is corrected. Paying it back proactively helps protect you. - Keep records
Document your communications with the CPA, your original return, and the amended return. This can protect you if questions arise later. - Consider reporting the CPA
You can report unethical or fraudulent preparers to the IRS using Form 14157 (Complaint: Tax Return Preparer). If the CPA is licensed, you may also file a complaint with their state licensing board. - Work with a trusted professional
Find a CPA or tax preparer who explains your return, encourages transparency, and aligns with professional ethics.
Should You Report the CPA?
Reporting a fraudulent CPA helps protect other taxpayers from falling into the same trap. However, it’s a personal decision. There’s no direct financial benefit to you, but it does uphold accountability in the profession.
Key Takeaways
- Always review your return before it’s filed.
- Never sign blindly: understand what Form 8879 or any authorization form means.
- You’re ultimately responsible for the information on your tax return.
- Correct mistakes quickly through an amended return to reduce risks and penalties
Tax season is stressful enough without worrying about unethical practices. If your CPA or preparer ever pressures you into signing or can’t clearly explain your return, take it as a red flag. At Huddleston Tax CPAs, we believe in transparency, accuracy, and compliance first because peace of mind comes from knowing your taxes are done right.
Need help amending a return or reviewing a questionable filing? Contact us at (425) 483-6600 to speak with a CPA who puts ethics first.