CCA 1313029: IRS supports abating tax tied to a return preparer's theft

Plain-English summary

An IRS attorney addressed a case in which a return preparer filed a return showing less tax than the return shown to the taxpayer, obtained a refund, and kept part of the refund. After an audit, the IRS assessed the taxpayer for the remaining tax. The attorney said the situation was similar to another case involving a taxpayer defrauded by a return preparer. The attorney concluded that it was appropriate to abate the portion of the assessment attributable to the preparer's theft.

Ruling snapshot

• Question: May the IRS abate the part of a taxpayer's assessment attributable to a return preparer's theft of refund funds?
• Outcome: Advice given supporting abatement on the stated facts.
• Key authorities: IRC § 6404

Full text (IRS public release)

ID: CCA-541224-12 Number: 201313029
Release Date: 3/29/2013
Office:
UILC: 6404.00-00

From: -------------------
Sent: Friday, May 04, 2012 12:24 PM
To: ----------------------
Cc: -----------------
Subject: RE: 12-17-08 Office of Chief Counsel IRS MEMO

I am writing to memorialize a phone conversation we had a moment ago. Recently, during the course of
an audit, you discovered that a certain TP had more taxes due than was shown on his return filed with the
IRS. Upon investigation, you discovered that the TP's return preparer had shown the TP one return
detailing the correct amount of tax due, but then filed another return with the IRS showing less tax due
and entitling the TP to a refund. This refund went to an account owned or controlled by the return
preparer. The return preparer only paid approximately half this amount to the taxpayer. Following the
audit, the IRS assessed the TP the remaining tax. In a prior e-mail you asked me if this situation was
similar to that discussed in ----------------------------where a similarly situated TP was defrauded by his return
preparer. As we discussed, the cases are similar and your instinct to abate the portion of the assessment
against the TP that is attributable to the return preparer's theft of these funds is appropriate. -----------------

------------------------------- Thank you