Wednesday, November 20, 2013

PTIN Revoked Under Circular 230; CPA Hung Out To Dry

David O. Christensen, a CPA licensed in Oregon and Washington, sued a trust being administered by his
brother, on behalf of his minor daughter for whom he was guardian ad litem (guardian of his daughter’s property).  The daughter was a beneficiary of the trust and Christensen believed (correctly as it turned out) that the trust assets were being improperly administered.  He obtained a $90,000 settlement on behalf of his daughter.

The funds (less a charge by him of $15,000 for reimbursement of the costs associated with obtaining the settlement) were deposited into Christensen’s personal investment account (as opposed to an account for the benefit of his minor daughter) and he proceeded to both lose money in trading activity and disburse money to pay other people to perform accounting and recordkeeping (note that he was a CPA).

Within eighteen months, less than $24,000 of the original $90,000 was still in the account.  Christensen was sued and eventually accepted a guilty plea to one count of first degree theft.  Christensen’s CPA licenses were subsequently revoked in both states as a result of the conviction.

Now comes the IRS.  The return preparer office of the IRS revoked Christensen’s PTIN for disreputable conduct by claiming that all PTIN holders are subject to Circular 230 in its entirety. Christensen appeared before an Administrative Law Judge and argued that his theft conviction was a family related matter having nothing to do with his income tax preparation, and that he should be allowed to retain his PTIN.  The judge, however, ruled that he displayed a lack of integrity and found for the IRS.  Christensen was prohibited from any practice before the IRS for a period of five years.

It would appear to your Editor that the IRS has a very potent weapon in pulling someone’s PTIN – you are out of the income tax preparation business.  It isn’t even necessary to suspend or revoke your right to practice (i.e. as a result of state action against one’s CPA license).  Losing your PTIN will accomplish the same thing.

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