Taking a preparer to small claims court- Arizona

[wondergirl2]

Hello, I want to get some opinions before I file a small claims against a tax preparer in Arizona.After reviewing this man's website, his feedback on Thumbtack, and talking to him on the phone regarding my tax situation (working from home in one state, company in California), I 'hired' him to complete my taxes. I sent him all the requested papers- w2's, 1099's etc. I asked him if he needed receipts for anything and he told me no.

After a week or so, he texted me, needing info on my house, since I work out of my homeI gave him basic info. A few days later, he called and said he was ready to e-file. After about a minute on the phone he freaked out for no reason, hung up the phone, and when I tried to call him back he started yelling and losing his mind (literally, for no reason- I think he had a mental breakdown).

I was so appalled- I promptly stopped my Paypal payment, and that angered him more of course. This started a series of messages and arguments, which ultimately led to his filing my taxes without my consent- he just filed what he had completed and then said that he had done the job and we needed to send him payment immediately.

To make a long story short, we had someone else review what he filed and there were major discrepancies- numbers that he just filled in without asking me. I now owe over 4k to the feds and state. I have a feeling he just plugged in numbers so I would not have to owe (I did not ask him to do this at all).

The new tax guy cost $500 because it took such a long time to go over the original mistakes. The first tax preparer also professed to releasing my returns and paperwork to Paypal as 'evidence' he completed the return, which I believe is a breach of confidentiality. I would like to take him to court to recoup my expenses for the second preparer and because he is a general jerk that thinks he is right when he was very, very wrong. To sum up:
-Neither myself or my husband authorized him to submit my returns electronically.
- He did not allow me or my husband to review our returns before he submitted them. We also never signed any documents allowing him to e-file our taxes.
- He did not present himself in a professional or ethical manner.
- Because of his belligerence and awful customer service, I placed a stop payment on his PayPal funds and asked him to refund my money and send me my documents back. He proceeded to e-file my taxes anyway and withheld our tax returns until after he e-filed.
- I had to hire another preparer to correct my taxes.

I am interested in opinions! Is it worth my time and effort? I have all the messages and voicemails.

 

[Zigner]

You aren't out any money because you stopped the Paypal payment (improperly, IMO) - what do you plan to sue for?

 

[wondergirl2]

You aren't out any money because you stopped the Paypal payment (improperly, IMO) - what do you plan to sue for?

Paypal hasn't given me the money back yet- they are still investigating. I have a feeling they will release the money to him, because technically, he did do a tax return- he just didn't do it right. I am waiting on that.

We had to pay an extra 500 to another preparer to fix the taxes- it wouldn't have cost that much to just do my taxes. It would have cost 200 at the most, but because they had to amend, we had to pay extra.
He also sent my personal information- social securities of all my family members, income, taxes, everything to Paypal. He cannot do that according to what I am researching:

Section 7216 of the Internal Revenue Code (IRC) and a related provision, IRC 6713, provide penalties against tax return
preparers who make unauthorized use or disclosure of tax return information. A tax return preparer covered by IRC
7216 and 6713 can include a person who prepares tax returns or assists in preparing tax returns, whether or not a fee is
charged for preparing a tax return.

 

[tranquility]

- He did not allow me or my husband to review our returns before he submitted them. We also never signed any documents allowing him to e-file our taxes.

This is a violation of IRS e-file rules. I'm sure the service would like to know. It doesn't give rise to damages to you, but if the preparer does not have signed authorization forms after having supplied you with a full copy of your return, he will have a problem.

- He did not present himself in a professional or ethical manner.

Pity. Don't use him again.

- Because of his belligerence and awful customer service, I placed a stop payment on his PayPal funds and asked him to refund my money and send me my documents back. He proceeded to e-file my taxes anyway and withheld our tax returns until after he e-filed.

I think you did not appropriately stop payment on PayPal and should owe funds to him for preparation of your return. However, I find it unlikely he will prosecute the matter as he acted improperly by submitting your return without following proper procedure.

- I had to hire another preparer to correct my taxes.

You have to pay to get your taxes done anyway, so I agree with Zigner, you are not out anything at this time. (Assuming you don't lose the PayPal dispute and are not sued by the preparer.) It should not take much more if any effort to amend a return than it would be to originally prepare a return.

The first tax preparer also professed to releasing my returns and paperwork to Paypal as 'evidence' he completed the return, which I believe is a breach of confidentiality.

This may or may not be a breach. Such things can be released in regards to a fee dispute by many ethics rules. The IRS rules would probably want a written release before turning them over in a PayPal dispute and I think the specific exception of general ethics rules would not apply to PayPal, but I did not research the matter. However the potential breach did not hurt you as far as you know.

It seems the main issue has to do with the preparer's relationship with the IRS and potential violations of e-file and other regulations there. You can certainly report him to them. It does not give rise to a lawsuit absent losing your PayPal dispute or get sued for failure to pay for the work done.

 

[wondergirl2]

This is a violation of IRS e-file rules. I'm sure the service would like to know. It doesn't give rise to damages to you, but if the preparer does not have signed authorization forms after having supplied you with a full copy of your return, he will have a problem.
Pity. Don't use him again.
I think you did not appropriately stop payment on PayPal and should owe funds to him for preparation of your return. However, I find it unlikely he will prosecute the matter as he acted improperly by submitting your return without following proper procedure.
You have to pay to get your taxes done anyway, so I agree with Zigner, you are not out anything at this time. (Assuming you don't lose the PayPal dispute and are not sued by the preparer.) It should not take much more if any effort to amend a return than it would be to originally prepare a return.
This may or may not be a breach. Such things can be released in regards to a fee dispute by many ethics rules. The IRS rules would probably want a written release before turning them over in a PayPal dispute and I think the specific exception of general ethics rules would not apply to PayPal, but I did not research the matter. However the potential breach did not hurt you as far as you know.

It seems the main issue has to do with the preparer's relationship with the IRS and potential violations of e-file and other regulations there. You can certainly report him to them. It does not give rise to a lawsuit absent losing your PayPal dispute or get sued for failure to pay for the work done.

Thanks all- and I did report him to the IRS. Question though- why do you all think that I stopped payment inappropriately? Would you pay for a service if part of the service was not done to your satisfaction- i.e. completing taxes with incorrect, random numbers? Let's forget the screaming and freaking out part- yes he was a jerk, but ok. Why would I need to pay him for this service if it was done wrong?

 

[Zigner]

Thanks all- and I did report him to the IRS. Question though- why do you all think that I stopped payment inappropriately? Would you pay for a service if part of the service was not done to your satisfaction- i.e. completing taxes with incorrect, random numbers? Let's forget the screaming and freaking out part- yes he was a jerk, but ok. Why would I need to pay him for this service if it was done wrong?

You stopped payment BEFORE that happened.

 

[LdiJ]

Thanks all- and I did report him to the IRS. Question though- why do you all think that I stopped payment inappropriately? Would you pay for a service if part of the service was not done to your satisfaction- i.e. completing taxes with incorrect, random numbers? Let's forget the screaming and freaking out part- yes he was a jerk, but ok. Why would I need to pay him for this service if it was done wrong?

I personally do not think that you should have paid him. He filed a return without authorization that he knew was not correct. I have been in the business for more than 30 years and I would not attempt to collect from a customer who had no opportunity to review my work and objected to my demeanor. I certainly would not e-file a return in those circumstances.

However, the cost of your amended return seems pretty high to me. You might want to find someone else to work with you in the future. Perhaps someone local that you can visit in person.

 

[wondergirl2]

You stopped payment BEFORE that happened.

Interesting! And yes I did, because of his freaking out- I seriously thought I had just given all my info to a crazy person. However I put a hold on the payment- not a full stoppage.Paypal wasn't even involved at that point- when you put a stop payment, you then have to work it out with the vendor and if you can't, you then escalate to PP. I told him to send my taxes so I could review, and he said no- I had to pay him first. He also demanded 25.00 more dollars. When I said no- then he e-filed, then I escalated with PP and put a full stop. And yes I have all this documented. It really is a long and convoluted story! But I get it- maybe we don't have a case, unless PP gives him my money.

 

[wondergirl2]

I personally do not think that you should have paid him. He filed a return without authorization that he knew was not correct. I have been in the business for more than 30 years and I would not attempt to collect from a customer who had no opportunity to review my work and objected to my demeanor. I certainly would not e-file a return in those circumstances.

However, the cost of your amended return seems pretty high to me. You might want to find someone else to work with you in the future. Perhaps someone local that you can visit in person.

The tax amender was local- they had to prepare three returns and we did visit with them. I thought it was high too, but honestly I just wanted it done. I know now not to pay until I have the returns in my hand !

 

[tranquility]

Thanks all- and I did report him to the IRS. Question though- why do you all think that I stopped payment inappropriately? Would you pay for a service if part of the service was not done to your satisfaction- i.e. completing taxes with incorrect, random numbers? Let's forget the screaming and freaking out part- yes he was a jerk, but ok. Why would I need to pay him for this service if it was done wrong?

He did the work. A court could determine if there were incorrect or random numbers and if you cooperated with proving timely information to aid in the completion of the return. "Wrong" is a funny term. If he put your business income on schedule E, that would be "wrong". If he multiplied your miles by the rate and placed it in other expenses on schedule C, it would technically be wrong, but it would not be something I would consider to be wrong in that the end result will be the same. YOU are making the right/wrong determination here. Even your second preparer's opinion is a problem as he had the availability of the first return to look at and that one might have required pulling of teeth to get enough facts and explanations to prepare.

Let's face it, it is unusual for a person to blow a gasket when talking about every day matters on the phone. You say "literally,for no reason", but I suspect he would claim differently. For example, yesterday a client called about some state information filing requested for his corporation. His normal preparer is out sick and I got the call. I explained the returns were never marked final and that unless he wanted to rollover his small pension plan to another trustee, he would have to keep the corporation open and he should reply to the state. He did not think I understood. So, I transferred him to another. After being told the same thing, the other preparer did not understand. Then to yet a third while I looked up the file and the Secretary of State file the corporation was still active and he should file the information. Guy went apoplectic as he pays us to know these things. I am still uncertain as to his complaint. But, I am certain he thinks I am an idiot.

 

[tranquility]

The tax amender was local- they had to prepare three returns and we did visit with them. I thought it was high too, but honestly I just wanted it done. I know now not to pay until I have the returns in my hand !

Some preparers won't turn over the return until you pay. We do, but our clients tend to be high net worth who have been here forever. But, once you have the return, you can file for yourself just by using the information it contains.

 

[wondergirl2]

He did the work. A court could determine if there were incorrect or random numbers and if you cooperated with proving timely information to aid in the completion of the return. "Wrong" is a funny term. If he put your business income on schedule E, that would be "wrong". If he multiplied your miles by the rate and placed it in other expenses on schedule C, it would technically be wrong, but it would not be something I would consider to be wrong in that the end result will be the same. YOU are making the right/wrong determination here. Even your second preparer's opinion is a problem as he had the availability of the first return to look at and that one might have required pulling of teeth to get enough facts and explanations to prepare.

Let's face it, it is unusual for a person to blow a gasket when talking about every day matters on the phone. You say "literally,for no reason", but I suspect he would claim differently. For example, yesterday a client called about some state information filing requested for his corporation. His normal preparer is out sick and I got the call. I explained the returns were never marked final and that unless he wanted to rollover his small pension plan to another trustee, he would have to keep the corporation open and he should reply to the state. He did not think I understood. So, I transferred him to another. After being told the same thing, the other preparer did not understand. Then to yet a third while I looked up the file and the Secretary of State file the corporation was still active and he should file the information. Guy went apoplectic as he pays us to know these things. I am still uncertain as to his complaint. But, I am certain he thinks I am an idiot.

I am making the right wrong determination,because I know what went down, and his filling out 18k of unreimbursed home office expenses and 25k of rent when I own my house is wrong (among other little things). With those numbers corrected, my tax situation changed- not in my favor I might add, but I certainly don't want to trigger the IRS and he put in things that were never discussed. I wasn't under the assumption that preparing taxes was a matter of opinion- I supplied the numbers and paperwork, they put them in the tax software and make sure that my states are accurate, because I had a weird work at home/in CA situation. So the end result between the two preparers was not the same, because the first supplied erroneous info, which I did not give him, nor did he ask for.

I too thought it was unusual for him to 'blow a gasket' however after he did, it became clear he is unstable- as in mentally. I am the first to admit if I did something 'wrong' and I know I did not. He asked me for my email, I said 'oh I sent you an email yesterday,so you should have it, but its ___' and he screamed... SCREAMED and hung up the phone. Then called back and called me 'F*&%head' and really crazy stuff- so unusual, but possible lol! He claims I was 'snippy'. A bunch of other people who have recently reviewed him have had the same experience, hence my thinking he is having a mental issue. Maybe best to leave it alone for my safety

 

[tranquility]

He asked me for my email, I said 'oh I sent you an email yesterday,so you should have it, but its ___' and he screamed... SCREAMED and hung up the phone. Then called back and called me 'F*&%head' and really crazy stuff

Ah, tax season. I know it well.

 

[davew128]

However, the cost of your amended return seems pretty high to me.

Not to me it doesn't. If a new client comes in and needs and amended return, the amount of work to do is the same as if it were an original filing.

 

[davew128]

I'm going to chime in here because some of the issues raised where something I was involved in a year back with creating new questions on the ethics portion of the EA exam (which is based on Circular 230).

There are several different ethical problems here.

1) Is the unauthorized e-filing of the return. As discussed previously this is an obvious violation but if it was inadvertant and there is no other e-file compliance problems then its not going anywhere. Why? Hell this year already I accidentally "Hit the button" on an LLC return because someone put the recently received e-file form for the delinquent PRIOR year in front of me while dealing with 2015 returns. Mistakes happen.

2) Is the disclosure of the tax return to Paypal a violation of 6713 and 7216? Absolutely NOT. I refer you to Reg. 301.7216-2(l).

(l) Payment for tax preparation services. A tax return preparer may use and disclose, without the taxpayer's written consent, tax return information that the taxpayer provides to the tax return preparer to pay for tax preparation services to the extent necessary to process or collect the payment. For example, if the taxpayer gives the tax return preparer a credit card to pay for tax preparation services, the tax return preparer may disclose the taxpayer's name, credit card number, credit card expiration date, and amount due for tax preparation services to the credit card company, as necessary, to process the payment. Any tax return information that the taxpayer did not give the tax return preparer for the purpose of making payment for tax preparation services may not be used or disclosed by the tax return preparer without the taxpayer's prior written consent, unless otherwise permitted under another provision of this section.

Now if this black and white? No...but if the preparer needs to provide proof of providing the service for which payment is being disputed...

3) Is the withholding of the tax returns pending e-file a violation? Yes it is. A preparer can withhold the return pending payment. He can withhold e-file pending payment. He cannot e-file without providing a copy of the return to the taxpayer to review. IRC 6107(a).