Tuesday, July 6, 2010

Is losing the right to practice before IRS = "death penalty"?

That is the way Tax Lawyer Peter Pappas described it:

Did Laskey receive what amounts the “death penalty” merely for his lack of due diligence or was he punished at least in part because he failed to appear at the initial administrative hearing?

Here is a chronology based on the facts described by US Administrative Law Judge Jim Moran:

As of June 2009, CPA Tim Kaskey had yet to file his own tax returns for the tax years 2001 through 2005. In addition, he did not respond to IRS questions about the diligence he had exercised in preparing an eyebrow-raising return for his clients.

The Office of Professional Responsibility sent him a registered letter listing these complaints in June 2009, certified mail, delivered to him on July 1.

Not only did he not show up at a hearing, he did not even bother to respond to the IRS complaints in the letter.

According to Admninistrative Law Judge Moran's opinion issued in September 2009:

Pursuant to 31 C.F.R. § 10.64(d), a respondent’s failure to file an answer within the time prescribed constitutes an admission of the allegations of the complaint and a waiver of hearing.

That opinion concluded that the failure to file his own returns alone is sufficient evidence to lose the right to practice before the IRS. So it doesn't sound like there needed to be any "retaliation" involved. A CPA who can't be bothered to respond to an IRS complaint is not someone who ought to be allowed to represent others until such time as he straightens out his own record.

However, Mr. Kaskey then went on to exercise his right to appeal that September 2009 decision.

The appellate opinion written in May 2010 by appellate authority Ronald Pinsky in the Chief Counsel's Office, upheld the original decision and is quite illuminating:

I concur with the decision of the ALJ that a decision on the Motion for a Decision by Default is appropriate. [CPA Kaskey] never filed an Answer to the complaint. [CPA Kaskey] never requested an extension of time to file an Answer to the Complaint. In his Appeal, [CPA Kaskey] did not provide any reasons for his failure to file an Answer. Since [CPA-Kaskey] failed to file an Answer, all of the allegations in the Complaint are deemed admitted as detailed in the opinion of the ALJ. [CPA-Kaskey] engaged in disreputable conduct within the meaning of 31 C.F.R. § 10.51(d) by willfully failing to timely file Federal income tax returns for the years 2001, 2002, 2003, 2004, and 2005 which were required to be filed, by failing to exercise due diligence as required by 31 C.F.R. § 10.22(a) in preparing, approving, and filing tax returns for S and N and in failing to determine the correctness of oral or written representations made to the Department of Treasury, by failing to inform clients S and N in violation of the regulations under 31 C.F.R. § 10.34(b) of any penalties reasonably likely to apply to S and N, as well as the opportunities to avoid such penalties with respect to the tax position the Respondent-Appellant submitted to the IRS on S an N’s behalf.

This does not strike me as retaliation. It strikes me as saying that a professional who does not bother to answer a complaint of egregiously irresponsible behavior nor to offer any excuse for his failure to answer that complaint is not entitled to the privilege of representing other taxpayers before the IRS.

Interestingly, in his appeal, he did finally offer a (rather sketchy) excuse for his failure to file his own tax returns. But the time to offer that excuse would have been last summer, when he received the complaint, not in his subsequent appeal.

In any event, the defense did not strike the appelate authority, Ronald Pinsky, as very compelling:

In his Appeal, [CPA Kaskey] states that his failure to file returns was due to an ongoing medical condition. The only evidence other than [CPA Kaskey]’s statements was a copy of a prescription. Throughout the period in which [CPA Kaskey] failed to file his personal income tax returns, he prepared many returns for other taxpayers.

Moreover, the ultimate penalty given to CPA Kaskey hardly seems the equivalent of a "death sentence."

For the reasons stated, I hereby determine that the Respondent-Appellant, Tim W. Kaskey, is disbarred from practice before the Internal Revenue Service, reinstatement thereafter being at the sole discretion of OPR, and at a minimum requiring Respondent-Appellant to have filed all Federal tax returns and paid all outstanding Federal tax liabilities for which he is responsible (or to have arranged with the IRS to pay, all outstanding Federal tax). This constitutes FINAL AGENCY ACTION in this proceeding.

The appeals ruling leaves open the possibility that he could work his way back into the good graces of the Office of Professional Responsibility, but specifies that a minimal condition for such consideration would first require him to file all his back tax returns and pay any associated liabilities. (He might also want to straighten out his record with the Florida agency that regulates CPAs, which lists his status as "delinquent, active"here.)

In view of all that, the IRS ruling doesn't sound like a death sentence to me.

It sounds like reasonable consequences for a pattern of cavalier and irresponsible behavior. Even accepting at face value his excuse of his illness interfering with his ability to file his own tax returns, I don't see that he has demonstrated fitness and suitability to practice as a professional representing other taxpayers before the IRS.

Not a death penalty at all.

He still has rights to life, liberty, and pursuit of happiness. He can even prepare tax returns and offer tax advice to anyone willing to listen to him. He just doesn't have the privilege to appear as a professional before the IRS on behalf of others.


  1. Mary,

    Did you really think I thought they were going to execute the poor sap?

    Disbarment is the death penalty in the figurative, not literal sense.

    This wasn't a mere suspension of his license for a term certain, it was a complete, final, and total disbarment.

    Yes, Laskey can grovel for his license back - that's always the case with disbarments - but the IRS has no duty to grant his request.

    I, apparently unlike you, would be very cautious before I snatched someone's livelihood away from them.

    I would want to know whether or not he has ever been sanctioned by his state's board of accountancy. And has he ever had problems with the IRS before? Is this an isolated incident or evidence of a pattern of conduct?

    It sounds like OPR didn't much like this fellow. But I guess that's what happens when you disrespect them by failing to show up to a hearing.

    Finally, the primary reason for the disbarment, at least according to OPR director Karen Hawkins, was that Laskey failed to do due diligence in determining the accuracy of the information his client gave him about their finances.

    If this was a case of him failing to file his returns without more, he would not have been disbarred.

  2. Mr. Kaskey may have gotten off easy. He can still preparer returns. Once the tax preparer rules go into effect this will not be the case.
    According to OPR Director Karen Hawkins, the new preparer rules will bring all tax return preparers under Circular 230.
    "“What that means for me and my office is that when we suspend somebody, or on the rare occasion disbar somebody, they no longer have the fallback position of preparing tax returns, because the suspension from practice … will encompass tax return preparation,” Hawkins said."

    The full article is here.