A Case Study: The Story of a CPA Who Failed to File Her Individual Tax Return

By Rona L. Cherno

The New York State Society of CPAs member had been overwhelmed by an unfortunate series of professional and family crises that went on for years. No matter how hard she tried to catch up, there was always a new crisis. Her practice and her family life suffered. She sought assistance through professional counseling. The problems persisted. Her clients’ work suffered. She prevailed on her partners and coworkers to help handle the mounting backlog. She asked the Internal Revenue Service (IRS) for extensions and tried to negotiate the payment of all her taxes due. Still, the problems persisted. She enrolled in continuing professional education courses on time management. She eventually caught up with her work and filed returns, only to be hit with another crisis.

Because of her chronic failure to timely file her tax returns, the IRS ultimately suspended her from practicing before it and published the suspension in the agency’s bulletin. The Ethics Division for the American Institute of CPAs, of which she was a member, learned of her IRS suspension and forwarded the information to the Society’s Professional Ethics Committee (PEC) and other state societies to which she belonged.

The PEC opened an investigation as to whether there was a violation of the Code of Professional Conduct and, if so, what the sanctions should be. The member responded to the PEC with the facts and circumstances summarized above. The member argued that because of the extenuating personal circumstances and the fact that she had ultimately paid her taxes, a strong sanction such as suspension from membership was too harsh.

The AICPA has developed sanction guidelines to ensure that the Institute and the state societies are consistent when determining sanctions. Because the public associates CPAs with the performance of quality tax services, the sanctions guidelines called for a suspension for this type of violation. The PEC agreed that the suspension was warranted, and it pointed out that when CPAs join the Society, they agree to abide by the Code of Professional Conduct.

Under Code Rule 5Ol–Acts Discreditable, interpretation 501-7 states that a member’s failure to timely file his or her tax return is an act discreditable. The sanction guidelines call for suspension from membership when a CPA does not timely file his or her tax return, regardless of the reason. The AICPA and the other state societies concurred with the PEC’s finding and the sanction.

This member failed to timely file her tax return. The Society’s and the AICPA’s bylaws call for the automatic expulsion of a member who is convicted of willful failure to file his or her personal tax return.