CPA Disbarred for Failure to Exercise Due Diligence

A CPA has been disbarred after the government found he failed to exercise due diligence in preparing tax returns for a corporation and its married shareholders. 

The Office of Professional Responsibility (OPR) alleged that Tim W. Kaskey failed to exercise due diligence under Circular 230, section 10.22 when he failed to determine the correctness of the representations he made to the IRS on the tax returns of the corporation and its married shareholders.  OPR also alleged that Kaskey’s misconduct included a failure to comply with the requirement to advise clients of potential penalties and any opportunities to avoid such penalties by disclosure contained in Circular 230, former section 10.34(b) (now section 10.34(c)). 

According to an IRS announcement, when Kaskey failed to respond, or appear, at the administrative proceeding, the ALJ deemed the allegations against Kaskey admitted and entered a default judgment for disbarment.  Kaskey appealed. On review, the Treasury Appellate Authority agreed that disbarment was proper.   

Kaskey defended against the due diligence allegations by arguing that his clients had misrepresented their income to him. The Appellate Authority observed that there was “a great deal of evidence reflecting the lack of due diligence by [Kaskey] in the preparation of these returns…[and that] it was inconceivable that [the individual taxpayers] could pay their living expenses based on the income reported on their returns.”
“Practitioners who think OPR isn’t serious about due diligence should take heed,” said OPR Director Karen L. Hawkins, in the announcement.  “Practitioners may not ignore the implications of information already known, and must make reasonable inquiries if the information furnished by a client appears to be incorrect, inconsistent, or incomplete.”

The opinions in the case can be viewed on by searching on OPR.