Risks Behind “My CPA Approved It”

One of the most common and most dangerous statements we have heard from California taxpayers who are being audited is: “My CPA said it was fine.”

While CPAs play a vital role in tax preparation and compliance, that statement does not provide legal protection when the Internal Revenue Service or the Franchise Tax Board challenge your filed tax returns.

Understanding the difference between tax preparation and tax defense can mean the difference between a manageable audit and a financially devasting outcome.

CPA Advise Does Not Equal Legal Protection

Auditors do not evaluate whether your CPA believed a position was reasonable. They evaluate whether the position complies with tax law. If it does not comply, liability rests with the taxpayer; not the tax preparer.

Many taxpayers are also surprised to learn that communications with a CPA are generally not protected by attorney-client privilege. In an audit or dispute, emails, notes, and explanations shared with a preparer may be requested and used as evidence against you.

“Good Faith Reliance” Does Not Stop Penalties

Another common misconception is that replying on a CPA automatically eliminates penalties. In reality, even when a CPA prepared a return, taxpayers may still face back taxes, interest, accuracy-related penalties, or negligence penalties. In California, these amounts can escalate quickly due to compounding interest and aggressive enforcement practices.

Audits Are Not About Preparation, They’re About Defense

Once an audit begins, the process becomes adversarial. Auditors are trained to identify unsupported deductions, residency and sourcing errors, misclassified income, or aggressive or inconsistent positions. At this stage, continuing without legal representation can expose taxpayers to unnecessary risk. How information is presented and how much is disclosed, matters.

Why a Tax Attorney Changes the Outcome

A trusted tax attorney’s role is not to re-prepare the tax return, but to defend it. This includes assessing legal exposure, controlling communication with taxing authorities, determining whether positions can be defended, negotiated, or mitigated, and preserving attorney-client privilege.

Bottom Line for California Taxpayers

CPAs are essential for compliance and planning. However, when an audit, notice, or dispute arises, CPA approval does not equate to legal protection.

The real question is not whether something was “fine” at the time; it is whether it can withstand scrutiny now. Early involvement of an experienced and trusted tax attorney can reduce penalties, limit exposure, and prevents small issues from becoming major financial liabilities.

Because in tax audits, what matters most is not who prepared the return, it is who knows how to defend it.

If you have any questions regarding your individual or businesses’ state and/or federal tax return(s)/tax liabilities or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.