I have a new tax client who lost some money in an obvious scam by the National Audit Defense Network (NADN). If you're familiar with NADN, then you know what kinds of abusive tax shelters and extremely aggressive tax deductions they promoted. If you're not, here's a small example... my client was told that he could include his bathroom area in the calculation for his home office deduction. Any quick internet search will give you multiple hits on this bankrupt group.
After accepting him as a client, I've learned that most of the "investors" (who were victims of the scams) are being hit with IRS audits and subsequent penalties and fines. What I'm concerned about is being dragged into an ugly audit for a client's previous returns and then coming under the scrutiny myself. I don't have any skeletons in my closet, but I don't want to go through the hassle of having all of my work reviewed, or have my other tax clients being reviewed by the IRS because of my association with this new client. I know we can ammend his effected prior returns to clean everything up, but I'm still bothered with the "guilt by association" principle.
Any thoughts or suggestions?
Thanks, Russell