Large Percentage of Rejects...

Hello, am in the process of buying a book of business that has about 400 tax clients. I have been alerted to an interesting fact by the seller that out of those 400 tax clients, about 70 were rejected due to identity issues. Seller of book uses Pro-Connect. Apparently, the seller tried everything back in April-July to resolve the issue but couldn't ever get any satisfaction.

If I buy the book, I will of course use my EFIN and will be using drake for the software provider for this book of business.

Anyone ever heard of such a thing?

As in 70 federal efiled income tax returns were rejected because another return was already filed with that ID number?

How many of those could have been idiots who wanted their EIP fast and used the nonfiler app on the IRS website?

Adjust your purchase price accordingly.

Are these walk in type taxpayers? Consider those 70 returns lost!

That seems like a really large percentage. I only get one or two a year, if that.
I'd start asking if this book had the data compromised at some point, either through a hack, or something internal. Or if they are just a target for folks trying to get one over on the preparer.

Just curious - do those 70 taxpayers know that their return hasn't actually been efiled? Did they paper file instead? Or do the taxpayers have no idea? Wouldn't speak well of the preparer if the TP doesn't know.

I had a new client that happened to a couple of years ago - prior preparer didn't/couldn't fix the issue of the reject, and the taxpayer had no idea it had ever happened. Very small refund, so she just never noticed. We were trying to amend and couldn't figure out why the IRS didn't have anything that she had ever filed.

Adjust your purchase price accordingly.

Exactly. Strangely, many were long-time clients - many of the CPA's extended family.

Yes, the clients were paper-filed and many are still awaiting their refund (thanks covid).

I called Drake this afternoon and asked if they had ever heard of such a thing, and no help. It's a total mystery to the seller and me. Really at a loss. I kinda lean to something attached to the EFIN or maybe some kind of internal shenanigans.

The CPA is fairly well-respected and has been in business for several years.

Adjust your purchase price accordingly.

Exactly. Strangely, many were long-time clients - many of the CPA's extended family.

Yes, the clients were paper-filed and many are still awaiting their refund (thanks covid).

I called Drake this afternoon and asked if they had ever heard of such a thing, and no help. It's a total mystery to the seller and me. Really at a loss. I kinda lean to something attached to the EFIN or maybe some kind of internal shenanigans.

The CPA is fairly well-respected and has been in business for several years.

If his own extended family members were affected, I suspect a data breach or hack occurred at some point in time. Could be external or an ex-employee etc. Drake can not solve this problem, so don't expect anything from them.

Your purchase agreement should have the right language to hold you harmless of any problems with the returns prior to your purchase. You may also want to discuss this matter with your E&O carrier before you sign on the dotted line.

70 out of 400 is a little large to coincidental.

Were last year's numbers similar? If not, I would think the 2020 numbers might be due to what sjrcpa alluded to in post #2.

Which may tell you something about the client base and/or the communication between the firm and the clients.

Great thoughts guys.

Oddly, the client base is not a H&R-type clientele.

Great thoughts guys.

Oddly, the client base is not a H&R-type clientele.

That leads me to suspect that there was a data breach or hack either externally or by an internal source, possibly an ex-employee or a computer repair person who had accessed sensitive information and perhaps sold it in the dark web!

It may sound crazy, but Google the stuff on Dark Web and how they get all that stuff to trade or sell. I had a restaurant manager as a client and she told me that one of the waiters at her place was using a skimmer to steal credit card data, until cops showed up!

ATSMAN has it and you should be reporting to the IRS. Sounds like a hack or someone or someone let an intruder in by accident (hack)... You probably need to notify IRS and others on the client list.