Customer Comes Back

[geekgirldany]

I previously wrote a thread about a customer that said he was going to get his brother or uncle (forgot which) to look at the tax return I prepared. That he knew of a way for them not to pay through a rental property. Well I got a call today from him saying he had forgot about the taxes. That he has found $4000 in contributions and wants me to redo their taxes. I'm just wondering if I should even call back. I felt insulted when he bascially said his uncle/brother knew a way to get around the rental loss limitation to get them back money or not owe as much. Good time for him to call I might add.

[Koss]

Fire the client?

You need to decide whether you want him back as a client next year. I probably wouldn't. Next year he'll start making up bogus expenses associated with the rental property. This client will keep pushing the boundaries, and eventually he'll get nailed by the IRS. You're off the hook if you clearly document that you are preparing the return based on information he gives you. But he'll still expect you to deal with the IRS on his behalf if it happens. And you'll end up having to tell him that a bunch of stuff is disallowed because he can't back it up. If you properly covered your butt when you did the return, advising him of risk of deducting arbitrary amounts that are estimates with little or no documentation, then when the IRS challenges it, you will end up telling him "I told you so."

This type of client probably isn't worth the headache.

Call him back and tell him that your charge for redoing the return will be $300 or something, because your time is high demand during the last week of the filing season.

Offer an extension and offer to do it for less if he waits until the end of May.

He'll probably go away and never come back.

Burton

[Koss]

Also

If you call him back, ask him casually when the donations were made, how much, and to what organizations. In the right context, you can lead him to believe that you are noting the information in order to change the return.

We both know that you don't need this information, and that it doesn't get entered on the tax return anywhere. But you should do this for two reasons:

(i) If you decide to redo the return, you should have a record of the conversation and what he told you to cover your own a**.

(ii) If he asserts that any individual donations were $250 or more, you should insist on actually seeing the receipts. Current IRS regs require a receipt for any single cash donation of $250 or more. And they actually require that the receipt be issued before the return is filed.

Generally I don't try to audit my clients' returns. But large charitable donations do have specific regulatory requirements. He probably doesn't know this. If he asserts that the $4000 was composed of a few large donations, then you can accurately tell him that even a cancelled check is not sufficient to support the deduction.

Burton

[geekgirldany]

Thank you so much for the advice Burton. I'm not sure where this $4000 magically appeared. I will definately ask for receipts. I will charge double just for the pain and do an extension. But you know really the way he treated me about the return I just do not want to even deal with him. I felt insulted and not sure he is worth dealing. I can accept that he thought his brother/uncle could get him back more money or not pay as much. But don't come back to me when he doesn't.

He added after the $4000 "if I felt comfortable doing the return". So I think that he knows it was an insult or he knows hte $4000 doesn't exist.

Thank you again for comments will help me making this decision.

[Koss]

More rambling

Some years ago I had a client who was self employed in the housekeeping business. She was married. Her husband was disabled and had no income except maybe some nontaxable social security or disability benefits. They had young children. Her income was well within the range to qualify for EIC.

She had no understanding of even the most basic principles of recordkeeping. She could barely distinguish between income and expenses. She had made an effort to keep some sort of general ledger in a handwritten format, but much of it was incomprehensible to me, and she was unable to answer even basic questions about the data.

But initially, I did not get the sense that she was intentionally trying to game the system or file a fraudulent return. I thought she was acting in good faith. I wanted to help her prepare a return that was at least a reasonable estimate of her income and expenses. The problem was that taken at face value, the expenses were so high that it just seemed absurd.

I did not explicitly encourage her to reduce the expenses. I tried to get her to see that the figures were not realistic, and I tried to help her find a way to come up with more accurate estimates.

Those of you who have done this type of return already know what's coming.

Reducing her expenses actually increased her refund, because it increased her earned income credit. She was self-employed, and she had not made any estimated payments. The entire refund was EIC, minus the self-employment tax.

No matter how many different ways I explained it, she could not understand why she "couldn't get more back by claiming more expenses."

Intentionally leaving out expenses in order to boost EIC has actually been deemed to be a type of fraud in a few cases. I would never encourage this. But in this case, I really thought some of the expenses she was trying to claim were not accurate, because her recordkeeping system itself was unsound.

She finally accepted, without comprehending it, that lower expenses were actually giving her a better refund. So we filed the return, and reported a moderately robust income for her, which gave a fairly decent refund. Her motivation for reducing the expenses was a little different from mine, but she was pleased with the outcome.

A month or so later, after she had received and spent the refund, she returned to the office, on a day when I was not there, and became quite belligerent with other staff members. She was apparently very angry that I had not reported all her expenses on Schedule C. Someone else tried to explain that amending the return to report these expenses would actually reduce her refund, but she was still incapable of understanding this.

When I finally met with her a few days later, and once again tried to explain her return, I discovered what the real problem was.

The higher income reported on her return was apparently disqualifying her from some other welfare benefits she was attempting to obtain. Food stamps, Medicaid, I don't know what it was.

Although she could not grasp the underlying concepts, she somehow accepted the fact that amending the return would reduce her EIC, and that she would have to pay back part of the refund she already received.

She didn't want to do that.

She wanted me to prepare a financial statement she could give the welfare agency to document the fact that her income was lower than what she reported on her tax return. She wanted me to include the expenses that I had determined were not supported by adequate documentation.

I told her that I would not prepare such a statement unless she also filed an amended tax return, which, as I had explained earlier, would involve paying back part of the refund she had received.

And it wasn't about the fee for preparing an amended return, either.

This unsophisticated client did not understand that she could have agreed to do this, and then simply never mailed in the amended return. She assumed that if I prepared an amended return, it would automatically be filed. (Her original return was filed electronically.)

I decided not to explain that if she chose to have me prepare an amended return, it would be her responsibility to actually file the return by mail.

She chose not to have me prepare an amended return, and I did not provide any kind of bookkeeping record for her to give the welfare office.

I never heard from her again. And I don't miss her at all.

Burton

[Gretel]

But you know really the way he treated me about the return I just do not want to even deal with him.

So, why don't you just tell him you don't want to deal with him.

Four years ago I had a self-employed barber who had a very bad record keeping and, as a result, his tax bill was too high. Of course he didn't have money to pay and still owed on previous tax return.

So, I wanted to help him and explained gently what he could do. I didn't realize first, that he doesn't want to keep better records so he yelled at me: You are like my mother. You can't tell me what to do. So I yelled back, that I am sorry, and never would try again to save him taxes. This was on the phone.

After that I realized I really was sorry no stopping to try help him the second I felt he doesn't want to be helped. When he came in I told him I was sorry for not respecting his view but he interrupted me, saying how sorry he was.

[geekgirldany]

I'm pretty bad about not wanting confrontations. I would rather just make up some reason or make the redo so high that he wouldn't come back then say you insulted me I don't want to deal with you. Guess I'm too nice.

Burton talking about doing a financial statment showing lower income amounts. I have a new business client that wanted me to write a letter stating I had done his taxes for the past two years. Told him no I wasn't comfortable doing that. I told him to fax me copies and I would write that I had reviewed his past two years taxes. Then he called later wanting me to write a letter stating I had done the taxes for a customer of his and that he made so much money. I told him no no no. I can't believe the things people ask.

[Snaggletooth]

Amazing

Geeko, it's amazing the phone calls you get during the last few days before April 15th. Some of these people you prepared in February, and they haven't even bothered to look at their return. All they know is that they don't want to pay, and this means telling you some preposterous story, then that's what they'll do.

If I charged them $120 initially, I would then charge $200, and ONLY if I had time to do it.
When I have to redo a return, my fee is normally the same as preparing it to begin with. Customers confronted with this usually just find someone else. If they return to me, they NEVER make this mistake again. If the redo is in April, then I charge MORE, just as I'm suggesting you do.

As a normal part of the interview, I ask them to identify the recipient of their largest contribution, and I record it. Usually if it's $4000, then $3500 will be to their church, and the rest will be spread out over Red Cross, local Schools, local charities, etc. I record the $3500 and let the rest go.

[Chief]

Late Comers

Oh my! I am getting too many of these kind of people. Yes I have clients I dont want to continue with.

[Black Bart]

Bad Apples

I had one a few years ago that made me laugh and still makes me feel pretty good about it every time I think of it.

He was an aggressive, pushy guy that specialized in "bulldozing" people into doing things his way. He strode into the office, grabbed a chair, tossed his package (C-SE) on the desk, and boldly announced, "I'll tell you right now that I get paid in cash a lot and I'm not going to turn it all in!"

It kind of caught me by surprise and I'm like GGD (I don't like confrontations), but I recovered fairly quickly and shot back "Thanks for telling me that straight out. Now I'll tell you something right up front too. I'm not doing your tax return." I pushed the papers back across the desk to the instantly angry man. He stood up and left the office without another word and I haven't seen him since.

[Gretel]

Good for you to have recovered that quickly, Bart. Sometimes that happens to me too, but most of the time I am too slow.

I actually don't know anyone who really likes confrontations. I think even pushy people are pushy because of that. Anyway, I hated (and still do) confrontation myself but I am discovering more and more how good it feels to truthfully stand up for myself. Maybe I have entered a love-hate relationship with confrontations?

[veritas]

I keep a 357 handy and I don't mean Internal Revenue Code

[WhiteOleander]

This time of year, with all the latest news reports, if something really weird comes in, I think, "Is this a sting?"

For someone to just outright say they don't intend to report all their income, I would really wonder if they were for real.

Better keep your radar on. Or you could be on the news!!!!!

[Black Bart]

It's true that things

This time of year, with all the latest news reports, if something really weird comes in, I think, "Is this a sting?"

For someone to just outright say they don't intend to report all their income, I would really wonder if they were for real.

Better keep your radar on. Or you could be on the news!!!!!

get a little tougher and stricter every year, I agree. But I don't think it's all that unusual as I've heard different variations of it lots of times before. In this particular case, I know the guy from way back--even in school he was alway a bully and a big pushy blowhard. I'd argued about deductions with him for a couple of years and had just had enough. I think their idea is to be able to later say to an IRS agent "I told him that I got cash, but he went ahead and did the return anyway. I don't know anything about taxes and I thought he was taking care of it."

They mainly want to take the deductions or leave something off and blame you for it if possible.

P. S. You're right, Gabriele. I usually can't come back with anything that quick--I have to think about it for 30 minutes or so until I get mad (I only publish my "success" stories).

[geekgirldany]

I'll standup for myself when I really have to. I guess I just don't want to start the confrontation.

I've got that yank customer I told you all about. I said that I would be posting about her. Well I am. She is about to drive me crazy. She has called 4 times since she brought them. Each time asking what else I need. So I tell her its moving expenses and some Schedule A items(advalorem tax, contributions). On second call she said well I gave 2000 in contributions. I asked to who.. its was clothing. "Do I need a receipt?" "Yes".... okay I will call you back with the information. Well again its like a magical auction the moving expenses went from 2000 to 4000, contributions went up to 3000. Then I get the question "do I still owe?" "yes". Okay I will call back later with the final figures. Calls again...says the same thing again.... "owe?'' "yes?'. I told her it was her defaulting on the 401k loan. then she asked me not to include it. Told her I couldn't. Even if it was left off by mistake they would catch it and add penalities and interest. "okay I will call later with the figures... waht do you need again?" Ahhhh!

The receipt from the phych. doctor should have been a clue