Unfiled 2006 1120S - new client

[Skate1968]

This business owner has not filed his 2006 or 2007 1120S. (this is the same guy from the 'Bidding on a job' thread)

http://www.thetaxbook.com/forums/showthread.php?p=67858#post67858

After getting money up front i'll start preparing the 1120S for 2006. Eventually i will need the client to provide all 2006 & 2007 payroll tax returns (several of which are in the posession of the prior accountant). But instead of asking for all payroll tax returns up front i aim to do as much of the 1120S as possible before giving the client a comprehensive list of what i'll need from him. I'll prepare as much of the 1120S as i can before reaching a stopping point.

I'll have him sign a POA.

I'll ask this owner if he could possibly get the list of the 2005 adjustments made by his accountant.

His accountant (if you wanna call him that) kept him farily current on payroll tax returns & payments. But his accountant procrastinates on the 1120 S returns. And that's why this business owner has sought me out.

I've known this business owner for some time and believe him to be trustworthy. His books and records support what he has told me about his situation.

I will tell this guy that he's subject to the late filling fee of 85 dollars per month for the 1120S.

Years ago I've gotten burned by underbilling myself. But i think that i'll be OK with this engagement.

Any thoughts?

thanks

[taxea]

Unfiled 2006 1120S - new client

Why wait for the info you need? Why are you not asking for a copy of 2005 returns? I would also be asking for the P&L and balance sheet for each year. taxea

[Skate1968]

Thanks for responding, TaxEA.

I'm sorry that i was not being clear. The client, the business owner, has already given me the 2005 1120S, the P&L, the 940 & the one or two 941s which he has. So again i intend to do as much as possible with what's available to me before having the client contact the accountant who he's firing.

[ED SMITH]

Running a risk

If the client has to contact the previous preparer, he might just get talked into going back to him. So, if you wait to get the info you run the risk of putting in a lot of work and then not getting paid for it.

It could also be that he is not going back to the old preparer, because he owes him money.

Get the info first, before proceeding with any more work.

Whenever you think you know someone, you will eventually find out that you didn't know them well enough.

[outwest]

Normally..

when a pick up a client from another accountant, I prepare plain paper letter to the prior accountant for signature. I then fax or mail directly to the prior accountant and contact the prior directly for information. Reasons: 1) prevents client cold feet and relieves stress of how to do it 2) allows direct questions to accountant and 3) makes the process easier and gets over that "it's so hard to change" hurdle.

A professional realizes some client turnover happens and responds in a professional manner. An uncooperative prior acct just confirms the choice of the client.

What I use:

We have engaged outwest as our accountant. This letter is to authorize you to respond to questions he may have and to release any records he may request on both our individual and corporate ( XYZ Inc.) activities.

Please forward copies of our most recent individual and corporate depreciation schedules, any tax carry forward schedules, and corporate basis schedules to:

[Jiggers]

Release of information

What I use:

We have engaged outwest as our accountant. This letter is to authorize you to respond to questions he may have and to release any records he may request on both our individual and corporate ( XYZ Inc.) activities.

Please forward copies of our most recent individual and corporate depreciation schedules, any tax carry forward schedules, and corporate basis schedules to:

In the "olden" days this would be acceptable. However under the new regulations regarding disclosure of information, this would not be.

If I would receive the above, I would have the now ex-client sign my release form which is based on these new regulations.

[outwest]

For the good of the cause..

your release says what?

[erchess]

Am guessing here

but I think Jiggers' point is that he does nothing to violate client confidentiality until HIS RELEASE has been signed IN HIS OFFICE by someone he (or a trusted subordinate) either recognized on sight or saw and photocopied the ID of in his (or the trusted subordinate's) presence. Anyone who has fax capability can send a fax. Anyone can learn that John Doe got his 2007 returns done by Outwest. Unless you are a handwriting expert and study carefully a known signature of the person and the alleged signature received by mail or fax you don't even have the right to an opinion on whether what you recently received is genuine or not.

I personally would respond with a phone call email or letter explaining what I needed and indicating that once this was done I would cooperate in every possible way desired by my former client and within the bounds of the law.

Back a few years ago I got a phone call from Alaska from a former client whose voice I was sure I recognized and who had absolutely told me before leaving my area that he and his wife were moving to Alaska and that their future tax returns would be done by their daughter who is a CPA in that State. At the time they talked to me from around here they said they were taking their copies of my work and didn't want anything from me. The phone call from AK pointed out that their copy had not included the list of assets being depreciated. Since they were so far away I accepted their faxing me a request that I fax the asset list to their daughter. Had they been an hour or less by car away even then I would have made them come to me and sign in my presence. If I had exactly the same situation today I would have made them sign and have notarized my statement. The rules keep changing and we have to adapt.

Even back then I got a call from their daughter asking why I had done certain things on Federal and NC. Since I don't have caller ID I said that I would discuss provisions of the law in general terms but I could not get into the specifics of her parents' returns on the phone nor even verify whether I had ever heard of her parents.

I've never had an engagement letter before this upcoming year but I am going to have three this year, one for preparation, one for representation and one for written opinions. The first two will clearly state that in order to get a copy of their information after it is first given to them at the time of preparation and payment, I will need my statement signed in my presence or with signature notarized and that if they do not pick up their information in person at my home office by prior appointment they will have to pay me in advance for any shipping costs.

[Jiggers]

Disclosure

See IRS Rev. Proc. 2008-35.

The consent must be on a specific size of paper and point type.

There are also specific wording that must be included.

Also see Reg §301.7216-1, Reg §301.7216-2, Reg §301.7216.3, Rev Proc 2008-12, 2008-4 IRB, and IR 2008-2.

I think I have all those listed correctly. From a recent 1040 seminar section on ethics.

To comply with the procedures, regs, and required wording, mine is two pages long!

[Skate1968]

Having been burned in the past -- years ago -- I'm probably now being overly cautious.

If the client has to contact the previous preparer, he might just get talked into going back to him. So, if you wait to get the info you run the risk of putting in a lot of work and then not getting paid for it.

Thanks very much for responding, Ed.

And yes, i've considered that possibility and that's why i'm getting money up front before starting. (although i think it highly doubtful that this owner will go back to his prior accountant.)

It could also be that he is not going back to the old preparer, because he owes him money.

That is possible but in this case i highly doubt it. If this owner and co worker are faking something here they would have had to gone through a tremendous amount of effort. I did look at the books and correspondence between owner, accountant & IRS.

And again, i'll be asking for money up front.

[JG EA]

See IRS Rev. Proc. 2008-35.

The consent must be on a specific size of paper and point type.

There are also specific wording that must be included.

Also see Reg §301.7216-1, Reg §301.7216-2, Reg §301.7216.3, Rev Proc 2008-12, 2008-4 IRB, and IR 2008-2.

I think I have all those listed correctly. From a recent 1040 seminar section on ethics.

To comply with the procedures, regs, and required wording, mine is two pages long!

Thank you for this information! I would have been in violation with the current consent form I have. Perhaps this would have been mentioned in year end update classes or in TTB but I have missed this so far.
A couple of points: I was interested in the star trek "Q" being so highly regarded by the IRS. Question: you don't think checking is included in getting permission do you?

[outwest]

Hmm.. interesting

but it strikes me as these regs are targeted to situations where the preparer of the return is initiating disclosure to other parties for marketing or other services. The examples in the Rev Proc seem to address that situation.

I think that is distinguishable from the taxpayer directing the preparer to send copies somewhere. The prior preparer is simply following the written instructions of the taxpayer, I don't think the law and regs are intended to prevent that.

That said, if one isn't comfortable with the letter, nothing prevents a more detailed release. it's interesting that the examples in the rev proc are 2-3 paragraphs.

[JG EA]

Yes, I read this over more carefully today. I started typing out the paragraphs to work into a Consent to Disclose that clients can sign. You seem to be right. Nothing seemed to fit. Just geting a client's tax return from another preparer when needed or even giving a client's tax return to a bank when they have a signed form is not what this is all about.

But, I did think of a very good thing to do with this. When the IRS asks for my client's bank, telephone number, etc. I am going to say - 'I haven't gotten an IRS required consent to disclose in order to release this information.'