Sub S Bankrupt

[Kurly]

Wow, Client called today, wants to file his Sub S as Bankrupt. What do I do? Any suggestions. Sub has no assets, To many contractor supplies extended him lots of credit.

Bank Account less than $1,000.00. His wife does the books I do the tax return using her information. She gives me a list of Cash In clients with name and $ amount. She also gives me a list of bills by category of expenses and the bank statements.

Kurly

[JohnH]

What do you do?

1) Estimate the amount of time you think it will take for any remaining work for him (payroll reports, w-2 forms, IRTS correspondence, final returns, etc).
2) Double the above figure
3) Get a retainer for 150% of the amount you estimated in step 2.
4) Refer him tp a bankruptcy attorney

[Corduroy Frog]

Statement of Affairs

Kurly, someone will need to prepare a "Statement of Affairs." If you're not familiar with it, refer him to a CPA. And the lawyer John mentioned will have to be drug in before it's over, if he doesn't have his own.

A Statement of Affairs is a balance sheet showing Assets at FMV and Liabilities. The FMV should be at liquidation value but not ridiculously low. These values will most likely not be the same as for taxes. However, if you have been doing his taxes, you may likely be sucked in to this even if you refer him to someone else because of your historical knowledge.