I thought I'd run this by here. Here is the scenario:
I have a potential new client. Evidently they started a business last year but didn't file it on their tax returns as it was a "sideline". The business has grown and they want to do things right. I told them what they need to do accounting wise and for income taxes going forward (and looking back)
They are wanting to refinance their mortgage and the bank wants an income statement. I am a CPA and can do this but normally I'd do an OCBOA Income tax basis report. The client has given me some figures which look reasonable enough.
Here is my dilemma: Is it OK to prepare a OCBOA income tax basis income statement when the tax returns in question didn't show this income? And is it OK to have an OCBOA income tax basis statement with just a compilation report - no balance sheet, cash flow or anything else? I'd feel much more comfortable if this were just a prescribed form but it is not.
Of course my recommendation to the client is to amend those tax returns. I told them that a bank most probably won't consider the income if it is not reported on a return. I'm just curious what you would do?
Carolyn
I have a potential new client. Evidently they started a business last year but didn't file it on their tax returns as it was a "sideline". The business has grown and they want to do things right. I told them what they need to do accounting wise and for income taxes going forward (and looking back)
They are wanting to refinance their mortgage and the bank wants an income statement. I am a CPA and can do this but normally I'd do an OCBOA Income tax basis report. The client has given me some figures which look reasonable enough.
Here is my dilemma: Is it OK to prepare a OCBOA income tax basis income statement when the tax returns in question didn't show this income? And is it OK to have an OCBOA income tax basis statement with just a compilation report - no balance sheet, cash flow or anything else? I'd feel much more comfortable if this were just a prescribed form but it is not.
Of course my recommendation to the client is to amend those tax returns. I told them that a bank most probably won't consider the income if it is not reported on a return. I'm just curious what you would do?
Carolyn
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