How to respond?

[AccTaxMan]

How would you respond if your client asks you the income range that he will be eligible for the EITC?

Let's take it to the next level...how would you respond if he asks you the income range that he will be able to get the maximum EITC?

Should we just refuse to answer such question at the expense of pissing off the client?

[JohnH]

Send him the link to the IRS web site (or write it down for him).

When people ask me general questions like this, I usually tell them my software does all these calculations for me and I don't keep this stuff in my head.

[Uncle Sam]

How to Respond

Under the conditions you propose -
I would tell the client - "The door is that way".

One of my first experiences when I started out in this field, even before I became an EA,
I had a client who clipped out a copy of then columnist Sylvia Porter who showed a chart of the maximum ranges of itemized deductions that were considered "normal" by IRS at the time, for different filing statuses and incomes and shoved it under my nose and expected me to automatically use the "maximum allowed" for his situation.

That was the last time I dealt with him.

[ChEAr$]

While my usual response would be along the lines of JohnH's #2 above, it might depend also on whether he were a schedule c client, or someone who worked always for wages,
and never got a 1099misc.

And I might add when talking to him, that congress has yet to finalize this year's tax law.
Which is true of course, cause as Yogi says, "it ain't over, till it's over."

[abctax]

Depends..

If an existing client, just asking out of curiosity, I'd answer (altho along the lines of JohnH's response....which is true. I don't memorize all those ##s).
A new client would be a different story. I'd likely ask why they were asking - and wouldn't provide any answer until after they provided their income/expense figures.
EIC fraud is serious - and no client is worth suspension/sanction.

[JohnH]

You know, that's the kind of client that you show the door AND you ask them to give back your business card as they're leaving.

[erchess]

My View

There can't be much argument about Sam's column reading client. He's out to commit fraud. The scenarios in OP to my mind could be simple curiosity. I like the idea of helping them find IRS sources instead of telling them directly in case I'm in error or in case fraud is in play.

Question for anyone who cares to answer - how and why, if at all, does the situation in OP differ from the situation where a person asks about the points at which itemized deductions or personal exemptions begin to phase out or how to minimize their exposure to AMT?

I do personally see one difference. The IRS has declared war on tax professionals who prepare returns that are even arguably fraudulent with respect to EIC, Mileage, or charitable contributions whereas to the best of my knowledge they normally give us reasonable benefit of the doubt when our clients may have committed fraud over other issues.

[JG EA]

How would you respond if your client asks you the income range that he will be eligible for the EITC?

Let's take it to the next level...how would you respond if he asks you the income range that he will be able to get the maximum EITC?

Should we just refuse to answer such question at the expense of pissing off the client?

I don't know. I am always curious about this question each year myself to see what wage range the IRS views as needing help.. Maybe the client is just curious.

[Lion]

Eic

Phaseouts and AMT questions, with no other suspicious activity, would make me think my client is curious after watching his tax liability climb as one or both those issues interact in his return, and is just asking about keeping his tax liability from climbing any further. EIC questions as specific as those mentioned would have me worried that the client is trying to get as much free money as possible instead of just being concerned about his own tax liability.

[MAJ]

If their asking - They're looking to get the MAX...

How would you respond if your client asks you the income range that he will be eligible for the EITC?

Let's take it to the next level...how would you respond if he asks you the income range that he will be able to get the maximum EITC?

Should we just refuse to answer such question at the expense of pissing off the client?

In any case - There's no good answer here. We all know or assume the reason he is asking. A link to the IRS website or printout is always a wise choice. But in any case that's why it's SOOOO important to document as much as you can. Ask the extra questions and cover thy TUSH as much as possible. Remember, the guy I sent away may be the same guy that found the answer and goes knocking on your door tomorrow.

I had a recent new client (referral from a long term client). She said she had about $9200 in earnings from sporatically working at a florist but didn't receive a 1099 or W2. She would call around the holidays and ask fi they needed extra help. What should she do? (of course she has 1 child). You must report it, right? These days, I wonder!! Makes you nervous as the preparer & client!

In order to prepare the return I asked her to validate her deposits by showing bank statements (which I copied). That way if the IRS audits her (and me by that statement) I did my due diliigence to validate the income as well as ask her various questions (child has different last name but is hers as my wife knows them from school as well. She also stated that she didn't always deposit the full amount and kept some out for groceries, etc. This would have pushed her higher to the maximum credit. She could not give me accurate figures on the cash amounts she kept out. What should I do? Report or go with the documented amounts? I went with documented.

What would you have done?

BTW: NJ just sent her a letter asking for a Tax ID #, Sales Tax info & copy of Federal Return before they will release EITC. Now they are forcing her to become their RAT. Should she say who she worked for? Puts us in bad situations.

What's your take on this mess?

[OtisMozzetti]

Tax Planning Information

...
Question for anyone who cares to answer - how and why, if at all, does the situation in OP differ from the situation where a person asks about the points at which itemized deductions or personal exemptions begin to phase out or how to minimize their exposure to AMT?
...

Actually, the information really is legitimate "tax planning" information, just as with any other tax rule such as the itemized deduction and personal exemption phaseouts, or such as AMT exposure, which you mentioned. The difference with EITC is that we must be especially diligent not to tolerate false statements by the taxpayers.

...
I do personally see one difference. The IRS has declared war on tax professionals who prepare returns that are even arguably fraudulent with respect to EIC, Mileage, or charitable contributions whereas to the best of my knowledge they normally give us reasonable benefit of the doubt when our clients may have committed fraud over other issues.

I will never be sure what issues the IRS is going to declare war upon. It would seem necessary to make reasonable inquiries, and to advise clients to avoid IRS problems, with all types of potential issues.

[ChEAr$]

Very interesting discussion

Concerning the lady who usually has "about" 9200$ in revenue with no 1099's, IF.....
and that's a big IF... I took her on, I would as one said above, look at all 12 banks statements, like IRS might do on one of "those" audits", then demand copies of all
deposit slips, probably a facsimili on bank statements, but if not, she could pay for copies,
plus have her go to the companies who paid her and get a list of her payments.
The latter would form a separate list of revenue to be attached to the paper filed return.

Wow; am I hard, or what?
(don't answer that.)

[erchess]

Maj

I would say she has a choice. If she rats out her employer she will get EITC from the State but she will most likely lose the revenue stream and the ability to use this Florist as a reference. If she does not rat out her employer she will not get EITC from the State and she may face other hassles with State and IRS but she would seem likely to keep the income stream and ability to use the Florist as a reference.

If she does not rat out her employer I would seek legal advice on the advisability of retaining her as a client. I would certainly think twice before I accepted a client referred by her. No Professional wants to be known to the taxing agencies as one who does very many shady returns.

I like Harlan's idea of making her get me both a statement from the employer of what she was paid and bank statements to see if there is any other income.

[MAJ]

Statements received....

I like Harlan's idea of making her get me both a statement from the employer of what she was paid and bank statements to see if there is any other income.

The only way I agreed to file her return was IF I had copies of bank statements to back up her deposits. It's too easy to just 'say' what you made. There has to be a line we cross (or don't) with accountability.

I have all clients sign the following statement after fully reviewing the return with the client. I make sure each figure on Form 1040 is understood and pointed out as to how the end figure was derived. Subsequent forms are also reviewed. Before completing their PIN or signing the return I ask them to be sure they understand and agree with the information as reported. Some listen, other have that 'glazed' look in their eye. But most all agree I review the return in greater detail than anyone else ever has.

Please review the letter below for any pervceived Errors or Ommissions or suggestions on how to improve the content to better protect my @$$ets.

Thanks



COPY OF LETTER I have clients sign:

This is a letter of agreement regarding the services to be provided. The objective of this letter is to communicate the terms and conditions of the provided services.

The specific services to be provided are listed in the invoice accompanying this letter.
In order to complete the services, you will be asked to provide certain information. It is your
responsibility to make sure the provided information is complete and accurate. The services do not include any verification of the information you provide. It is also your responsibility to maintain records of this information since you may need to satisfy tax authority inquiries.

The fees for these services are indicated on the invoice accompanying this letter. Please note that additional fees beyond those indicated may be necessary. You will be contacted for approval prior to the incurrence of additional fees.

If you agree to the terms and conditions, please sign and date this letter and return it with your payment. A separate copy of this letter is provided for your records.

Sincerely,

XXXXXXX