Dilemma

[oceanlovin'ea]

Hypothetical situation:

John and Mary Smith file a joint return with children. John has been unemployed for the last year drawing unemployment compensation from the state.

EA preparing the return knows he was doing work on side from time to time. Asked them how much he made. He gave amount but told preparer that the checks had been issued in Mary's name so it would mess up his unemployment.
If EA prepares the return, the amount of money IRS receives from the return will be accurate and it will match all the records the IRS receives.

Would you prepare this return?

Linda, EA

[bgiez]

No, I wouldn't

Two things wrong here - he's trying to game the system by not reporting income while he is collecting unemployment, and if the return is prepared crediting the spouse with the income, you're inflating her future Social Security benefits. Not to say that this kind of thing doesn't go on all the time, but in this situation, you know the truth because the client told you, and to prepare the way the client wants would be to knowingly prepare an inaccurate return. Now they'll just go down the street if you refuse to do that, but at least you will have done the ethical and correct thing. And who knows, maybe they will see the error of their ways and agree to file a correct return.

Did the spouse receive a 1099-MISC?

Why are we expected to bail the client out by being an accomplice to their bad behavior? (That's just a rhetorical question :~)

[oceanlovin'ea]

Agree

I agree.
Even if they just brought in the forms for preparer to do the return,preparer would have had to ask what were you doing for this company. if wife just sat there and said she did work she didn't do, the preparer would do the return without any problems.

But if John says this is what we did, preparer has knowledge of something really illegal that has been done. As an enrolled agent, doesn't circular 230 prevent one from doing this?

I think this is an ethical question actually.

Linda, EA

[veritas]

I agree

Two things wrong here - he's trying to game the system by not reporting income while he is collecting unemployment, and if the return is prepared crediting the spouse with the income, you're inflating her future Social Security benefits. Not to say that this kind of thing doesn't go on all the time, but in this situation, you know the truth because the client told you, and to prepare the way the client wants would be to knowingly prepare an inaccurate return. Now they'll just go down the street if you refuse to do that, but at least you will have done the ethical and correct thing. And who knows, maybe they will see the error of their ways and agree to file a correct return.

Did the spouse receive a 1099-MISC?

Why are we expected to bail the client out by being an accomplice to their bad behavior? (That's just a rhetorical question :~)

The state unemployment funds are going broke. My rate has increased 250% in two years.

Why would I help someone who is stabbing me in the back?

[Peachie]

Here in Georgia Linda,

people are being served warrants right now for doing what your client did. When I drew unemployment, I didn't claim any money during tax season. I knew it was against the law and was unethical, though, I probably could have "gotten" away with it. Everybody gets mad at Washington for intruding into our lives and then we turn around and have people like these two that's certainky a big part of the problem. My state is in the hole for unemployment insurance because of the gamers in the system. I am not an EA but I know what's right and what's not. Be careful.

Peachie

[oceanlovin'ea]

dilemma averted

Hypothetical dilemma averted. Told client I couldn't prepare the return that way and that when I sign the return I am saying that everything on that return is accurate and I knew it wasn't.
So he told me to report it in his name. Honest after all.

Linda, EA

[BP.]

Told client I couldn't prepare the return that way

So he told me to report it in his name. Honest after all.

Best possible outcome!

[Jesse]

people are being served warrants right now for doing what your client did. When I drew unemployment, I didn't claim any money during tax season. I knew it was against the law and was unethical, though, I probably could have "gotten" away with it. Everybody gets mad at Washington for intruding into our lives and then we turn around and have people like these two that's certainky a big part of the problem. My state is in the hole for unemployment insurance because of the gamers in the system. I am not an EA but I know what's right and what's not. Be careful.

Peachie

EXACTLY!!!!

[bgiez]

If you give 'em half a chance,

I think most people would prefer to be honest. In addition, I think that the fact that this client decided to do it the right way means he values your services.

Barbara, E.A.

[mactoolsix]

Pay back unemployment?

I'm curious - if he did make enough "side money" to actually effect the unemployment he received, will he fuss up and repay some of the unemployment funds? These days government computers seem to "talk to each" other more & more.

Isn't reporting this to the unemployment department part of our code of ethics? or so you let it ride and see what happens?

[Burke]

Isn't reporting this to the unemployment department part of our code of ethics? or so you let it ride and see what happens?

I don't think it is our responsibility to "report" this. Preparing the tax return correctly is as far as it goes.

[TaxmannEA]

I'm curious - if he did make enough "side money" to actually effect the unemployment he received, will he fuss up and repay some of the unemployment funds? These days government computers seem to "talk to each" other more & more.

Isn't reporting this to the unemployment department part of our code of ethics? or so you let it ride and see what happens?

You might want to look at Circular 230 in regards to unauthorized disclosure of confidential information by a preparer before you make that call.

[mactoolsix]

You guys are good!

You might want to look at Circular 230 in regards to unauthorized disclosure of confidential information by a preparer before you make that call.

Yep - From Circular 230 Knowledge of client's omission:
The practitioner must advise the client of the consequences
as provided under the Code and regulations
of such noncompliance, error, or omission.

Thanks,