the liability involved in giving a Corporate return to a bank?

[tacks]

If a CPA cranks out an 1120 S quickly for the client to show to a bank when asking for a business loan how much liability is involved? Could the CPA be sued if numbers are off?


Should he sign the return? should he sign "CPA?" Write a disclaimer with it?


Their book keeper doesn't have year end completely tied out yet so the numbers MIGHT be off. But gross revenue is accurate. And totalexpense is probably OK although some expenses might be misclassified.

[the client will NOT send this return to IRS, so no problem there]

thanks in advance

[taxmandan]

You better have some really, REALLY good E&O insurance if you are going to do this. I prepare tax returns to calculate tax owed not for banks to decide about loans. Every return I prepare has that disclaimer in the cover letter, it is not for any use except to determine tax and is not intended for any other use. If some business wants to give a complete & accurate return to a bank, it would only be a return that was prepared for tax determination.

[Koss]

Preliminary Draft

You could mark all pages of the return with the word "draft" or "estimate." Let the client explain to the bank that they don't have all the final numbers yet...

I have a PDF generator that allows me to put "stamps" over each page with anything I want, such as the word "draft."

Some office supply stores still sell rubber stamps that do not have be custom ordered, with terms like "copy" or "draft."

BMK

[Burke]

They are playing the CYA game. Trying to prove to the regulators that they are depending on the verification of others as to the accuracy of income. Don't play that game. Just say "No." I did, and the TP still got the loan. How he got it, I have no idea, since he essentially had NOL's for the previous two years and the tax returns showed that.

[jimmcg]

Competant loan officers can evaluate a loan applicant's credit risk and make the loan determination. Incompetant loan officers try to get third parties to share the credit risk.

[Corduroy Frog]

Your Roles

Tacks, you had best get a handle on what your role is for this client or you're going to step in some quagmire that you want no part of.

Prepare the client's tax return. Period. No opportunity to be accused of double-talk if you simply do this and avoid being accused of incomplete documents, acceptance of biased input, etc.

Give the client his a copy of his tax return when you are finished. Your signature is no more than what is necessary to meet your professional obligation for preparing tax liability. Nothing more than that. If the bank needs to have the tax return mailed in a separate envelope from your office, have the client give you written permission.

[AJsTax]

why not do the standard

income statement and balance sheet and put a standard compilation letter on top of it that states that this is not an audited Income statement and used only numbers supplied by the client, then sign the compilation letter only?
That will have most of the information on it that is on the income tax return without the risk of preparing an inaccurate return.
And sometimes you just have to say no, we do not have enough information to prepare an accurate set of reports.
And be sure to get a signed release before sending anything to the bank.

[ttbtaxes]

"The bookkeeper didn't have time to do this", "The bank wants that." Too bad, that's not my problem. Don't let the client shift the burden of the proverbial 800-lb gorilla from his back to yours.

I wouldn't provide the client with a draft copy of a return I knew was not correct. It's not my problem the client needs something immediately. I'd hold firm and provide a final product when I had all of the information.

Even if you were to adequately disclose, and cover yourself, the loan officer may never forget it when they get a "final return" where the numbers are different.

Your reputation is at stake.

[JON]

What world

are you guys in. If bank has loaned to a client they will always ask for the income tax statements, even if they have financials. If your thinking about buying an existing business would you ask only for a financial statement, prepared by the seller, or would you also ask for the sellers income tax statements. You can give the income tax statement to the bank or the can client zerox or give his copy makes no difference. I have never thought of stamping an income tax return for management purposes only.

[Burke]

The fact is, they will always ask. And the client can give them whatever he wants. Copies of the income tax returns, financial statements, P&L's to-date, etc. But the preparer is not required to back up all the information or certify to it, unless it is a CPA who does an official audit in that capacity. The pendulum has swung in the other direction, where instead of relying on "stated income" and liar loans, they now want verification from anyone they can convince to give it to them. That may not be a bad thing, but I wouldn't sign off on it unless I was the bookkeeper as well, and had access to the bank statements, income and receipts each month.

[JON]

The liability

for preparing a corprate income tax return does not change if the client gives a copy to the bank or the preparer gives a copy to the bank... It does not increase or decrease by who submits it to the bank or the IRS.

[taxmandan]

The OP wasn't about giving a tax return to the bank, it was preparing a psuedo 'sort of' tax return for the bank that was not going to be what is filed with the IRS. That alone spells trouble for the preparer and client. I have no problem with giving a complete "As filed" tax return to the bank, but it would be a copy of what went to the IRS. Anything else is going to be trouble.

[taxxcpa]

Tax return solely for loan

If you prepare a tax return which is not to be filed and is just to get the loan, you are, in effect, preparing something like a statements that should be accompanied by a compilation report.

The safest approach would be to prepare a compilation report, then MAYBE prepare a tax return with all the same figures with 'See Accountant's Compilation Report" on every page. The report should explain that the figures are preliminary and might be changed before finalizing the tax return.

You should not prepare a "compilation" without a compilation report.

[BHoffman]

http://www.xtranormal.com/watch/7515137/

[geekgirldany]

http://www.xtranormal.com/watch/7515137/

Toooo funny!

"All I need for you is to write a letter so I can approve the loan."
"All I need is a letter from a CPA so I can approve Mr Client's loan."
(repeated 10 times)

"Don't worry... if the fax is blurry."

"I found a CPA on the internet that will write the letter for only $25"