Do you think the IRS will catch this?

[bgiez]

New client came in today because they had self-prepared and figured they owed IRS over a grand, but couldn't figure out why. So I look it over and found 3 mistakes: no schedule M making work pay credit, using tuition & fees deduction instead of lifetime learning (already had a degree), and, can you believe it - didn't subtract the standard deduction for MFJ! So I look like a real hero getting them $1700 back instead of owing more than $1000.

Now for the "Will the IRS catch this?" part - as I reviewed their 2009 return, I noticed that they took both the tuition and fees deduction AND the education credit for the same student for the same expenses. Don't you think this should have been caught?

I advised the client that 2009 should be amended and there would be interest and penalties involved. They want to do the amendment themselves.

[AZ-Tax]

I would have them sign a form.

I would tell them since I am not amending your 2009 tax return, I need to make sure that I advised you to amend your 2009 tax return, offered to amended your 2009 and you have rejected my services. This will avoid any confusion regarding our discussion.

You never know, they may change their maid and hire you.

Sorry about that, that was suppose to be "mind", not maid.

About 3 yrs ago I showed a couple who both qualified for the max IRA contribution, their tax savings. The couple refused to contirbute so I had them sign a form that as their tax preparer preparing their 2007 tax return, you would save $ ___ in total income taxes if you contributed $____ to your 2007 IRA. I told them this will stay in my file just in case their is any confusion for once 4/15/2008 passes, you can no longer contribuite to your 2007 IRA. The couple changed their mind and contributed. This year I had a new client refuse to complete my tax organizer. Not even the page that ask for full name, date of births etc. New clients like him seem to have something to hide when they seem afraid to put something in writing.

[JohnH]

I advised the client that 2009 should be amended and there would be interest and penalties involved. They want to do the amendment themselves.

Smart client. If you told me I needed to amend my return and pay more money I'd tell you the same thing - "No need for you to do that; I'll handle the amendment myself. But I REALLY appreciate your bringing that to my attention.".

[PIGLEE]

You never know, they may change their maid and hire you.

That is a good one, now "MAID's" tell people to change their MINDS. I guess they do more than change the sheets.

[ChEAr$]

I would tell them since I am not amending your 2009 tax return, I need to make sure that I advised you to amend your 2009 tax return, offered to amended your 2009 and you have rejected my services. This will avoid any confusion regarding our discussion.

You never know, they may change their maid and hire you.

Just to be clear, you have no obligation to tell them that. You did not prepare the 2009 return and have no liability for anything.

[bgiez]

Well, I figured

I would tell them since I am not amending your 2009 tax return, I need to make sure that I advised you to amend your 2009 tax return, offered to amended your 2009 and you have rejected my services. This will avoid any confusion regarding our discussion.

You never know, they may change their maid and hire you.

the maid was the clean-up crew

[snowbird]

Originally Posted by AZ-Tax
I would tell them since I am not amending your 2009 tax return, I need to make sure that I advised you to amend your 2009 tax return, offered to amended your 2009 and you have rejected my services. This will avoid any confusion regarding our discussion.

Just to be clear, you have no obligation to tell them that. You did not prepare the 2009 return and have no liability for anything.

If biziez is a EA, CPA or Attorney, he has an obligation to tell them to amend the return.
Cir 230 § 10.21 Knowledge of client’s omission.

A practitioner who, having been retained by a client
with respect to a matter administered by the Internal
Revenue Service, knows that the client has not complied
with the revenue laws of the United States or
has made an error in or omission from any return,
document, affidavit, or other paper which the client
submitted or executed under the revenue laws of the
United States, must advise the client promptly of
the fact of such noncompliance, error, or omission.
The practitioner must advise the client of the consequences
as provided under the Code and regulations
of such noncompliance, error, or omission.

[JohnH]

I don't see anything in there about it being in writing...

[snowbird]

I don't see anything in there about it being in writing...

AZ just said he would "tell" them. I would certainly make a notation of the date and discussion in the file for later reference. The client would be happy to throw you under the bus to avoid a penalty.

[geekgirldany]

I would get it in writing if they paid you to review the return. If not I would just make notes myself about the conversation.

They may hire you.... and they may not. My long story about reviewing a return:

Last year I was hired to review a return. The clients are friends of another client. They were owing quite a bit compared to the previous years returns. I looked over the return and found estimated taxes were not entered correctly. About a $10,000 mistake. After this mistake was discovered they asked if I could review their return further. I actually charge them as though I was preparing the return because it was verily complicated.

I found one more mistake.I did not give them a copy of the return I prepared but reviewed it with them and told them to call their CPA about the mistakes. I had them sign an engagement letter telling them what I found, to amend the return, and to talk to the tax preparer.

They were pretty mad about the mistake. I tried to calm them down by it is no excuse but mistakes happen. I talked to them about a week later and they said the CPA apologized and fixed the mistakes. They had been going to him for a long time.

Well you know I thought I probably had gained myself a client. Well they went to the same CPA again and friend said they want me to look it over again. I said yes but I had forgotten about the situation last year.

Kinda chaps me that they went back to him to do the returns and now wants me to check it again. Doesn't make sense.

[ChEAr$]

Originally Posted by AZ-Tax
I would tell them since I am not amending your 2009 tax return, I need to make sure that I advised you to amend your 2009 tax return, offered to amended your 2009 and you have rejected my services. This will avoid any confusion regarding our discussion.





If biziez is a EA, CPA or Attorney, he has an obligation to tell them to amend the return.
Cir 230 § 10.21 Knowledge of client’s omission.

(quote from 230 omitted for brevity's sake.)

But... client did not retain in this case to prepare the 2009 return,
hence my contention there is no requirement. Of course I think we all would tell him, but doesn't have to be in writing. Unless you think you should cover your ... uh.. assets in all cases. Very often we get hung up on what we read and it almost causes paranoia! (grin

[bgiez]

Just to clarify - I was only reviewing the 2009 return in order to prepare the 2010 return. You know, checking for items that would impact the 2010 return and to see what sourrces of income they had, historically. I would also have reviewed the 2008 if they had it with them as instructed. I verbally informed them of the error they made and the need to amend the return and documented that fact in my client notes.

FYI: bgiez is a she, and an EA. For background, I started out preparing '94 returns in a franchise office of the green box store. When the franchise was sold in '02, I worked for one year for the new owner, but was very disatisfied with how the office was run. I decided to study for the EA exam, took it in the fall of '02 and passed all 4 parts the first time, and then went out on my own. The franchise office was a great training ground because I saw all kinds of clients and situations. Now I don't prepare anywhere near the same number of returns each year as I did when working for the franchise (and I have a "day job," too )and don't see the variety, either, so I feel as if I've lost my edge. I have mostly clients with investments, a few farmers, a few trusts, several with rentals, and a large proportion of sole props.

I appreciate all of the responses on my posts, but don't often respond my self to the posts of others, either because someone else beat me to it or because I am unsure or have no idea what the correct response would be.

[Davc]

But... client did not retain in this case to prepare the 2009 return,
hence my contention there is no requirement. Of course I think we all would tell him, but doesn't have to be in writing. Unless you think you should cover your ... uh.. assets in all cases. Very often we get hung up on what we read and it almost causes paranoia! (grin

Where in the Circ 230 quote does it limit the requirement to returns the practitioner prepared or was engaged to prepare? The use of the words "any return, document, affidavit, or other paper which the client submitted or executed under the revenue laws of the United States" seems to make it all inclusive.

[ChEAr$]

Where in the Circ 230 quote does it limit the requirement to returns the practitioner prepared or was engaged to prepare? The use of the words "any return, document, affidavit, or other paper which the client submitted or executed under the revenue laws of the United States" seems to make it all inclusive.

It is not.
Client did not engage preparer for any purpose reference the 2009
return.

Now if client had sought a review of the 2009 return and preparer agreed to do it for compensation, 230 does apply.

[Black Bart]

It's not catching...

Do you think the IRS will catch this? ...client came in...they took...tuition and fees deduction AND the education credit for the same student for the same expenses. Don't you think this should have been caught?

Should have but probably won't. If not caught during processing, those types of things usually never come up again. Here's another example -- a few clients I've picked up brought old returns claiming Retirement Savings Credit, had taken 401 withdrawals in the two preceding years, and got the credit anyway. Heck, one took it in '09 and had a withdrawal right there on the face of the '09 1040 and it STILL went through without a hitch. Talk about sleepin' on the job.

I appreciate all of the responses on my posts, but don't often respond my self to the posts of others, either because someone else beat me to it or because I am unsure or have no idea what the correct response would be.

At last -- a kindred spirit! Your candor is most admirable, bg -- I just knew there was somebody out there who could put my operating philosophy into words .