Amend questionable return?

[Possi]

I was asked to amend a return to file the 5405 and it is a questionable return. I don't know how to handle this.
The client has a friend in Las Vegas who talked him through TurboTax and told him about deductions he could take.
One is clearly wrong, hobby expenses and no hobby income, but form 2106 is questionable, expensing tools and additional expenses totaling $5000 on taxpayer and $500 on the wife. Non cash charitables of $8000 and zero cash contributions. I know that at least $2k of that was jewelry that wife made and couldn't sell, but they took the sale value. The rest of the 8283 is unclear.
There is a Sch C for him that began in August and had $500 of income and netted over $18,000 in a trumped up loss. He expensed 70% of a truck for a total Sec 179 of over 14k alone. Then things like $1000 supplies and $800 cell phone, oh, and don't let me forget the $400 in contract labor.
They were clearly coached.
What do I do? I clearly did not prepare the original return, and I don't want to be liable if they are called on these expenses one day.
If I amend for the 5405 and only correct the hobby expense, would that be legal? The suspiciality (is that even a word?) of the rest of the return is my own suspicions, and I would not accuse them of cheating.

Some people should lose the right to prepare their own tax returns. And Mr Las Vegas.... well.... nevermind....

What should I do?

[spanel]

Usually my stance is... If im going to correct 1 thing.. Im going to fix it all.. or no amendment.


Chris

[Burke]

I agree. Tell the client that amending the return and signing off on it means reviewing all the items just like you would if you were doing the original. And ask for documentation of all those items you are questioning. Like cancelled checks for the "labor," receipts for the 2106 expenses, Sche C items, charitable record detail, etc. These numbers are reeeeally fishy. And, an audit waiting to happen based on what you post just on the Sche C loss and charitable. Two red flags. But, if he can prove everything, well......... My bet is he will go somewhere else. And good riddance.

[jimmcg]

Get a very large retainer up front or simply say no......better things to do this time of year.

[WhiteOleander]

An amended return with a FTHBC will get some close scrutiny. If the IRS audits these clients, they might come after you for not using due diligence. So, I would definately ask to see the supporting evidence. Or refuse the return. Why don't they do the amended themselves? They might be under the mistaken assumption that returns done by paid preparers are less likely to be questioned.

[S T]

Well

I agree with others, either prepare the amended retrurn the correct way (all corrections - with the 5405, requesting all of the documentation, or have the "friend" in Las Vegas assist the taxpayer in filing TT, and let the taxpayer file for the amended on his own as self prepared.

Your signature and PTIN aren't going to make a difference in whether or not IRS is going to accept the Amended return or process any faster.

And I don't believe I would file an amended return on one tax item alone, without reviewing the entire return for other corrections. ( My 2cents worth)


Sandy

[Lion]

Amen!

Amen! Ask him to bring in his file with all his documentation when he brings in all the documentation for the FTHB. You probably won't see him again.

[JohnH]

The jurat on the 1040x should answer all your questions about what you are signing on to when you prepare the return. Sign it, and you own responsibility for it all.

Personally, I wouldn't touch this return even if they DID agree to making all the changes necessary, and there's no amount of documentation they could provide to satisfy me about the things you've already mentioned in your post. I'm even betting the FTHB credit is fishy. (I'd probably want to see the HUD-1 just out of curiosity, just to see how blatant the "tweaking" was and if I could spot the alterations, but I digress)

I'd tell them flat out I can't help them, and I think I'd even ask them to give my business card back to me.

[origun]

Give him the forms

I once had a similar situation with an original return that I didn't want anything to do with. I printed out a blank 1040X, marked in pencil where his additional credit information should go, printed out a sheet of IRS instructions for the credit, gave him an envelope with a mailing label and told him that he should be able to do it himself. It took very little of my time, I didn't put my name on something I couldn't defend, I saved him prep fees and hopefully I didn't alienate him which might cause him to "bad mouth" me out in the community. I did, however, warn him that amended returns were examined manually and he might be asked for supporting documents by the IRS.

[JohnH]

With some people, it helps you out in the community if they bad mouth you...

[Black Bart]

Ditto

Personally, I wouldn't touch this return even if they DID agree to making all the changes necessary...

My sentiments exactly (and throw in a ten-foot pole). Good grief -- it screams "AUDIT ME!" Think about spending next summer defending the indefensible...

I'd tell them flat out I can't help them...

and, when asked why, I'd just say it's obvious to me and very likely would be to IRS that the whole thing is "made up."

With some people, it helps you out in the community if they bad mouth you...

Amen, brother.

[Uncle]

I would correct the return!

This type client is not unknown in my practice. If the return is to be audited, I am going to collect my audit fees - in advance. All of the entries on the corrected return would be correct and documented by me. I would sign it only if I was sure that every number was correct and properly documented. Since the potential client may have second thoughts when they see the result, my retainer - collected in advance of any serious work - is going to be large and non-refundable. If the amount of work to correct the return exceeds the retainer, I would stop work until I had collected an additional retainer. When these jobs are actually finished and the proper tax is actually paid, I always feel some satisfaction that another cheater has finally paid at least some of their share.

[Possi]

I agree

Thanks everyone. I agree 100%.

The return is for the property manager where I pay my rent, so I don't want to offend her. She wants me to amend it, but I'm not going to do it. I really don't want to be responsible for any of it and she can't afford to pay me what it would cost anyway.

I am going to give it back to her and tell her to call her Las Vegas friend, very sweetly.

Does the IRS not audit these frivilous returns?

If the IRS would subsidize our policing of frivilous and flat-out illegal returns, they would close the tax gap much quicker.

[DaveO]

We only amended or prepared returns with the FTHBC for existing clients or in some cases children of our clients. I will only amend a return prepared by someone else if it's very simple such as a dependent left off unless I do the total review of the source data. I like the idea of providing the forms and saying goodbye.

[Burke]

Thanks everyone. I agree 100%.

The return is for the property manager where I pay my rent, so I don't want to offend her. She wants me to amend it, but I'm not going to do it. I really don't want to be responsible for any of it and she can't afford to pay me what it would cost anyway.

You could point out to her the obvious problem items which you posted to bring to her attention the probability of audit risk, all the while refusing the return and convincing her you are really trying to help.