Taxpayers who we suspect are omitting income

[Bees Knees]

I don't see anything wrong with dyne's suggestion to refer to a CPA. I get referrals all the time from other tax preparers who for one reason or another cannot or will not do their return. Some turn out to be good clients. Others, I can tell when they are trying to pull something. I'm not afraid of a potential bad client. I simply tell them what's what and if they don't like it, go away.

[FEDUKE404]

Am I missing something?

Rest assured I have often referred complicated returns to those with much higher tax skills than I possess.

But I would NEVER "refer" a potential client who I strongly suspected of having a fraudulent return to another specified professional!

And I would be terribly "irked" if anyone referred such a client to me.........

Referrals in/out could easily revolve around client personality clashes, costs involved, available preparer time/skills, and much more.....but I cannot foresee being in any professional relationship (sender or receiver) where the "this return stinks!" issue is a major factor for a referral.

The closest I might come is to suggest considering a store-front operation, whose pockets are generally deeper. Otherwise my interview would end with something along the lines of "I'm sorry, but I cannot prepare your return."

FE

[taxea]

I don't automatically turn away a client who appears to obviously be hiding things. I explain the consequences that are likely to occur should the IRS find a reason to question him. If he chooses to continue to claim he isn't trying to cheat then I will tell him why I am not comfortable taking him on as a client. If he still continues to claim he has declared everything I tell him that he will have to find someone more willing than I to jepordize their standing with the IRS. Then I turn him in.

[FEDUKE404]

This is a joke, right??

I don't automatically turn away a client who appears to obviously be hiding things. I explain the consequences that are likely to occur should the IRS find a reason to question him. If he chooses to continue to claim he isn't trying to cheat then I will tell him why I am not comfortable taking him on as a client. If he still continues to claim he has declared everything I tell him that he will have to find someone more willing than I to jepordize their standing with the IRS. Then I turn him in.

At least to me, there is a distinct difference between "explaining the rules" to a client versus dealing with an apparently fraudulent return.

One results, hopefully, in a clearer understanding....the other results in a handshake.

But I have never turned (even a potential) client in to the IRS. Although I obviously have nothing personal to cite, my initial thoughts would be such might well be somewhat counter-productive to future business relationships in the community...

FE

[dyne]

I wish I had omitted my entire sentence which started with "I tend to refer them to a CPA" from my post. Or perhaps I should have said "I tend on RARE occasions to refer them to a CPA..." The main points of my post were overlooked by most who replied. I refer ONLY to ONE CPA, a man who I have know for more than thirty years and I consider to be the BEST in this area. He asked me to go to work for him in 1984 after I retired from IRS. He and I have discussed WHY I refer taxpayers or clients to him and I know him well enough to know how he will treat those whom I do refer. I did NOT refer this client to this CPA and have not referrred ANY client or taxpayer to him in the past two or three years. I almost never refer a taxpayer to this CPA because of the complextity of the issues involved but I do refer to him taxpayers who have very many stock sales and perhaps a few issues which are pet peeves of mine. I thank all who commented. Best wishes.

[Uncle Sam]

Dyne -

Why would you refer questionable clients to a specific practitioner at all, especially if you wouldn't accept them as clients?
Your last post was just a defensive response to issues well raised that we all face and have to deal with.
I doubt we're interested in your professional life history.

[Gary2]

I've been around the internet and usenet long enough to know that participants can fixate on a statement that was written without being analyzed, and that says something that wasn't really intended. Now that we have the necessary clarification, let's not continue to condemn a single incautious sentence inside a larger paragraph that clearly shows the correct intent.

[taxea]

Feduke...there is no handshake. I give him every opportunity, through educating him on the law, to do the right thing. If he doesn't come around I don't do the return. I see no reason not to report him and let the IRS investigation him. The IRS doesn't go to the crook and tell them "so and so told us you are cheating on your taxes". Their investigation usually gives them ample evidence that on its own shows his actions. And there is no negative business results to my reporting him.

[ttbtaxes]

One other thing I thought I would mention. Whenever I've had a client whose income appears low I make sure we discuss why it is low and how they lived on the income reported. If the answers are wishy-washy, they're history. If they describe how they've lived on savings, borrowed money from relative,s or friends, or from other sources, I confirm what I can. If my gut tells me they're being honest with me I make them sign a letter of representation that spells out exactly, in writing, what representations they've made to me.

It doesn't remove me from my responsibility to use proper professional judgment but it does memorialize our discussions. More importantly, if the client is under audit two years from today, they can't try to throw me under the bus by saying they told me the deposits were source of income that I missed.

I get a letter of representation every year from every business tax return I prepare whether it is a corporation, partnership or Schedule C. I also get a letter of representation for every personal return in which a client made a specific representation to me regarding something unusual.

I'm not signing my name to a return unless a client is willing to sign their name to a letter of representation.