I have a client who is trying to get his lender to approve a short sale of a rental property. Today, I received a mail from the lender. They attached a copy of the tax return that I have prepared for my client last year and asked if "the enclosed tax return is factual". Well, I have no problem to verify that I have prepared the tax return and it is the same as the one that they have attached in the mail. But they want me to verify that the tax return is 'factual'. Does that mean I have to verify that all the figures on the tax return are accurate? I have prepared the tax return based on information provided by the client. But am I in the position to verify that the information that he has provided to me is accurate? I honestly do not think so. Opinions? Thanks.
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I would reply just as you did in this post - this is tax return I prepared from information provided by client WITHOUT any audit verficiation! -
But they want me to use their form. And on the form, it just says"the tax return is factual" and want me to answer yes or no. Do I have the right to refuse to use their form, but instead write them a reply letter with my own wordings?Originally posted by luke View PostComment
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You have any rights you choose
I have had these types of forms presented to me in the past for clients trying to obtain a loan - never had one requested based on a short sale??- I have respectfully declined, and submitted my own "verbage" along with my normal disclosures
Something to the effect - I prepared the return, ( I can not guarantee that this is the return the tax client filed with the government agencies) unless you efiled the return in question- the information contained in the tax return was presented by the tax client, and I did not conduct an audit of those items. I can only attest to the preparation of the return, using due diligence as required, and information as represented and received from the tax client.
Keep us posted
SandyComment
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Looks like it is a very good reply letter. Thank you Sandy.Originally posted by S T View PostComment
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I would reply with my own wording and enter "see attached" on their form. The're trying to bully you into doing it their way, so you should push back. You don't work for the bank so they have no business tell you how to run your business.
Just a few weeks ago I had a lender threaten to trash a client's loan application over this issue of not filling out their forms their way. I did what I described above, informed the client as to why I would not do it the bank's way, and wished them well. After a couple of ugly email and telephone exchages with me, the bank approved the loan."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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Proceed with some caution
That's an interesting approach by the bank.
Frankly I would be reluctant to sign the bank's form, especially when a reasonable person (not to mention an attorney for the bank!) might read more into the term "factual" than you would like.
De minimis you could provide a simple statement, on your letterhead, that the tax return was prepared by you based upon your normal professional due diligence and the necessary information requested by you/provided by the client.
If the return was efiled by you, then an additional statement to that effect could be added.
I basically concur with the suggestions offered in this thread by others.
Otherwise, your job is not to jump through the hoops lifted by the client's lender!
FWIW, I have encountered similar bank paperwork and returned it unsigned but with "my" response as stated. If there was any head-butting between the client and the lender, I am not aware of such. Of course, it is possible the short sale issue mentioned here may be tilting the table a bit.
FEComment
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Client
AccTaxMan - is your client the owner of the property (borrower) requesting lender to approve a short sale, or is your client the potential buyer offering the lender the $$ on a short sale?
SandyComment
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Why not just reply that you prepared a tax return for year XXXX using unaudited information supplied by the client. If they need verification of what has been filed with the IRS, they can contact the IRS and get a copy of the filed return.You have the right to remain silent. Anything you say will be misquoted, then used against you.Comment
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I've dealt with this myself and always include my own statement. I had the bank call me a couples of times wanting me to fill it out their way. When I explained they did try to push me into it by saying the client would not get the loan. I told them that was not my problem what I provided to them was enough to prove that I prepared the return based on what the client provided and that I did not audit the items listed.
I had one mortgage person wanting me to say that I was a CPA and that I had prepared 5 years of tax returns for a client when I had not. Both the client and mortgage person kept saying "its not that big of deal... just for our records". I did not budge and the client went somewhere else.Comment
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Similar thing just came in to my office this week. Clients return was efiled in March, in July he called and said bank wants confirmation of the filing of the return. I gave him the acknowledgement I received from my software company. Tuesday he called and said the bank won't accept that, they want a printed copy of the extension form with confirmation by IRS. I told him that's all there is, there is no printed copy with confirmation, told him they can contact the IRS direct with his permission if they want to confirm the filing. I concur with the earlier responses, I only confirm that I prepared an unaudited tax return based on information provided by the client, period."A man that holds a cat by the tail learns something he can learn no other way." - Mark TwainComment
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I would very simply reply on my own letter head that I indeed prepared to tax return and signed the one filed with IRS.
then I would refer them to the jurat located at bottom of page 2 where taxpayer and I signed
for further information.
Yeah, make them look that word up in their Funk and Wagnalls.ChEAr$,
Harlan Lunsford, EA n LAComment
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Just recently had a mortgage company pushing me. Client and wife are shareholders in their S-Corp. Bank asked for verification of employment from the S-Corp. I made out a statement that they had been employees of their S-Corp. for XX years, and that I had prepared their personal and business returns (unaudited) for XX years. Lender called me and said the underwriter was insisting that the letter be changed stating that they were self employed. I explained that they were employees of the corporation, and were not in fact self employed. They kept pushing, so I called the client and explained that I would be lying if I made that statement. They called the lender and pushed the lender.
A week later, the lender called asking me to prepare a statement that if the client were to use company funds for the down payment, it would not be detrimental to the business. I told the lender that I had no idea whether it would be detrimental or not, due to the uncertainty of the economy. Called the client, and they were not even using any of the business' money or assets for collateral. I really think that the lenders are trying everything they can to be able to point the finger at us if a loan goes south.
I refuse to be pushed by anyone to do anything that I don't ethically believe that I can do.Gary B., E.A.
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I make no claim as to the accuracy of the information and will not be held liable for any damages caused by using such information.Comment
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The above is a link and contains a sample comfort letter:
"Date
ABC Company
Address
City, State Zip
Dear Mr. _______________:
I am writing to you at the request of Mr. & Mrs. ____________________.
The purpose of this letter is to confirm to you that I prepared the 20XX federal income tax return of Mr. & Mrs. ______________ and delivered this return to them for filing with the Internal Revenue Service (IRS). At their request, I have attached a copy of the tax return and related schedules provided to them for filing.
This return was prepared from information furnished to me by Mr. & Mrs. _______________. This information was neither audited nor verified by me, and I make no representation, nor do I provide any assurance regarding the accuracy of this information or the sufficiency of this tax return for your credit decision-making purposes.
I prepared Mr. & Mrs. ___________________ tax return in accordance with the applicable IRS rules and regulations solely for filing with the IRS. As a result, the tax return does not represent any assessment on my part as to creditworthiness and does not include any statement of their financial position or income and expense for the year 20XX in accordance with generally accepted accounting principles and should not be construed to do so.
As you know, a credit decision should be based on a lender’s exercise of due diligence in obtaining and considering multiple factors and information. Any use by you of Mr. & Mrs. __________________ 20XX federal income tax return and this letter is solely a matter of your responsibility and judgment. This letter is not intended to establish a client relationship with you, nor is it intended to establish any obligation on my part to provide any future information to you with regard to Mr. & Mrs. ____________________.
Sincerely,
____________________________________
(Firm Name)
cc: Mr. & Mrs. ______________________ (Client)"
A search for "bank comfort letters" will give you a bunch of sites with other types of sample letters suggested by E&O insurance companies.Last edited by BHoffman; 09-24-2011, 10:20 AM.Comment
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Loan underwriters often act as though they think we're prety dense. Fascinating how many time the banks want to say "it isn't a big deal" while they're asking us to basically accept responsibilty for the return. Well if it isn't a big deal, then it won't be a big deal for them to accept our word for what we can ethically verify either.
Guess the definition of a big deal depends upon whose ox is being gored."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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