Privacy Issue

[Kram BergGold]

A few times a year I am asked to write a letter to a mortgage company saying Mr Jones has been self employed for the past 10 years. Typically my client will ask me to fax it to the mortgage company. Do you think this requires a signed consent form from the client?
My feelin gis maybe not as there is no information in the letter about income or deductions. There is just the mention of being self employed.

[Burke]

You know, this is ridiculous. They have copies of the tax returns, and it shows a Schedule C in all probability. I would ignore it unless you can personally certify that you have frequented his business for the last 10 yrs. If they want that documentation they can call the city/county for his business license and record.

[ChEAr$]

Yes, I would encourage all of us to take a stand on this issue.

I had three calls yesterday from Well Fargo in Iowa, three different girls/women, each not aware of what the other one was doing. No written letter was needed, just my word that my client had been self employed and was still.
I could answer the questions without resorting to any tax return information, so didn't see any problem with privacy concerns.

[geekgirldany]

I had a client call wanting me to fax copies of tax returns for a refinance. I returned her call later that day. I guess too late never heard from her. Just talked to her after a week and somehow she found her copies and faxed them herself.

[JohnH]

I'm just wondering if I can verify that any of my clients are self employed if they are tax clients only. I can verify that I prepared a Schedule C based on information they provided for me, but unless I did their accounting work I really can't say for certain that they are truly self-employed.

The banks are trying to drag the tax preparer into the mix if things go south, so I'm getting very cautious about what I say to them. I had a similar conversation with a banker about 2 months ago. She got hufffy and made all sorts of threats about not approving the loan if I didn't sign her little form exactly as it was presented to me, but in the end she found a way to get it done. I guess if she didn't really want to make the loan, my intransigence would have given her a built-in excuse.

[FEDUKE404]

They will not get it from me!

I'm just wondering if I can verify that any of my clients are self employed if they are tax clients only. I can verify that I prepared a Schedule C based on information they provided for me, but unless I did their accounting work I really can't say for certain that they are truly self-employed.

The banks are trying to drag the tax preparer into the mix if things go south, so I'm getting very cautious about what I say to them. I had a similar conversation with a banker about 2 months ago. She got hufffy and made all sorts of threats about not approving the loan if I didn't sign her little form exactly as it was presented to me, but in the end she found a way to get it done. I guess if she didn't really want to make the loan, my intransigence would have given her a built-in excuse.

I tend to agree with John.

Unless I am directly involved in the business activities of a client, I would take the position that I only prepared a tax return for the client. I will not make any other supportive statements nor fill out any forms the bank or whatever might want. With the client's permission, I will provide a copy of said tax return although I normally first inform the client of my position (they already have a copy!) and the "problem" usually goes away.

In this day and age, it is simply not my concern as to what the banks need to maintain their CYA perspective and/or "pass the buck" ideas.

[gboykin]

I told all of my clients this past tax season that I would not give any information to any banks for any reasons. I give the clients a copy of the tax return, and if they need a copy, I will email the client a copy with written consent, or they can pick up a copy at my office for a fee of $25.00 per copy per year.

I explained to them that the banks were trying to make me a part of the approval process, and that I had no business being a part of the loan process. The bank can get a copy of the tax return from the client, and they can get the transcript from IRS and see that what I prepared matches what was reported to IRS. That is my only concern regarding my clients.

Now when the bankers call me, I simply tell them that the client has all pertinent information in regards to the tax returns that I filed, and they must get the information needed from the client or the city/county in regards to how long the business has been in operation.

I was preparing a return for a new client that was trying to get a loan. Their appointment was on April 1, and the lender demanded a letter from me along with 2 copies of the tax return. The banker told me that they wouldn't be able to get a transcript to match the copy. I told the banker that if I got the return finished and e-filed by the end of the day, the information for the transcript would probably be available by the time of closing. The banker was adamant that I would prepare the letter or the client would lose out on the loan. I told the prospective new client that I could prepare their return and file it for them, but I would not be pressured by a bank to prepare a statement that I could not defend in regards to their being in business for XX years. Gave them the option of taking their paperwork and having someone else help them. The client liked my attitude with the bank and had me finish up the return. They called me after April 15 to let me know that they still got the loan.

That's my .02 on this issue.

[AZ-Tax]

I had similar experience a couple yrs ago....oh yea!

I had a client call wanting me to fax copies of tax returns for a refinance. I returned her call later that day. I guess too late never heard from her. Just talked to her after a week and somehow she found her copies and faxed them herself.

Ex client calls up "I misplaced my tax return". Ok, I charge $5 per page $25 max. She said what and hung up. Never heard back from her....do you think she found a cheaper copy of her tax return at Wal-Mart : )

[RitaB]

I agree

You know, this is ridiculous... If they want that documentation they can call the city/county for his business license and record.

Yeah, I'm writing that one down.

Last month, I had a lender asking me to verify that my tax client was "in business." Client does his own bookkeeping, quite the DIYer, and it seems he overlooked his annual renewal with state of TN, and was administratively dissolved. Lender looked it up online.

Suddenly, they thought this was MY emergency.

I said, "How would I know if he is in business? How about calling his vendors and customers and taking a look at his bank transactions?" I have not heard from anybody since.

[Gretel]

What a good thread. I totally agree with not being part of the loan approval process. To come back to the original question about getting the release signed from the client: It is my understanding that we cannot even tell someone else that a client is a client of ours, let alone confirming anything. Even if not explicitly found in the IRS tax laws, I would not want to risk anything. Lawyers always find a way.

Why creating possible hazards down the road?

[ChEAr$]

What a good thread. I totally agree with not being part of the loan approval process. To come back to the original question about getting the release signed from the client: It is my understanding that we cannot even tell someone else that a client is a client of ours, let alone confirming anything. Even if not explicitly found in the IRS tax laws, I would not want to risk anything. Lawyers always find a way.

Why creating possible hazards down the road?

I'm not at all sure we can't mention a client's name. Naturally I would not confirm or deny same to anybody who calls out of the blue, but to other clients, especially those who actually referred Joe Blow to me, sure, " I still see him every March, or April."
Nothing wrong with that.

To completely keep clients from knowing other clients, we would need multiple entrances to our offices plus back doors.

[DaveO]

I respond to a few of these every year. I use some language to the effect of “To the best of my knowledge the tax payer is self employed and has filed Schedule “C” consistent with self employment for xx years.” Lately I’ve had requests to state that the use of business funds would not have an adverse effect on the taxpayers business. I have flatly refused to do this as I have no way of knowing what if any effect the use of business funds for any purpose would have on the business.

[JohnH]

I wouldn't even be comfortable with the "to the best of my knowledge" part of the response. Common sense says it's accurate, but I wouldn't want to be swept up in the mix if the client defaults and the bank is looking for scapegoats. Factually, all you really know is that the client gave you income & expense info and you prepared a Schedule C. (unless you did their regular accounting work).

As for that other insidious question about adverse effects, I agree with you completely. No way I'd answer that, except maybe with a counter-question to the bank. "Can you be certain that lending money to my client will not have an adverse effect on your bank's business, regardless of what answer I might give to your question?"

[Gary2]

I'm not at all sure we can't mention a client's name. Naturally I would not confirm or deny same to anybody who calls out of the blue, but to other clients, especially those who actually referred Joe Blow to me, sure, " I still see him every March, or April."
Nothing wrong with that.

To completely keep clients from knowing other clients, we would need multiple entrances to our offices plus back doors.

I wouldn't even go that far. It's just as courteous to say "I'll have to thank him the next time I see him." Granted, the information isn't likely to be considered highly confidential, but it's better to just be in the habit of revealing nothing.

Getting back to the original post, if the only way you know someone is because you prepare their taxes, then commenting on whether or not they're self employed is tax return information, subject to IRS confidentiality rules.