Danger of self-prepared biz returns

[Gretel]

I am starting on new thread on this since I believe this is an important issue.

I have a new client that is doing his own S-corp...'nothing to it'. At first I thought it was a mess, but I have his QB, we went over some bookkeeping issues, and except for the fact that I don't know his basis (and it's likely I'll be computing it after the season), I'm comfortable with the numbers on the k-1.

So here is what I have run into with a client who did his own 1065 after I did the first one. His 1065 is really simple in the sense that everything repeats every year just the numbers change. The only thing not simple is basis since I have no clue about basis and he has small losses (rental activity).

Only recently did it dawn on me that I cannot take any losses on tax return unless I know his basis. I am sure he has enough basis but that does not justify not knowing the exact figure. I did some research and found out that we are required to have a basis worksheet on file for 1065 and attach same to tax return for 1120-S (if losses are claimed). Call me ignorant but I never knew that.

Unless you have a good QB file where you have all details there is no way to figure out basis on a self-prepared biz tax return because these details are not correct (at least with this on client).

[Koss]

Basis

Are you saying that the return has no basis in reality?



BMK

[Burke]

Only recently did it dawn on me that I cannot take any losses on tax return unless I know his basis. I am sure he has enough basis but that does not justify not knowing the exact figure. I did some research and found out that we are required to have a basis worksheet on file for 1065 and attach same to tax return for 1120-S (if losses are claimed). Call me ignorant but I never knew that.

Unless you have a good QB file where you have all details there is no way to figure out basis on a self-prepared biz tax return because these details are not correct (at least with this on client).

That is why I quit doing S-Corps/partnerships 3 years ago. And I just turned down an S-Corp who said "his is really simple." Really. Do you have payroll? "No". Never taken a salary. Why did you call me? "Had falling out with old preparer." Wanted to file extension. Told him S-Corp extension was three weeks ago. Sorry.

[Mo Sheets]

Almost there myself....

I am considering giving up all business returns unless I also do their bookkeeping. For the second year, a client dropped off their business records. Of the two line items I have personal knowledge of (their payroll and my fees)....both numbers they reported are incorrect.....which obviously shines a light on the items of which I know nothing about.

I think I can make more money taking on basic returns than taking on these headaches. My thoughts might change once tax season is over and I have a chance to rest....but I think at times I'm getting too old to "babysit" clients.

Thanks for letting me vent!

Mo

[joanmcq]

My self-prepared S-corp client has already extended the S-corp, and the personal returns are going on extension too. I figure I'll have time to figure out the basis.

[JoshinNC]

Why would someone self prepare a Corp

and then hire a pro for the personal? I've never run across this. I have seen the other way around, but I tell my clients if I do the Corp you really should let me do the personal since it all flows together.

To each their own I guess.

[joanmcq]

New spouse is insisting on pro for personal; and with same-sex couples, the individual can be harder than an S-corp!

[Burke]

I am considering giving up all business returns unless I also do their bookkeeping. Mo

That was my dilemma. And when I really gave it enough thought, I didn't WANT to do the bookkeeping. Others may relish the year-round income. I want only to work half the year, winding up all tax returns by 6/30. Payroll and other issues become a real headache, and deadlines too which I am not interested in having to meet. I do too much travelling in the other half of the year.

[geekgirldany]

When I first started learning tax preparation... the way I was taught was to always take the loss. The shareholder basis was never kept up with and in many cases neither was the balance sheet.

After I went into business for myself that is when I learned more about shareholder basis, distributions, etc. So now I know they are limited. But it is hard explaining that to a client that had another accountant take the losses for years.

I have two clients that I prepare the corporation but they do the personal. One was not allowed the loss from the S-Corp. I tried to explain to him and he seemed to understand. I ended up telling him he was not allowed the loss... but I did not know what TT would do when the K-1 was entered. I told him that I would really like to their personal.... wife wanted to do it.