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    Danger of self-prepared biz returns

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

    Originally posted by joanmcq View Post
    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).

    #2
    Basis

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



    BMK
    Burton M. Koss
    koss@usakoss.net

    ____________________________________
    The map is not the territory...
    and the instruction book is not the process.

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      #3
      Originally posted by Gretel View Post

      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.

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        #4
        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

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          #5
          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.

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            #6
            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.

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              #7
              New spouse is insisting on pro for personal; and with same-sex couples, the individual can be harder than an S-corp!

              Comment


                #8
                Originally posted by Mo Sheets View Post
                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.

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                  #9
                  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.

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