OT: Ethical Question

[geekgirldany]

I have a client that I have been preparing S-Corp and Individual returns for several years. His business closed down at the beginning of 2012. He is going through financial problems and he does not want to file the S-Corporation because of no money to pay me to complete it. He does want me to finish the personal return.

I told him I would have to double check on whether I can ethically do this because I know the situation. He said he would take his personal return somewhere else if I could not do it.

I believe that I can not ethically finish the personal return. I know there are items on the S-Corp that will affect the personal return. So I feel like I can not finish the personal return.

Am I correct in this?

I could offer to go ahead and prepare the S-Corporation. He has been a very good client over the years but I am not sure if I would ever be paid as he talks like he is in bad shape financially.

Thank you
Dany

[smithtax]

Depends

If you're a federally authorized tax practitioner, then Circular 230 applies:

§ 10.22 Diligence as to accuracy.
(a) In general. A practitioner must exercise due diligence
(1) In preparing or assisting in the preparation of, approving, and filing tax returns, documents, affidavits, and other papers relating to Internal Revenue Service matters;

§ 10.34 Standards with respect to tax returns and documents, affidavits and other papers.
(a) Tax returns.
(1) A practitioner may not willfully, recklessly, or through gross incompetence —
(i) Sign a tax return or claim for refund that the practitioner knows or reasonably should know contains a position that —
(C) Is a willful attempt by the practitioner to understate the liability for tax or a reckless or intentional disregard of rules or regulations by the practitioner as described in section 6694(b)(2) of the Code (including the related regulations and other published guidance).

[ChEAr$]

If you're a federally authorized tax practitioner, then Circular 230 applies:

§ 10.22 Diligence as to accuracy.
(a) In general. A practitioner must exercise due diligence
(1) In preparing or assisting in the preparation of, approving, and filing tax returns, documents, affidavits, and other papers relating to Internal Revenue Service matters;

§ 10.34 Standards with respect to tax returns and documents, affidavits and other papers.
(a) Tax returns.
(1) A practitioner may not willfully, recklessly, or through gross incompetence —
(i) Sign a tax return or claim for refund that the practitioner knows or reasonably should know contains a position that —
(C) Is a willful attempt by the practitioner to understate the liability for tax or a reckless or intentional disregard of rules or regulations by the practitioner as described in section 6694(b)(2) of the Code (including the related regulations and other published guidance).

Danny, I have to agree with my esteemed colleague in OK (for whom I'm obligated to pay for our next breakfast BTW).

How much time can it take to prepare a 1120S with so few items on it? Can you charge him a reduced fee perhaps?
That may just salvage the relationship.
After all, WE set our own fees.

[geekgirldany]

Thank you both for responding. I thought I was correct but I always like to double check.

Well, he called back and said he would pick up the paperwork for the individual return. I told him I would do the S-Corp and he could pay me later. I added that he would owe on the individual return because of the S-Corp. He told me he would just pick up the individual docs and take to a franchise preparer.

Hate that, I tried to explain the penalties and interest that would come up later but I guess people just don't want to think about those things.

Thank you all again.

[taxmandan]

If you think he would be a good future client for his personal returns you could discount the Corp return to salvage the future personal tax work. Otherwise, he'll have to go somewhere else from now on due to Circ. 230 standards.

[geekgirldany]

Yes, I offered to do the S-Corp and he could pay me later. I charge a reasonable price $500 and I cut it down to $250 for him. Since including the S-Corp income would make him owe he is electing not to let me do either returns.

I thought I was correct in Cir 230 provisions not allowing me to do such, but as I say double check

[Roland Slugg]

Everyone is certainly right about preparing the return correctly, based on all information to which you are privvy.

If this were a good client of mine, though, especially one of many years running, I would offer to do the S Corp return for free. Well, almost ... I would bill, say, $10, just so I could legitimately sign the return as a paid preparer.

This may be a moot point in your case, though, as you posted that he's going elsewhere anyway.

[smithtax]

[for whom I'm obligated to pay for our next breakfast BTW]

Can I pick the place?

[AZ-Tax]

Dont let the door hit you on the way out.

Yea, you think HRB is going to reduce their fees or better yet, pay me when you have money, NOT. I use to do an S-Corp for a tax preparer who worked at JH for they dont do Bus returns. Geek, your looking for clients not headaches. If TP closed their S-Corp in early 2012, that final S-Corp return was suppose to be done what a couple months after the close date or face a heavy penalty. There is a good chance this taxpayer will end pay out in the form inconvenience and money then the TP would have went with you Geek but those TP's usually will never swallow their pride and come back and admit they were wrong. This summer I will again send out a couple Dear John letters to couple clients so far. Before I would even consider charging $10 for an S-Corp, I better be preparing their books earning a monthly bookkeeping fee and if they are drawing a salary, I better be also earning a monthly fee doing their payroll. Then I many consider it. I am an full time EA 12 months a calendar year not some tax preparer who prepares taxes 3 months out of the year or maybe every other year.

[ChEAr$]

[for whom I'm obligated to pay for our next breakfast BTW]

Can I pick the place?

Sure, as long as we happen to be in the city, e.g. Charleston, SC in May. (Just imagine my traveling to
Oklahoma? )

[ChEAr$]

Yea, you think HRB is going to reduce their fees or better yet, pay me when you have money, NOT. I use to do an S-Corp for a tax preparer who worked at JH for they dont do Bus returns. Geek, your looking for clients not headaches. If TP closed their S-Corp in early 2012, that final S-Corp return was suppose to be done what a couple months after the close date or face a heavy penalty. There is a good chance this taxpayer will end pay out in the form inconvenience and money then the TP would have went with you Geek but those TP's usually will never swallow their pride and come back and admit they were wrong. This summer I will again send out a couple Dear John letters to couple clients so far. Before I would even consider charging $10 for an S-Corp, I better be preparing their books earning a monthly bookkeeping fee and if they are drawing a salary, I better be also earning a monthly fee doing their payroll. Then I many consider it. I am an full time EA 12 months a calendar year not some tax preparer who prepares taxes 3 months out of the year or maybe every other year.

Except..... Danny said business ceased, and she didn't say corporation was dissolved yet. I'm betting this fellow hasn't taken final steps to dissolve the corporation, hence the due date is still March 15th for a calendar corporation.

[geekgirldany]

Yes, Harlan is right. No steps have been taken to formally dissolve the s-corp. He was suppose to go to a lawyer to do this but never did. The business closed in Jan/Feb 2012 but s-corp was never dissolved.

AZ, you are correct. Some people never look down the road.

[smithtax]

Sure, as long as we happen to be in the city, e.g. Charleston, SC in May. (Just imagine my traveling to
Oklahoma? )

Breanna would be wonderful, I'm sure, but I'll be in Annapolis listening to Frank & Bryan in July.

We'll have to hook up another time.

[joanmcq]

I agree Dany, don't let the door hit him on the way out. He's ethically challenged, and don't let his problems become your's. You did what you could; you're not a babysitter.

[smithtax]

Sure, as long as we happen to be in the city, e.g. Charleston, SC in May. (Just imagine my traveling to
Oklahoma? )

Breanna will be in Annapolis this year also!

AATP