Previous Preparer Non-Compliant providing tax return copy

[Taxadvisor VA]

Client has asked me to prepare 2012 tax return. I'm sure we all ask for the prior return b/c you simply need it. What I do is offer to audit it for free and yes, it does lead to amended returns and increased fees. In this case, I alsways make sure it is mutually beneficial to move forward with the amended.
The client copy of the 2011 return is incomplete. I have asked them to request a copy from the preparer.

According to IRC § 6695(a) – Failure to furnish copy to taxpayer. The penalty is $50 for each failure to comply with IRC § 6107 regarding furnishing a copy of a return or claim to a taxpayer. The maximum penalty imposed on any tax return preparer shall not exceed $25,000 in a calendar year.

I like to give people chances to do the right thing. However, if this preparer does not follow through and provide the copy then what are the next steps?
I'm sure my client can report this to IRS (A step that I don't want to pursure but I may have to!) and how do they do that?

Thanks,
Taxadvisor VA

[JohnH]

You'd find it faster and more productive to obtain a copy from IRS via e-services or by filing 4506 or 4506-T.
I'm not justifying the previous preparer's actions (for which he may have reasons even if not defensible ones).
You never know what the history may be when a new client shows up, and they will conceal the truth if it's bad.
But I'm also suggesting your task is to get a job done, not to even any scores for anyone.

Personally, my usual practice is to tell the client to ask for the copies, and if nothing shows up in a few days I give them the 4506 or 4506-T. If they don't follow through on that, I generally don't want their business because they've shown me something important about their own lack of follow-up.

[MDEA]

Providing tax return

JHW never gives a copy of the 1040.They provide their own form which is never complete.I have had new clients try to obtain a complete copy but they can not.I assume what they give meets the law.If some one owes me money I do not give them a complete copy.You only must give them the e-file form and their W-2's.

[David1980]

JHW never gives a copy of the 1040.They provide their own form which is never complete.I have had new clients try to obtain a complete copy but they can not.I assume what they give meets the law.If some one owes me money I do not give them a complete copy.You only must give them the e-file form and their W-2's.

Why would you file a return that you have not received payment on?

(a) Furnishing copy to taxpayer
Any person who is a tax return preparer with respect to any return or claim for refund shall furnish a completed copy of such return or claim to the taxpayer not later than the time such return or claim is presented for such taxpayer’s signature.

In IRS Publication 1345, it's written "The electronic portion of the return can be contained on a replica of an official form or on an unofficial form. However, on an unofficial form, the ERO must reference data entries to the line numbers or descriptions on an official form." So you potentially could give them a printout with line numbers and amounts (like an IRS transcript). However you are required to provide a copy in some form at the time you present the return for signing.

Just don't have the taxpayer sign the return until you can get payment. You can prepare, review, etc... the return with the taxpayer and then hold it until they can make payment before getting your signatures and transmitting it. If they can't pay, just give them their source docs back and you don't have to provide the return.

[MDEA]

Copy of return

When you do bank products if they owe money you do not receive your fees.If they want a complete copy of their return they must pay the prep fees.

[JohnH]

Why would you file a return that you have not received payment on?



In IRS Publication 1345, it's written "The electronic portion of the return can be contained on a replica of an official form or on an unofficial form. However, on an unofficial form, the ERO must reference data entries to the line numbers or descriptions on an official form." So you potentially could give them a printout with line numbers and amounts (like an IRS transcript). However you are required to provide a copy in some form at the time you present the return for signing.

Just don't have the taxpayer sign the return until you can get payment. You can prepare, review, etc... the return with the taxpayer and then hold it until they can make payment before getting your signatures and transmitting it. If they can't pay, just give them their source docs back and you don't have to provide the return.

I occasionally get stiffed on a filing fee, but that's because I don't go through the hassle of having them back to my office to get signatures, review the entries, exchange checks, and and all the other time-wasting details. In my business model, that would be acting penny-wise and pound-foolish. When I finish the return I put it in an envelope and mail it to them with a bill.

So every now and them someone doesn't pay even after a few follow-up notices and a phone call; it's rare but it happens. When it does, I give them the benefit of the doubt and write it off. Personally, I think it's a more efficient use of my time and worth the rare write-off. But if I were taking walk-ins and working with lots of new clients, I'd probably adopt a different model.

My point is simply that one-size-fits-all doesn't apply any more in this business than it does in any other.

[Gary2]

The client copy of the 2011 return is incomplete. I have asked them to request a copy from the preparer.

The preparer is only required to give one copy. They're not required to give a second copy if the client loses part or all of the first copy.

What exactly is incomplete about the copy the client has? I know that many preparers don't provide work papers (such as depreciation schedules), and I'm not sure if they're required to.

[Taxadvisor VA]

Response to Gary

The preparer is only required to give one copy. They're not required to give a second copy if the client loses part or all of the first copy.

What exactly is incomplete about the copy the client has? I know that many preparers don't provide work papers (such as depreciation schedules), and I'm not sure if they're required to.

Gary- I have never heard the one copy limit before. IRS doesn't say that in their IRC code wording. I'm sure you have something in writing that you could share with me. Thanks!
2011- page 2 of the 1040 believe it or not are missing. Very important piece to be missing.
Thanks agaoin,
Taxadvisor VA

[taxmandan]

Gary- I have never heard the one copy limit before. IRS doesn't say that in their IRC code wording. I'm sure you have something in writing that you could share with me. Thanks!
2011- page 2 of the 1040 believe it or not are missing. Very important piece to be missing.
Thanks agaoin,
Taxadvisor VA

AGI is on the bottom of page 1, itemized info is on the Sch A, Exemptions on 1040 page 1, Credits listed on various forms and schedules, withholding on W-2s/1099s, what is it on page 2 of the 1040 that you can't reconstruct from the rest of the return?

[Gary2]

Gary- I have never heard the one copy limit before. IRS doesn't say that in their IRC code wording. I'm sure you have something in writing that you could share with me. Thanks!
2011- page 2 of the 1040 believe it or not are missing. Very important piece to be missing.

It's not a limit - you're free to give as many as you want, or charge for additional copies. But the fact that only one copy is required is right in your quote from 6695: "furnishing a copy of a return" (emphasis added). Section 6107 makes it clear that there's no requirement for additional copies after filing: "shall furnish a completed copy of such return or claim to the taxpayer not later than the time such return or claim is presented for such taxpayer’s signature."

You're correct that page 2 of the 1040 would be required, but as others have said, it would simpler to just get a copy via a 4506-T or the various routine alternatives. There may be no way to know whether the missing page 2 is because the taxpayer lost it or because the preparer's printer ate it.

[JohnH]

Page 2 could be missing because there's no paid preparer information entered on it, or perhaps it says "self-prepared".
But then you should have already been able to sniff that out by talking with the client.

You definitely need to see what IRS has seen, especially if the preparer seems to be stonewalling.
You could start by having the client order a transcript here: http://www.irs.gov/Individuals/Order-a-Transcript

And if there are any unanswered questions after that, escalate to a 4506.

Just a thought...

[David1980]

When you do bank products if they owe money you do not receive your fees.If they want a complete copy of their return they must pay the prep fees.

That is true. Non-payment would have to be a risk one takes when using bank products to pay prep fees.

Other than the $50 penalty per failure to provide a copy of the return, any other risks to withholding a tax return until payment when doing bank products? Could one be barred from preparing tax returns or anything like that?

[AZ-Tax]

Receipt

So every now and them someone doesn't pay even after a few follow-up notices and a phone call; it's rare but it happens. When it does, I give them the benefit of the doubt and write it off. Personally, I think it's a more efficient use of my time and worth the rare write-off. But if I were taking walk-ins and working with lots of new clients, I'd probably adopt a different model.

A business client called me a couple years ago saying: I have a client who didnt pay me, I can write that off, correct? I replied, well you dont actually write it off or deduct it. You just dont include that income in your gross income since you never received it but you can deduct all business related exps associated with the services you provided to that client who didnt pay you. My client didnt understand what I just said so I had to go over it again and he was not happy.

RECEIPT: Last year I had a client swear up and down he never received a copy of his tax return so beginning on my 2012 tax returns, my cover page also contains the words, "I am in receipt of a paper copy of my 2012 tax return" and then there is a line for the taxpayer to sign.

[JohnH]

Trying to explain to cash-basis taxpayers why you can;t write off uncollectibles is like trying to explain to restaurant owners why they can't write off food thrown away due to spoilage or discarded because it was prepared but didn't sell. I even remember one who continued to keep regular daily records of discarded food even though he claimed to understand what I told him. (Maybe he was really a cost accountant at heart. Or maybe he was shopping around for an accountant who saw things his way). Before I adopted a policy not to do accounting for restaurants many, many years ago, I wasted lots of time and breath on that one.

[RitaB]

Yeah, I wish I had a nickel

Trying to explain to cash-basis taxpayers why you can't write off uncollectibles...

I wish I had a nickel for every do-over perm and re-cut the hairdressers write on their piece of spiral notebook paper with the ruffled edge still there to make me crazy.