Would you write a letter for a person that you did not prepare their tax return?

[Taxadvisor VA]

This client may become mine b/c current relationship with their tax preparer is not the greatest.

Would you write a letter for a taxpayer who has a unique tax situation even though they are not your client? _______

I would get an engagement letter specifying what the nature of this assignment is before I would write any letter.
My financial advisor has approached me with a situation whereby the bank has screwed up and admitted as much to his client. It was a situation where $40K was sent to the bank from an IRA to purchase shares and the funds (shares) were supposed to be put back within 60 days to avoid any tax consequences. Well, good intentions don’t fly when you miss a tax deadline. The company holding the funds issued the 1099R as they should b/c of non-compliance when it comes to this 60 day window.

2nd and last question! If you were filing this return would you attach both a letter from the bank and a tax advisor indicating the sequence of events and the reason for not including the 1099R in the tax return? Basically, you are telling the IRS you are not at fault and here’s what happened.

Thanks,

Taxadvisor VA

[ATSMAN]

Are you an EA or CPA, if not I would stay away from writing any letter for a return you did not prepare.

[taxmandan]

No

You state that the bank admitted they screwed up, did they do that in writing? Bankers avoid admitting screw-ups in writing. It not, you are not going to convince theIRS that it was not taxpayers fault. Sort of like blaming the preparer for an incorrect tax return when the client forgot to give you the 1099R. The taxpayer should have been more diligent about making sure everything was done in a timely manner.

[FEDUKE404]

What was the error?

You state that the bank admitted they screwed up, did they do that in writing? Bankers avoid admitting screw-ups in writing. It not, you are not going to convince theIRS that it was not taxpayers fault. Sort of like blaming the preparer for an incorrect tax return when the client forgot to give you the 1099R. The taxpayer should have been more diligent about making sure everything was done in a timely manner.

You also might have a difficult time proving there was ever any "error" on the part of the bank which issued the Form 1099R for the original $40k IRA withdrawal.

"Were supposed" is right up there with "shoulda" and "woulda" and "coulda."

I would have grave doubts if there was anything in writing, and legally binding, that specifically said the bank would transfer the funds (and taxable earnings?) within the 60-day window. Even if such exists, the tax situation might not change although there may be some financial recourse (damages) against the bank.

FE

[MDEA]

Write a letter

Even if the bank writes a letter I do not believe IRS will change the treatment of the withdrawal.The only way to win is find some case law on this point.

[ATSMAN]

I agree. I am sure IRS has seen many versions of a sob story to abate penalties!

[buzzardbreath]

Yes I would

I'll answer the original question, as the circumstances told to us invite warnings from the forum.

I would do it for a fee, or for a gentlemen's agreement that he would become your client.

That is the simple, straightforward answer of course. In addition to the factors brought out by other posts, there are often reasons why people develop "strained relations" with their previous preparer when they show up on your doorstep.

Sometimes they are justified in their "strained relations" and sometimes they are not. I am familiar with almost all preparers for several miles around and I know whether each one is deserving of praise or criticism in most cases. One guy called me because he was hacked off with another preparer (whom I know very well). Turns out he hadn't paid last year's preparer and didn't want to go back there (of course).

Another caveat: I said I would write a letter FOR A FEE. I would make sure the client is aware of the possible noneffectiveness of such a letter prior to arranging to take his money and enter the engagement.

[ATSMAN]

Over the years I have been asked by clients to write a letter to IRS to waive penalties or to do this or that, especially in OIC situations.

My position has been that if I write a letter is it based on facts and law that I can defend. As a tax professional IRS auditors expect us to know more than the average taxpayer. So if we shoot from the hip and our position is not reasonable, grounded in case law or statute, we risk being sanctioned and possibly making it worse for the taxpayer.

Some preparers may want to stick their neck out, that is their choice.