Form 4852, Help

[geekgirldany]

Got up early this morning to work on some of these extensions.

Customer brought by 2004 & 2005 tax returns to be prepared. He stated that he did not receive a W-2 from his employer for either year. I asked him for prior years checkstubs. He says he does not have any that they didn't give him any. I asked how they paid him... he said by check but no checkstub. I asked how he knew they were deducting taxes. He said that he knew they were. I then asked for the company's name and address. He gave me their name but would only say they were located in New York. He gave me the amounts in whole dollar figures.

===Edited Out. Got To Detailed=====

I read on the IRS that they recommend calling them before filing the Form 4852. That the IRS will notify the employer and then send a 4592 to the employer and employee
Re:

http://www.irs.gov/taxtopics/tc154.html

http://www.irs.gov/newsroom/article/0,,id=106470,00.html

I told him to contact the business to get a reissued W-2 or atleast get his wage and deduction information. He said they had went out of business.

I just have this feeling like something doesn't smell right. Should I have him call the IRS? I know that if a W-2 was filed they can give a printout. I would be okay to fill out the 4852 and show SS & Med. But he is wanting me to estimate Fed & State. Not sure on that. I just feel like contacting the IRS and him lodging a compliant would help matters.

Any suggestions on this is most helpful.

Thank you for reading

[jimmcg]

F 4852

It has been my experience that it is best in the long term to be a little selective up front in accepting clients. Why would you want to be involved with a client like this? You will probably never recover all your time spent on this client if you collect at all and in the process you may damage your professional reputation by having clients like this........... If you do take on this client get an ample retainer up front!

[WhiteOleander]

I would have him come back in. With him present, call trhe IRS. Request a printout of the income reported to the IRS for his number and his wife. They will have this for 2004. They may not have it yet for 2005.
Then prepare the return from what info you get from the IRS.
If he refuses to do this, just send him on his way. He can't just make up numbers out of the air.

[DTS]

Go with your gut

You mentioned that something doesn't smell right. If you have this feeling, you're probably right. Your first clue is the fact they did not come back to pickup the past years return. Personally, I would not waste one more minute on them.

I have had some clients come in and tell me this story to the last word. In the past, I would spend time trying to work with them, doing all the work, but in the long run, they will not return calls, get info to me in a timely fashion, etc. They want you to jump through hoops, but will not do the same for you! I will not take on clients like this anymore.

I hate to generalize, but these clients are all alike. The word "deadbeat" comes to mind. I would cut him loose, ASAP.

Dennis

[geekgirldany]

jimmcg, this customer has been coming since 2002. I've always had a funny feeling about him. One thing that stood out was mortgage interest being more than what him and his wife make together. A red flag to me but I still filed his return for that year. I've never had him be this fague on income before tough. Dennis like you say my gut is just saying something is wrong.

I just looked back on his paperwork and in 2004 he has them down as went out of buisness. But then has down income again from 2005.

I will just tell him like jimmcg said to come by my office... we will call the IRS... so we can report the employer. I will tell him I can't do the sub W-2 until I get a 4852 from them. I think he will not do it.

Thank you all for responding!

[jainen]

One thing that stood out

>>One thing that stood out was mortgage interest being more than what him and his wife make together<<

Some on this board have argued that we don't audit client information, so anything the client claims should be put on the return. I think you have reached the limits of that position. When the figures are obviously false, Circular 230 requires that you make a reasonable reconciliation of the problems.

Researching undocumented earnings and withholding is not an ordinary part of tax preparation. You should bill it separately, generously, and in advance. Of course, that's just another way of saying you can be bought. If you are uncomfortable with that, decline the engagement because you will be even more uncomfortable doing it for free.

[sea-tax]

>>One thing that stood out was mortgage interest being more than what him and his wife make together<<

Some on this board have argued that we don't audit client information, so anything the client claims should be put on the return. I think you have reached the limits of that position. When the figures are obviously false, Circular 230 requires that you make a reasonable reconciliation of the problems.

Researching undocumented earnings and withholding is not an ordinary part of tax preparation. You should bill it separately, generously, and in advance. Of course, that's just another way of saying you can be bought. If you are uncomfortable with that, decline the engagement because you will be even more uncomfortable doing it for free.

Also another good reason to have the client sign an engagement letter stating that you do not audit his records and that you only look for them to be in good order( reasonable).

[geekgirldany]

I ususally do not "audit" their paperwork. But something like that really does stand out to me and raises concerns.

I think that is the best business practice decision I have ever made is doing engagement letters. I do state that it is their responsiblity and I do not audit their information. I've been having people sign them for 4 years.

[Black Bart]

4852 / what-to-do?

Customer brought by 2004 & 2005 tax returns to be prepared

stated that he did not receive a W-2

asked him for prior years checkstubs. says he does not have any that

asked for the company's name and address would only say they were located in New York.

Any suggestions

I agree with everybody else -- best thing is to get rid of him. Your first impression is that he's a low character and not to be trusted. 95% (or more) of the time, those first impressions are right on the mark. I think we all have those guys and it's hard to deal with them. He's got all the earmarks: No W-2--he probably got one (or more) but there's no withholding, so he decided to get a better one made. No checkstubs--that's common enough among contractors, but, on the other hand, they usually don't list any w/h details on the check's "memo" line either, but, oddly, he "knows" that tax was withheld. Doesn't want to say where in New York they are--sounds like he doesn't want you contacting them and maybe receiving different figures/information.

You might try this -- tell him that, first, before you can do anything else at all and start working on it, that he has to pay you -- right now -- for the previous MFS returns and that the charge for those returns is separate from and has nothing whatever to do with the MFJ returns that he wants you to file now. There's about a 50% chance that this will kill the whole deal because he'll probably stall and say he doesn't have the money right now (or something) and that he'll settle the whole bill in full when you get it all done. Don't do that, because this probably isn't going to work out to his satisfaction and he won't pay again. If he pays you with a local check, tell him to come back the next afternoon and you'll start. Take it immediately to the issuing bank and get the cash. If it's an out-of-town check, tell him to come back next week, then deposit the check immediately and give yourself enough days for the check to clear his account

Next, WhiteOleander's right about the transcript--it's the only way to be sure. When somebody says "you don't need that" about a 1099 you glimpsed, it's an excellent indication they know it's taxable and they know you know. Next time, just say "Actually, I do need to see it" and if they refuse, tell them you can't do their taxes. If they ask why, say that you don't think they've given you the complete and necessary information.

If you still want to go with the substitute W-2, you can call the Practitioner Priority Line (866-860-4259) with him in your office and they will take the information from him over the phone. Tell him before you call that he is going to have to speak to them and tell them the figures (refuse to go further if he won't). He might try to hand the phone to you whenever he does get on, so just say no or whatever you have to do. They'll fill out the 4852, send him a copy of it, and will also send one to the employer.

Decide on your fee. Tell him half now--half when done.

[Bees Knees]

The thing that sticks out in my mind is that he doesn't have a W-2, he doesn't have a pay stub....yet he knows exactly the dollar amounts that should be on them for you to fill out his return.

Nobody is that good. Not even me. I am the type of person who keeps maticulous records. I keep all of my receipts; cancelled checks; I prepare detailed financials on not only my businesses, but also my personal transactions. Yet without my pay stubs or W-2, or payroll records that were used to fill out the W-2, I could not tell you what goes in each box of the W-2. I certainly could tell you my net and make a good guess at the gross amount, but nobody knows fed, state, fica, 401(k), etc etc without an actual pay stub or W-2.

If I can't do it, he can't. I am the ultimate type A personality. I used to flip a coin as a kid and record the results, just to see if it came out 50/50. I have recorded lifetime bowling scores and golf scores in a log book for every game I ever played. Nobody keeps records like I do. So if he says he knows what should go on the W-2 by looking at the ceiling, he's a liar.

Dump him.

[Armando Beaujolais]

Some on this board have argued that we don't audit client information, so anything the client claims should be put on the return. I think you have reached the limits of that position. When the figures are obviously false, Circular 230 requires that you make a reasonable reconciliation of the problems.

If the figures are obviously false, the client is asking you to commit fraud and you need to separate yourself immediately. Don't do any audit, reconciliation, or any further work.

Suspicious numbers are a different story. Your experience tells you that there would have to be one of a limited number of circumstances where mortgage interest is higher than income. To do the return, you would need verification from the client about the rich uncle, etc.

Note that when a paid preparer signs a return, he or she is affirming "belief" that the figures are true, correct and complete. The threshold of how far you'll go in taking the client's word for a figure is based on your experience.

It looks like you don't trust the client, and you don't believe the numbers he's giving you. If that's the case, you could be asking for trouble if you do any work for him. If there's a huge mess down the line. You don't want to be standing anywhere near it.

I had a client for years who had a struggling restaurant. It was feasbile that he had losses, lots of restaurants have losses when they start up. One year he made a little money, but not much. Then losses again, and again. I believed he was sinking lots of dough into the business because he kept taking out mortgages on his house. Then one year I got the figure for the auto license tabs for his expensive new car. I immediately requested a complete accounting for all the money he'd put into the business, where it came from, and where it went. He called and gave me vague answers. I refused to do any more work for him. Not long afterwards I got a call from a person who was investigating his finances.

Was I glad that I was able to say I'd refused to do any work for the guy? Yup.

[geekgirldany]

Well I called the guy. He asked if he had to go through all that just to do the Sub W-2. He said he would call the IRS. I told him I can't do the return until I get the Form 4592 from the IRS. THen said he could call the guy that owned the company. I said "Oh I thought you could not get in touch with anyone to get a W-2". He said the owner was in a foreign country now. But he was still under contract with the company. "I thought it went out of business." Him"Well the bank has control of everything". He said he will call the owner first to get the W-2. I explained that especially if he didn't file W-2s with the IRS he needs to report the company. I told him just to call teh IRS and explain that he did not get W-2s for those two years and they will take over from there. I also said that they should have a copy of 2004 W-2 if he did file them.

I called him back about the mortgage interest being so high. He studdered ALOT. I asked him about the property it was on. That I thought it had been sold in 2004. He said it was but the mortgage was paid off in 2005.

Maybe I am just thinking the worse. But I swear things just don't add up. His mortgage had been alot previous years. I had figured when I said that about calling the IRS he would come get his stuff or back down. He might not even call or show up again like Bart mentioned. I am not working on anything until I hear about this W-2. Like I said maybe I am thinking the worse??

I think that he will probably do one of the following:

1) Call and try to give me the numbers over the phone
2) Have Form 4852 filled out and say it is from his employer
3) Have a actual W-2 with no Fed ID number listed

I feel like just packing his stuff up and mailing it back to him certified mail.

I've never fired a customer before. What would I tell him or explain why I can't do his return?

Thank you all again for responding

[Black Bart]

I feel like just packing his stuff up and mailing it back to him certified mail.

I've never fired a customer before. What would I tell him or explain why I can't do his return?

Well, I don't have a standard form for it, but the last time I did it, I didn't give them any excuse. I just sent them this memo by certified mail: "Dear Mrs. So-and-So: In regard to the tax documents which we received from you on __________ (date), this is to advise you that we will be unable to file your tax return and your papers are enclosed. Yours truly, BB." Of course, if you don't want to talk to them (and I'd usually rather not), then that letter is more likely to prompt a response than if you do give him a reason. The recipient of that letter, for instance, did call me back and want to know why, so I just told her that she had complained about several things in the past and generally seemed unhappy with my service, so I would just rather not do it. She didn't like it, claimed not to know what I was talking about, but after a few minutes she gave up and hung up.

Another one in which I did give a reason is this: (same beginning except for..."to advise you that, due to the volume of our caseload and the complexity of your return, we will be unable..." On that particular one, I did not get a phone call or ever hear from them again.

Your guy may still call when he gets the box back--again it's about 50-50 odds because those guys have a lot of gall and they'd much rather argue you down than start all over again trying to bulldoze somebody else into doing what they want (it's their specialty). Anyhow, if it comes to it, you may as well just be blunt and say "I'm sorry, but I'm not doing your tax returns." If he calls before he gets the letter, just tell him the same thing--it's too complicated, you have many other cases, and you don't have the time. It doesn't really matter if he believes you or not because, generally, when you tell somebody you don't want to do their taxes for whatever reason, they'll get mad, stay mad, and you won't ever be on good terms with them again--it's not a big deal, but you'll have to get used to that situation.

Also, if you do send it back certified mail (with return receipt is best), if you don't get the green card with his signature on it back in a few days, check with the post office and ask if he's picked it up. Sometimes deadbeats will not pick up certified mail (which requires a signature) because they get a lot of letters from lawyers and other people that are after them. If that's the case, send him a memo by regular mail saying that you sent him a certified letter and it hasn't been picked up.

[Armando Beaujolais]

Well, I don't have a standard form for it, but the last time I did it, I didn't give them any excuse. I just sent them this memo by certified mail: "Dear Mrs. So-and-So: In regard to the tax documents which we received from you on __________ (date), this is to advise you that we will be unable to file your tax return and your papers are enclosed. Yours truly, BB."

Agree 100% with Mr. Bart. Don't waste any time trying to fluff it up or let them down easy - it's impossible and you'll just open up conversations you don't want opened. If you make up some lame excuse for firing the client, you'll have to defend that excuse.

With respect to the client calling up and pressuring you, think about it. If you got a letter from a company saying "We don't want to do business with you any more," wouldn't you just say good riddance and take your business somewhere else? The type of person who would not do that is the type of person who created this situation in the first place, and you don't need the headaches. You can bet they wreck most of the professional relationships they have, but they think it's everyone else's fault.

Mr. Client,

Because of the questions and concerns I have about your tax information, I am not comfortable with assisting you with preparation of your tax return. Our office will no longer be able to provide services for you.

I wish you the best in future.

Sincerely,

[OldJack]

Mr. Client,

Because of the questions and concerns I have about your tax information, I am not comfortable with assisting you with preparation of your tax return. Our office will no longer be able to provide services for you.

I wish you the best in future.

Sincerely,

I agree with all the suggestions, especially Armando's, and would consider adding "Suggest you contact HRB (or some other preparer you are not fond of) as they may be better suited for doing your preparation."