"Client" wanting to file their own return

[cjlcpa]

What is your opinion on a new client that just wants advice on how to file their own return? I don't recall having this situation in my 20 years in practice. It seems to me that this could open me up to a significant amount of liability if he does it wrong. He is not asking me (yet) to review his preparation, but simply to advise how to do certain things for his new business (depreciation etc).

[ATSMAN]

What is your opinion on a new client that just wants advice on how to file their own return? I don't recall having this situation in my 20 years in practice. It seems to me that this could open me up to a significant amount of liability if he does it wrong. He is not asking me (yet) to review his preparation, but simply to advise how to do certain things for his new business (depreciation etc).

Run Forrest Run!

BTW I get asked many times to help a client's relative or friend who is doing their own return and just seems to be "stuck" on one issue. My answer is please ask them to call me to make a tax prep. appointment, just like you did this year. That usually solves the problem.

[cjlcpa]

Thank you for your quick response. That was my first reaction too. I have decided to tell him no.

[geekgirldany]

I would not do it either. I use to get a lot of phone calls asking tax questions. When I first started my business I would answer some but quit after I learned about liabilities issues. I tell them to make a appointment for me to prepare their tax return. I once had someone want to bring their laptop and me help them prepare their return on turbo tax hah!

[ATSMAN]

I would not do it either. I use to get a lot of phone calls asking tax questions. When I first started my business I would answer some but quit after I learned about liabilities issues. I tell them to make a appointment for me to prepare their tax return. I once had someone want to bring their laptop and me help them prepare their return on turbo tax hah!

During tax season I routinely see on Craigslist postings to help people do their tax returns on Turbotax, TaxAct. I had my son contact one of these posters and it turned out to be a high school kid who would walk you through the process and you had to meet him at a certain McDonalds with your laptop and papers and $20 cash payment!

[JohnH]

I tell people it takes me more time to help someone than to just prepare the return, because I have to spend a lot of extra time explaining tax concepts & parlance they probably don't understand. Same answer if they prepare their return and want me to "grade their paper". I tell them it takes me as long to input their basic info in my tax program and review as it does to prepare the return. Either way, it's cheaper for them to simply hire me to prepare the return, just like all my other paying clients.

If they don't understand or agree, then I tell them this is my fee schedule (or something along these lines):
1) Hourly rate, $120
2) If you watch, $140
3) If you help, $160
4) If you laugh, $180

[FEDUKE404]

Solving the problem

I tell people it takes me more time to help someone than to just prepare the return, because I have to spend a lot of extra time explaining tax concepts & parlance they probably don't understand. Same answer if they prepare their return and want me to "grade their paper". I tell them it takes me as long to input their basic info in my tax program and review as it does to prepare the return. Either way, it's cheaper for them to simply hire me to prepare the return, just like all my other paying clients.

If they don't understand or agree, then I tell them this is my fee schedule (or something along these lines):
1) Hourly rate, $120
2) If you watch, $140
3) If you help, $160
4) If you laugh, $180

Love the approach!

But, I might also add:

5) Use of cell phone, $100 per call

FE

[taxea]

I would tell him that I don't do tax training and there are numerous free resources out there where he can research any questions. I would determine what would be included in his return and recommend he use a professional if it is not a "simple' return. I would also offer to review it for a price which would include my normal fee if i find errors and the return needs to be corrected. Lastly, if i review the return I would tell him that my review does not include what the errors are or how to correct them but I would prepare the return at my normal fee.

[TAXNJ]

Correct

What is your opinion on a new client that just wants advice on how to file their own return? I don't recall having this situation in my 20 years in practice. It seems to me that this could open me up to a significant amount of liability if he does it wrong. He is not asking me (yet) to review his preparation, but simply to advise how to do certain things for his new business (depreciation etc).

Believe that in any way that you (a Professional) participate in advising in the prep of the return you may be considered the preparer. Check cir. 230 & if CPA, check your ethic rules.

Don't waste anymore of your time.

[Snaggletooth]

Cannot do it if I wanted to

I believe ethics requires us to sign a return if we are paid at all. Many of these people buy into the TurboTax ad that buying their product will make them the equivalent of a CPA or EA. TurboTax and TaxAct build their customer base by carving into the clientele of flesh and blood preparers.

All of us have horror stories about taxpayers that have messed themselves up with these software products -- not that anything is wrong with them, but simply because they don't know how to manage the questions and preparation protocol. These are the same people who set up their LLCs incorrectly because they think LegalZoom.com is a substitute for experience, and they are looking for a cheap way out instead of paying a professional.

And giving "free" advice doesn't require us to sign a return, but subjects us to potential liability. Worse than this, your advice will be repeated at the barbershop, local bar, kids soccer games, etc. and be on a par with these armchair street experts.

I simply tell these people that advice is dependent on the entire spectrum of a taxpayer's situation, thus I would have to review every item on his return. Else the advice will most likely not be adequate or accurate. This means I am in the business of doing returns, and this is where they can decide whether they want to become a customer or not.

[TAXNJ]

Yes. Much

I believe ethics requires us to sign a return if we are paid at all. Many of these people buy into the TurboTax ad that buying their product will make them the equivalent of a CPA or EA. TurboTax and TaxAct build their customer base by carving into the clientele of flesh and blood preparers.

All of us have horror stories about taxpayers that have messed themselves up with these software products -- not that anything is wrong with them, but simply because they don't know how to manage the questions and preparation protocol. These are the same people who set up their LLCs incorrectly because they think LegalZoom.com is a substitute for experience, and they are looking for a cheap way out instead of paying a professional.

And giving "free" advice doesn't require us to sign a return, but subjects us to potential liability. Worse than this, your advice will be repeated at the barbershop, local bar, kids soccer games, etc. and be on a par with these armchair street experts.

I simply tell these people that advice is dependent on the entire spectrum of a taxpayer's situation, thus I would have to review every item on his return. Else the advice will most likely not be adequate or accurate. This means I am in the business of doing returns, and this is where they can decide whether they want to become a customer or not.

Yes there are many references on this. Attached are two that are interesting:

http://www.aicpa.org/publications/taxadviser/2014/december/pages/purcell_dec14.aspx

More code and court cases:

http://scholarship.law.marquette.edu/cgi/viewcontent.cgi?article=2727&context=mulr

[dtlee]

Worse than this, your advice will be repeated at the barbershop, local bar, kids soccer games, etc. and be on a par with these armchair street experts.

Of course they will leave out key pieces of critical information when repeated and add their own, making the resulting repeated information quite dissimilar from your original advice.

[JohnH]

Makes me think of the many conversations with clients over the years about buying luxury cars, boats, etc for "business" reasons-. They are making up justification to do something they already decided to do in the first place. I explain to them that the tax break is not a justificaiton for spending the extra money - they need to focus only on the business aspects.

I'm sure that when I conclude a 30-minute conversation by saying "I remain unconvinced that it's a good business decision, but if you're absolutely certain that the Lexus/Humvee/boat is going to improve your profitablity, then you should go ahead and get it.", they repeat the conversation to their friends quite differently. Such as "My tax guy and I went over this for a good half hour. The last thing he said was 'You should go ahead and get it.' "

[TAXNJ]

Agree

Makes me think of the many conversations with clients over the years about buying luxury cars, boats, etc for "business" reasons-. They are making up justification to do something they already decided to do in the first place. I explain to them that the tax break is not a justificaiton for spending the extra money - they need to focus only on the business aspects.

I'm sure that when I conclude a 30-minute conversation by saying "I remain unconvinced that it's a good business decision, but if you're absolutely certain that the Lexus/Humvee/boat is going to improve your profitablity, then you should go ahead and get it.", they repeat the conversation to their friends quite differently. Such as "My tax guy and I went over this for a good half hour. The last thing he said was 'You should go ahead and get it.' "

Agree. As long as you know you provided the proper advise and got paid. It's time preparers start spending some money to keep up with their clients and buy those luxury items to change the image of the profession. As the expression goes "one can avoid but not evade".