Questionable 10099-b

[JohnEA]

Tp received 1099-b for sale of bit coins in the amont $3300.00 t/p claims no knowledge of this, but wants to file and pay the taxes to get it over with. Not 100% sure if her statement is correct. Claims she contacted the issuer and filed fraud complaint, the account is closed per t/p. As an ea is it ethical for me to file this return not knowing if the 1099-b is correct?

[spanel]

Nothing wrong with waiting until you get resolution with this. Wait for a 1099B correction or figure out how to proceed with the form you have.

Chris

[Rapid Robert]

"As an ea is it ethical for me to file this return not knowing if the 1099-b is correct?"

How do we ever know if a 1099-B is "correct"? It's not clear if you are worried about over-reporting or under-reporting taxable income. You only mention the proceeds; did the 1099-B show basis? You also said taxpayer wants to "file and pay", so I don't see how following the taxpayer's instruction in this case is unethical, unless you think they are understating their tax liability.

Also as a side note, being an EA has nothing to do with it. Circ. 230 only applies to representation before the IRS, which does not include mere return preparation. Your obligations here are no different than any other preparer.

[New York Enrolled Agent]

"As an ea is it ethical for me to file this return not knowing if the 1099-b is correct?"


Also as a side note, being an EA has nothing to do with it. Circ. 230 only applies to representation before the IRS, which does not include mere return preparation. Your obligations here are no different than any other preparer.

I would suggest you read section 10.22 of C230 in relation to what you assert. John does have a legitimate concern.

[Rapid Robert]

I stand by my comment. Circ 230 only applies to representation before the IRS. Preparing a tax return is not representation, per court decision. If you disagree, please provide a citation to back your claim.

Here is my citation to back my claim. Let's refresh from what TheTaxBook update reported at that time, just barely ten years ago. Please note especially the final paragraph.

"In a decision issued on February 11, 2014, in the case of Sabina Loving, et al. v. Internal
Revenue Service, et al. (No. 1:12-cv-00385), the United States Court of Appeals for the
District of Columbia Circuit sustained a Federal District Court decision and injunction
against the IRS which prohibits it from administering regulations requiring return preparers
to pass a competency test and complete annual continuing education before obtaining
or renewing PTINs.

Both courts concluded that tax return preparation does not constitute representation
within the meaning of the statute relied on by the IRS to authorize the regulatory actions
that were struck down.
[...]
In light of the decisions and the injunction, the IRS’ Office of Professional Responsibility
(OPR) has determined that a suspension or disbarment from practice before the IRS
may not include a restriction on return preparation for compensation, and that access to
the PTIN required for such services may no longer be blocked based on discipline under
Circular 230."

In light of this, please elaborate in what way John has a legitimate concern. Yes, if he intends to practice representation before the IRS, then it might be an issue, but there was no indication of that in the OP. Many EAs never practice representation -- I don't. And further, OPR has stated in webinars they are not out to penalize those who make one-time mistakes, but rather those with a pattern of disreputable conduct.

Not to mention, you didn't even address the main question: leaving aside Circ 230, what is the actual ethical question? Whether it is OK to rely on an apparently legitimate 1099-B to prepare a tax return, if it does not appear to be incorrect or unreasonable?

[New York Enrolled Agent]

I stand by my comment. Circ 230 only applies to representation before the IRS. Preparing a tax return is not representation, per court decision. If you disagree, please provide a citation to back your claim.

Loving involved the registration of tax preparers and the authority to regulate those tax preparers. Not John's issue. If you took the time to actually read the section I referenced, you find:

? 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

John - as an EA, you cannot sign a tax return unless you have a reasonable basis for the items on the return. Do you have that?

[Rapid Robert]

"Loving involved the registration of tax preparers and the authority to regulate those tax preparers.:"

But it went beyond that. You are ignoring the conclusion that the courts reached -- that tax return preparation does not constitute representation and therefore is not practice before the IRS. See the middle paragraph of what I quoted. Also you are ignoring the 3rd paragraph -- if the ruling was as limited as you imply, then why did OPR restore previous PTINs it had suspended? That has nothing to do with preparer registration (the failed RTRP initiative). They obviously think the decision was more far reaching than you do. From the same TheTaxBook update:

"The Internal Revenue Service has announced that some suspended or disbarred tax
professionals are now permitted to obtain or renew preparer tax identification numbers
(PTIN) and may again prepare federal tax returns for compensation as a result of a recent [Loving]
court decision."

In short, Circ 230 is ten years out of date and contains many obsolete provisons. Subsequent court decisions affirm this, like Ridgely (IRS can't prohibit contingent fees, contrary to what Circ 230 says) . OPR and Circ 230 is the very least important thing for John to take into account here.

"you have a reasonable basis for the items on the return."

The only factor here is IRC 6694(a), which applies to all preparers.

So once again, are you saying that a normal looking 1099-B form with no outlandish numbers on it is or is not reasonable basis? That is the question that John came here to ask, so why are you asking him?

[Lion]

Tp received 1099-b for sale of bit coins in the amont $3300.00 t/p claims no knowledge of this, but wants to file and pay the taxes to get it over with. Not 100% sure if her statement is correct. Claims she contacted the issuer and filed fraud complaint, the account is closed per t/p. As an ea is it ethical for me to file this return not knowing if the 1099-b is correct?

OP got mixed messages from his client. I would ask client a lot of questions. If client continues to claim no knowledge of trading in bit coins, I'd probably suggest an extension to see if his fraud complaint uncovers a trail away from the client. If client continues to want to file and pay the taxes to get it over with, John will have to decide which way feels reasonable to him based on the facts & circumstances. Where all has the client filed fraud complaints, for instance, &/or has he filed ID theft with the IRS, FTC, police, etc. Did he have that same account/1099-B the prior year? Is it a known brokerage that would have paperwork from opening the account? Is this a new client? Ask a lot of questions.