Client's Info

[Donanita]

How do most of you handle your clients information. Do you take their word that they had 30,000 business miles or do you ask for a record.Do you ask to see their receipts or do your take their word. Just wondering,I have talked to tax preparers in the past and some say they take their clients info at their word,as the burden of proof is on the client and some say they ask for info to backup as clients aren't aware of the tax laws and sometimes provide deductions that are not legit.
Also,if husband or wife(only one coming in) bring in tax information and only one comes back to pick up their paper work do you send a engagement letter with the one who picks the return up and hope the other spouse signs and mails it back or how do your handle this.

[Bees Knees]

Tax preparers are not required to perform an audit on client information. You give the client the benefit of the doubt that they are giving you truthful information.

One of the nice things about e-filing is the letter I send to the client along with Form 8879.

I say in my letter: “Enclosed are your copies of your tax return….I prepared your return based on the information you provided to me. Please review your return to verify that there is no material miss-statement of facts. When you have completed reviewing your return, please sign and date the enclosed Form 8879 (both H & W must sign) and return it to me in the attached envelope. I will e-file your return once you have singed and returned Form 8879 to me….”

Or something along those lines. Doing it by mail, you are putting the burden of proof on the client. You are asking that they verify you prepared the return based on the information they provided. You don’t e-file their return until they have signed off on the information they provided to you. Right or wrong, the letter puts the responsibility of whatever information was used to prepare the return on them and not on you.

[DTS]

Clients

Donanita,

I always take the word of the client, but always make sure they are aware of the necessity to be able to produce the original receipt. Almost all of my clients come to the office with a computer report of their expenses and income. The rest are handwritten, but catagorized. In both cases, I go over each catagory and tell them where and how this will be input on the return. This doesn't take long, but I feel this gives me additional time to question items and make sure they understand the importance of their record keeping and what is deductible and what is not.

As far as the mileage logs go, I have most of my clients give me the mileage at the beginning and the end of the year. We go from there, as far as personal, commuting and business miles go. After years of stressing the importance of the "written" log, they are getting better about writing this down. I stress the ability of being able to prove this, just in case. If a log is not kept, I will have them produce a couple of repair receipts that will verify the mileage and take an average for the year.

Engagement letter...shouldn't it be signed by both before you begin the work?

Dennis

[Gretel]

How I do it

First, I like your way of doing it, Brad. Right now, most of my clients come in to pick up their return but I will offer them to mail it next year.

I attach a letter to their copy of the tax return (that probably never gets looked at) stating basically the same. Then they sign form 8879 in my office.

I take their word on most items if it makes sense. If not, I ask more questions. I always feel uncomfortable with the mileage and I explain each year the importance of a log. I am considering to start having them sign a note with their mileage next year.

On one hand I want to be a little safer, on the other I don't want to be a bureaucratic institution and keep it as simple as possible. I refuse to see my clients as potential enemies, which can harm me in the future.

Clients, I don't feel comfortable with at all, I send away.

[taxmandan]

Client info

If it's in writing, a computer printout or in their own hand, that's good enough for me. I always keep the originals, I give them copies with their tax return. I don't like verbal information from them, less chance of them denying they said what they said if it's written down. Some bring in receipts, most don't, unless they haven't totaled them up, then they pay for bookkeeping costs to organize everything. And like Dennis, I tell them that proving the deduction is business related is THEIR problem should the irs ask for receipts or documentation.

Daniel

[Donanita]

Yes

I agree with all of you.Just wondering how long it will be before the IRS wants us to audit our clients.Look what they have done with the EIC credit with the due diligence.I have gone over the tax return with my clients and seen this blank look like I hear you but whatever, just show me here to sign. I don't question my clients on their expenses but I'm really uncomfortable when they have these expenses and they are all nice rounded numbers.I haven't used engagement letters in the past but plan to do so this year.When you mail them out before tax season does your clients always send them back or do some ingore them.

[jainen]

Due diligence

Due diligence for EIC does NOT require us to audit client records. Form 8867 merely documents that we have evaluated every element of the credit, and that's no different than what we are supposed to do for any other tax matter. Circular 230 quite clearly says we can rely on client information without verification. We can not, however, "ignore the implictions" of whatever they give us, especially if it appears to be inaccurate, inconsistent, or incomplete.

[Jesse]

Form 8867

Do any of you have your clients actually sign the Form 8867?

I go over each line on the 8867 and then have the taxpayer sign the form to keep in my files and place a copy with their tax return copies. A few new clients have said they have never signed anything for the previous preparer, yet a copy of the Form 8867 was in the prior years tax return copies.

[Gene V]

Form 8867

Do any of you have your clients actually sign the Form 8867?

I never have the client sign form 8867 (actually there is no place for them to sign anyway). I do go over the questions with the client.

[Donanita]

Form 8876

I always get the 8876 signed and keep with my copies.The client has the option to sign theirs.It is always included with the client copy of the return.My software has the names printed out on the second page and the client signs above their name.

[oceanlovin'ea]

Verification of expenses

I tend to agree with those that say that they take their clients word for their expenses. At this point in my business, I either have known my clients for some time or they bring in pretty detailed lists of expenses. I will usually go over those with them and tell them the ones that are not deductible.

I am instilling in them to keep mileage records. Most of them just bring me totals, but not round figures so I am assuming they have kept records.

I prefer not to police my clients unless I feel the need to. Although, I had one S corp that used the business account for everything. i went over every transaction with them and asked what this was for. We eliminated a lot of personal out of their expenses. I told them that that was a NO NO. Only use business account for business. So we will see how they do this year.

Linda F