filing 2003 1040 -- no tax owed

[Skate1968]

I decided that I should take a quick visit to the bar early in the day. But the bar was more crowded than i expected. I did not get a chance to speak privately with my client. I was not able to ask a single tax related question.

I saw people i knew, they bougt me a few beers and I wound up having the most excellent time! I stayed for several hours.

(so perhaps there's one additional big reason for me to avoid prepping for bartenders-- another reason entirely seperate from 'unreported tip income' )

Anyway I've known this woman for years. Both her employment history and personal history are troubled. (but i''ve never before had reason to ask any details) And while she was most probably wrong to NOT file a return it's probable that she would NOT have owed any tax. Yes, she was most probably trying to hide tip income but she most probably did NOT have anything to hide. This is all speculation on my part. And I imagine that it would be easy enough to find out the truth. So I'll post again after i find out more info.

Again thanks much to everyone who posted, Oxtrainer, Jack, rosieea, snaggle, janien, etc.

[Bees Knees]

You mentioned that you would have to “estimate her modest income” in order to file for these back years.

Line 22 of Form 8867 under the preparer’s Due Diligence Requirements asks the following question: “Did you comply with the knowledge requirements? (To comply with the knowledge requirements, you must not know or have reason to know that any information used to determine the taxpayer’s eligibility for, and the amount of, the EIC is incorrect. You may not ignore the implications of information furnished to or known by you, and you must make reasonable inquiries if the information furnished appears to be incorrect, inconsistent, or incomplete.)”

My question to you is: How are you going to estimate her income? Did she keep any records? If not, how can you comply with your knowledge requirement?

The only way you can is to have her, not you, re-construct her income. You can’t coach her on the dollar amounts to put down, as you are obviously biased. It is your idea to do this, not hers. So keep your mouth shut and don’t give her any ideas on what income range will qualify for EIC. To the best of your knowledge, you really do not know what her income is, and neither does she. So you are at great risk of failing the knowledge requirement if IRS were to look at this, which they would on an amended return filed just before the statute of limitations runs out.

[Skate1968]

Thanks again

to Bees Knees and everyone who advised me on this. I'm not going to look at this client's 2003 situation any further.

After busy season i'll speak to her about tax year 2005. I really don't know what she'll tell me.

I might decide NOT to file for 2005. In which case I'll remind her that getting another accountant's opinion is one of her options. (and i don't mean 'go find some shady preparer who will do anything for a buck')