Advice needed Please.

[geekgirldany]

I hope you all can give me some advice on what I should do on the following. Its long but would appreciate any help.

Short: I have a customer that has had a lawyer call me saying I should pay half of penalty and interest she owes on a State Return that was filed late.... because I didn't mail her the tax return. I won't mail a return to a customer unless requested. She never contacted me about the return. Let me say that I think this lawyer is really a friend.

I know this was a long post but this is the first time I have dealt with a customer having a lawyer call me. I know I will have to deal with it in the future so I was just wanting any advice on what to do. I really don't feel like I am responsible and if I pay even a little bit of money back to her I would be admitting I am wrong.

Thank you all for reading.

[DTS]

Past returns

Geekgirldany,

Personally, I would tell the "lawyer" to go pound dirt, but not in those nice words! Nor would I pay one dime for this gal unless there was an error on my part. I believe the letter you sent her will also help your case, although I'm not an attorney.

She must feel like a total idiot (and she is) and is trying to shift all the responsibility on you. I'm sure this call took you by surprise and got you upset. Maybe, you can try to talk some sense into her, but I would not worry about this anymore.

Dennis

[Snaggletooth]

Not One Red Cent

Did you deviate from your established practice? No. Did you deviate from industry practice? No. (In fact, I don't believe one even exists).

Delivery of tax returns to a customer occurs in many different ways. I mail every return to the customer that is not electronically filed. If electronically filed, I mail the copy. But I collect money up front before anything gets mailed unless it is a business customer.

Dany, there exists a requirement for these returns to be signed by the customer. Many practitioners will not deliver a return in person unless the customer signs the return. If this is your practice, you would have an easy defense. She never came in to sign the return, so here they sit.

I personally will not take responsibility for mailing a customer's return. I mailed the returns my first year in practice, but when the refunds didn't come, I got blamed for not mailing them. From that point forward, the responsibility of mailing the return rests with the customer. The customer also has the right to take his return to another preparer if he does not like your product. He can't do this if you mail it for him.

All of the above provide you with possible defenses, should it go that far. I would tell the lawyer to take a hike. Without revealing any sensitive tax information about your customer, I would also let other practitioners know who your client is, and who the lawyer is.

Ridiculous. Ron J.

[geekgirldany]

Thank you guys for responding. I am settled down a little bit now. I will not contact her or the lawyer again. He can call if he wants but I am not having nothing else to do with it. They can do it all in writing from now on.

Dennis it did take me by surprise. When she got the returns she seemed so happy that she wouldn't have to pay all that money. I mean it is just totally ridiculous as you say Ron. I do mail a few customer's their tax returns. I've got three out of state and three that live in towns about 50 miles away from me. I ask each year if they want their returns mailed. I always mail certified. I really do not like mailing returns like I said because of the information contained. So this is not a regular practice of mine. I also do not mail signed returns for customers. I did it once for a couple that was 88 years old. Only time.

Ron I do believe I have several defenses as you said if they want to do anything about it. I was reviewing my engagement letters I have people sign and I have the following:

"It is also your responsibility to carefully examine and approve your completed tax returns before signing and mailing them to the tax authorities. We are not responsible for the disallowance of doubtful deductions or inadequately supported documentation, nor for resulting taxes, penalties and interest."

I didn't start engagement letters until 2004 so I need to double check her folder for signed letter on those years. I believe the lawyer is a friend and is just threaten (sp?) me. I think they believe that I am a country gal and a small business that can be threatened with court and I will pay. I will not.

I have already talked to the lawyer about the state returns but only what I put in my first post. I have not given him any other information. I will not be speaking to him again except to tell him "no" and hang up. I will warn my colleagues.

Thank you all again for the responses. Have helped so much and eased my mind.

[FEDUKE404]

Yet another reason.....

This sounds to me like another classic example of why e-filing should be used whenever possible.

You get timely acknowledgement that the IRS and state(s) have received the returns, and everyone is covered.

I would, however, be sure you have the signed Form 8879 on file before you "push the button," regardless of any apparent extenuating circumstances.

(Yes, I know these specific returns were filed late and paper returns were necessary.)

Wearing my non-lawyer cap, I'm not aware of anything that requires a preparer to do anything other than provide the client with accountant-signed copies of returns ready to be filed, perhaps with a customary cover letter to "sign here" and "mail there." Anyone who tries to blame an accountant for not mailing a tax return has a genuine problem anyway, unless the firm does this as a normal part of their business and charges/documents accordingly for the additional service.

Of course, I've also known attorneys who prepared taxes and photocopied every piece of paper the client brought, sent everything FedEx Overnite, etc. Many accountants are now closing in on the "paperless office" concept. Choose your poison, I guess.

FE

[George Boutwell]

Harmless Error

>>I filed the prior years return in a envelope in her tax folder. She did come back to me to prepare her 05 and 06 returns. I did not remember about the State returns and she did not ask for them.<<

That isn't going to win you any awards for professionalism or efficiency in office procedures. Maybe the advocates of e-filing are correct -- at least there's a chance that IRS will come by and paw through your files and discover forgotten unfiled returns.

However, I suspect that most of the penalties (for late filing) had already accrued by the time she got around to providing you with all the required information and documents. At most, you and she share responsibility for the accrued interest. Did she have the money in the bank, ready to pay the balance due a couple years ago? If not, she would owe interest anyway. She probably owes you something, because the state is charging less than if she had paid it with one of her credit cards.

[erchess]

I believe that

Danny should discuss this matter with whomever handles her E & O insurance. My contract stipulates that I am to pick up the phone every time a client explicitly threatens legal action, much less any time I am actually contacted by an attorney. I am not supposed to discuss a case with an attorney for the other side unless someone from my insurance company is present.

[Black Bart]

How low...

Just goes to show that gratitude has a short life -- customers like this are especially upsetting since you bent over backwards to help her out.

I think you're handling it alright and I agree with the others -- you don't owe her a dime. As to the interest, it's just like IRS says -- she had use of the money all that time and she owes it to them. As to the penalty, she is required to file a return and that requirement implicity includes the responsibility to either mail the return herself, or to verify and confirm that it has been mailed or e-filed. I don't know of a particular rule about it, but common sense dictates you aren't required to get any client to your office/the post office or to keep in mind that Jane Doe's return has/has not been sent off. Contrary to the statement of her "lawyer," it is her problem -- not yours. I don't see anything wrong with your office procedures -- I've got five or six returns that were never picked up (I'll bet most of us do), but they're not on top of my desk and I'm not constantly wondering "When's Jack gonna pick up his '02 stuff?" -- they're sitting in a box on a shelf where they belong.

I wouldn't talk to her pal again since you don't have a POA authorizing you to (don't mention that--even if he is a lawyer, he's probably never heard of confidentiality rules). If the client calls (probably too sheepish to show up in person), you might just take the opportunity to say just how low, sorry, and trashy her behavior was to someone who went the extra mile for her.

If they're only asking for half ($350) and you take out, say, $250 for his client, that only leaves $100 and a lawyer probably isn't going to "take it forward" very far past a phone call for that piddlin' amount.


"What has he done for us lately?" AL SMITH - 1928 presidential candidate.

[jainen]

ignore the attorney's letter

>>they're only asking for half<<

That is an admission that the taxpayer was at fault. Still, there is no harm in asking....

I would ignore the attorney's letter.

[Uncle Sam]

Advice needed Please

My question is-similar to George Boutwell's - when the client came in this year - why didn't you or whoever was working on this client's file - bother asking about the filing of the prior year's return? Regardless of all other factors - that COULD possibly create a contributory negligence factor.
Yes-I know it's frustrating and exasperating to go through this - and I do sympathize with you Dany. We all have our sour moments in dealing with brash arrogant clients. While it's NOT THE SAME-getting an attorney involved is far more severe - I'm in a situation right now where a client (referred by a recurring client) came to me to virtually reconstruct multiple years' corporation accounting records because IRS was after him for non-filing. He pays me an advance, I do the work, he pays me some more, I complete the returns to meet his IRS deadline-but doesn't pay me the final 40%. Now I have to go to small claims court to get the balance.
After he formed the corporation years ago and stopped filing-he moved into a different state-NEVER registered with the new state-by now is dissolved by proclamation in original state- kept no accounting records whatsover, stopped paying payroll and payroll taxes, used the corporation's checkbook for his personal living expenses, didn't file personal returns, etc.
And yes, all corporation tax returns I did showed substantial balance dues - and IRS keeps sending collection notices for non payment ~ $ 30000.

But don't hesitate to keep us informed of the progress of this case. As I said before - each of us has our own version of frustrating experiences.
One of the MAJOR objections I have to e-filing - is that we are now RESPONSIBLE for a client's filing. Our original professional responsibility - for which we GOT TRAINED for, was to PREPARE the return under professional standards being fully compliant. Now we're also responsible for FILING as well.

[jainen]

I wondered about that

>>One of the MAJOR objections I have to e-filing - is that we are now RESPONSIBLE for a client's filing.<<

I wondered about that too, in the beginning. I was trained that we couldn't even tell the client how many stamps he needed on the envelope!

Now I feel different. One of the major reasons FOR e-filing is that it puts this key step under our control, totally eliminating the previously common problem presented in the original post.

[ChEAr$]

Just a quick show of support here.

I may have missed it, but do you know for a fact that the person calling WAS an actual
lawyer and member of the bar? Anybody can impersonate a lawyer.

anyway, As George mentioned above, you can't speak about a client or former client's affairs without a valid POA from client. And if the person on other end of line persists, tell him
to speak with YOUR attorney, you know, Bubba from out on the Dawsonville highway!
(grin)

[George Boutwell]

Don't Ask, Don't Tell

One of the MAJOR objections I have to e-filing - is that we are now RESPONSIBLE for a client's filing. Our original professional responsibility - for which we GOT TRAINED for, was to PREPARE the return under professional standards being fully compliant. Now we're also responsible for FILING as well.

Now, of course, the responsibility is to poke a piece of paper in front of the client's nose and tell him (her, or them) to sign, pay and go away.

Eventually, this failure to provide a reasonable opportunity to review a return, and to encourage clients to do so before filing, will result in some phone calls from lawyers that are a lot more serious than the one discussed in this post.

[geekgirldany]

I didn't know I had to get a POA from the customer. I thought a verbal "yes" was enough. I was reading last night in Circular 230 that I have to get written permission to discuss anything with a third party. On not knowing if this guy is a attorney or not I did research on the internet and found out about him. He is a mortgage attorney. I still have no proof though that he is. I will not speak to him anymore.

I've got a call into a family lawyer and I will call my E&O Monday. I wasn't sure about calling them. I've got a deductible and really not sure how to proceed with the insurance company on it. I'll find out though.

As far as telling her about the prior years returns needing to be filed... I just did not remember it. She has a "friend" bring her returns by to be prepared. She then has the friend drop them back off signed for e-file. So I had not seen her for two years and I didn't even really think she would come back to me to prepare her returns. I was surprised in 2006 when her friend brought them. I appreciate all the feed back I am getting on this and I can see the otherside point.

You know if she would have called or come by and talked to me about this it could be different. But she never did contact me about this... had her lawyer to do it.

[Black Bart]

Spoken like a true lawyer

...when the client came in this year - why didn't you or whoever was working on this client's file - bother asking about the filing of the prior year's return? Regardless of all other factors - that COULD possibly create a contributory negligence factor.

Or, put another way; "My negligent, deadbeat client shouldn't be inconvenienced to the extent that she be forced to check on her own taxes. Surely someone else is to blame for this ****ed outrage."

What is it about the mention of the word LAWYER (I know maybe one who's competent and diligent) that make accountants tremble and fall into line like a herd of frightened sheep?