Disclosure backlash

[Zee]

The IRS has accomplished the goal - intimidation of tax preparers - which probably will make the majority of us follow the rules - might take a bit more research at times. This does not bother me. What bothers me is the free ride the self-prepared will probably still have.

I agree. The requirement for tax preparer to disclose will most likely result in an increase in the sale of personal TurboTax, etc., and an increase in the business for the less ethical tax shops.

[joanmcq]

and an increase in my day job's business...representing TurboTax users in audit.

[Kram BergGold]

To KJ Judd re losses

The 2 out of 5 rule is not black or white. If the client has a profit 2 out of 5 years he is presumed to be working at a business for profit. If he has not had a profit in 2 out of 5 then the presumption is he is not for profit. In the first case theh IRS has to prove not for profit. In the latter you have to prove for profit. So this would not fall under the adequate disclosure rules in my opinion.

[taxxcpa]

Unsupported deductions?

Unless a client brings in all of his records and you audit them or compile the tax figures from the source documents, you don't really know whether that $ 500 donation was by cash or check.
People generally bring W-2s and 1099s and morgage statements, but do not always bring all the back-up for their itemized deductions or business expenses, so I would say that the problem area would be more likely if someone claims something clearly not allowed by law, like penalties on tax underpayments--which I once saw being claimed on a return prepared by a guy who was both a CPA and lawyer. If he took the position that the penalties were a cost of doing business, that would be an unreasonable position.

[skhyatt]

Ok, so I am doing a client's return. We get to charitable contributions. I ask if you have any. You say yes and verbally tell me the amount. I ask, do you have documentation to support that. You say yes, but I don't have it with me. Do I as the preparer, take their word or say, I need to see the documentation before I can put that on the return???

[Zee]

Unless a client brings in all of his records and you audit them or compile the tax figures from the source documents, you don't really know whether that $ 500 donation was by cash or check.
People generally bring W-2s and 1099s and morgage statements, but do not always bring all the back-up for their itemized deductions or business expenses, so I would say that the problem area would be more likely if someone claims something clearly not allowed by law, like penalties on tax underpayments--which I once saw being claimed on a return prepared by a guy who was both a CPA and lawyer. If he took the position that the penalties were a cost of doing business, that would be an unreasonable position.

Yes, client's don't generally bring backup and I wouldn't want to sort thru all those receipts if they did. I'll probably use a stronger tax engagement letter and checklist and require a signature on each.

[solomon]

The good faith clause is still in 230 so I would accept it with a clear explanation of the penalties involved if records were not available on audit. I would have them sign something attesting they have records for all deductions.

[KJ Judd]

I have in my engagement letter...

You represent that the information you are supplying to me is accurate and complete to the best of your knowledge and that your expenses for meals, entertainment, travel, business gifts, charitable contributions, dues and memberships, and vehicle use are supported by records as required by law. I will not verify the information you give me. However, I may ask you for clarification of some of the information.

I generally get most of my clients to sign the engagement letter. I know I'll be even more strict about it this year.

[solomon]

Tax Preparer Fines:

http://www.usatoday.com/money/perfi/taxes/2006-06-21-irs-usat_x.htm