Conflict of interest

[Jesse]

I had a client approach me today that is in the process of starting a LLC which will be be taxed as a P-ship and wanted to know if I could do the business return as well as their personal return. His concern is that it would be a conflict of interest. Any opinions?

[taxmandan]

Conflict

Not at all, I have numerous clients that I do both the partnership/corporate returns and also their personal returns. I prefer it, that way I can see the whole picture, not just some K-1 that may have questionable numbers on it prepared by someone else. Don't let some other tax office tell him that he you can't do the business return because of a conflict of interest. I've had that happen.

[Bird Legs]

Conflict of interest

I see no conflict. Where there may be one later on is if you are doing all partners personal returns and there is a big split up in the partnership.
The conflicts I have are mainly with husband & wife who are getting a divorce and you are trying to do each of their separate returns.

[Unregistered]

Conflicts

I
The conflicts I have are mainly with husband & wife who are getting a divorce and you are trying to do each of their separate returns.

Please expand on this statement. As longs as you do not discuss each persons return with the other why would it be a conflict.

[jainen]

day of reckoning

This is a great question. Although the practice is very widespread, I believe there will soon be a day of reckoning starring one of our colleagues. The simple fact is that a separate entity is, well, a separate entity. It has it's own interests separate from the owners or partners (who have interests separate from each other as well). I mean, isn't that separation one of the primary reasons for incorporating in the first place? What do you suppose is the purpose of Form 8275, if not to disagree with a K1?

Even simpler to understand is the violation of confidentiality in allowing a partner or shareholder to see information from the company books. Some day some lawyer will bring it all down. Maybe the Enron-plus accounting scandals will trigger it. We are all going to need heavy indemnification clauses in our engagement letters just to do a 1040.

[jainen]

Suppose they each say

Suppose they each say they supported the child and qualify for Head of Household. If you prepare both returns according to their separate information then you have knowingly made a false document because they can't both be right. And yet, how can you refuse or even ask for an unusual amount of proof without explaining what the problem is?

[Joe Btfsplk]

Cheating ex-spouses

The nearest thing like that I have encountered was two people who claimed to be divorced. The husband claimed one child and filed HOH. The wife went to H&R Block or some other tax preparer and probably also claimed HOH.

The guy always paid me in cash, but the last time he came he gave me a check and it was on a joint account with his wife. I said 'adios' to him after that.

When I used to have walk-in clients, sometimes the both ex-spouses would claim the child. The IRS allowed it to the one who filed first and rejected the filing by the other one.

[geekgirldany]

Partnerships are a little difficult. I had two partnerships. One I am still doing... the other I'm not.

The one I am not preparing anymore... well my client went into business with another person. So the year the business started I did both partner's personal returns and partnership. Things started coming up though. My original client said his partner's wife was complaining about me. Partner's wife wanted to do the bookkeeping and not let me. Original client did not want this wanted me to keep up with it. Other Partner agreed but you know wife still wanted to do it. Also the wife said I didn't know enough because I am not a CPA. She called me several times telling hwo she had taken bookkeeping in college and wanted to start doing it for the company. I told her okay. Then talk the partners and they said no.

Well this went on for a little while until one month they didn't bring their bookkeeping in. I called the original partner. No return call. So they obviously went to someone else. Kinda glad they did.

Taught me a lesson. I probably would not do the other partner's return but do my original partners. I don't know it does bring up some issues.

[Gretel]

Llc

I have a LLC/Partnership and will have a conflict of interest in advising both partners what is best in regards to GP/Se tax.

For now partnership nets enough to keep both partners above water.

First partner is married with high income spouse and would love to get some income as passive income.

Second partner is single dad who would loose EIC if passive income is over $2,700.

Partnership just became LLC in 2005 and I don't even dare to bring up this issue.

[taxmandan]

Conflict of interest

Even simpler to understand is the violation of confidentiality in allowing a partner or shareholder to see information from the company books.

??? Any partner or shareholder of a closely held company who doesn't look at the books is a fool. They most certainly have a right to see the books, how does a business have the right to withhold financial information from an owner?

[wv112]

All partners or owners get their own copy to keep of the tax returns and a copy of the financial statements. No info is withheld from any partner.

[Guest]

I have several P-ships/LLC's that I do both the business(1065) and personal 1040's. I have never thought about this being a conflict of interest. I like taxmandan prefer it that way so I can see the "whole picture". I never thought of it from Gabriele's point of view. I really don't like it when I have a P-ship K-1 from a business return that I did not complete, it just seems there can be so much "hidden" or unanswered questions. I feel so much more comfortable doing both.

[jainen]

How nice

How nice that you are comfortable. I hope your clients are also comfortable but I wouldn't flatter myself that it all makes the clients' attorneys comfortable. This is just me being paranoid and cynical. The business environment has become very edgy. When it goes over the edge, everyone starts pointing fingers (sometimes it's just one finger). You like to see the whole picture, but the whole picture doesn't always apply to the separate returns. It's worked for years but you can't rely on that anymore.

[Jesse]

How nice that you are comfortable.

Why do you have to belittle others opinions?

[jainen]

Like I said

Like I said, just me being paranoid and cynical.