Investigating tax returns

[Kong]

nycCPA

The attorney did not give wrong advise, here's what happen.
1-Client needed to show INS that he had enough income on his affidavit of support. Or else he would have needed co-sponser which he did not want to enlist.

2-If your friend married US citizen and I believe that is his wife/sponser he needs to remain married for a period of two years in order for conditions on his residency to be removed.

3-If they have children from marriage then conditions on residency will not apply.

4-Leave well enough alone, have judge isuse child support order. Next year when he prepares accurrate return and if there is a least a 15% differance then he can ask to have child support modified. If your friend wants to dig a deeper hole for himself let him.

[thomtax]

Another thought

I'm with jimmcg. I think this is a bored guy somewhere who thinks it's funny to post ridiculous crap.

Any ridiculous crap I post is sincere.

In my usual paranoid thoughts, possibly this is someone from the IRS testing to see what types of answers they will get. This might give them ideas as to other glorious rule changes.

LT

[Zee]

The attorney did not give wrong advise, here's what happen.
1-Client needed to show INS that he had enough income on his affidavit of support. Or else he would have needed co-sponser which he did not want to enlist.

2-If your friend married US citizen and I believe that is his wife/sponser he needs to remain married for a period of two years in order for conditions on his residency to be removed.

3-If they have children from marriage then conditions on residency will not apply.

4-Leave well enough alone, have judge isuse child support order. Next year when he prepares accurrate return and if there is a least a 15% differance then he can ask to have child support modified. If your friend wants to dig a deeper hole for himself let him.

So, it's ok that a fraudulent tax return was prepared in order to satisfy INS laws? You've got to be kidding. Anyone providing this kind of advice should lose their licenses.

[JohnH]

As a side benefit, I think we're getting some interesting insights into what passes for "truth" when people are providing information to the INS ("let me know what you need to hear and I'll tell it to you")

It also helps explain why the immigration situation in this country is such a mess - the regulators don't do any regulating. Meanwhile, IRS is expecting us to inspect every Goodwill receipt to be sure the taxpayer doesn't overstate the value of his old sofa by $25 or else they want to fine us thousands.

It just reinforces my point that the main focus of much law enforcement at all levels is to focus on the basically law-abiding citizens because that's where the money to pay fines and penalties can actually be collected.

[drdino]

Legality?

"and didn't tak as many Sch C deductions as he could have"




.........For my own curiosity, is it improper to not list all the deductions one is entitled to? Same idea as being able to itemize, but taking the standard deduction instead.

[BHoffman]

Sch C + EIC

= phat opportunity for a lot of trouble. Sch C profit can be easily manipulated by the unscrupulous to maximize the amount of EIC by not recognizing all expenses. Is that illegal reporting? I believe it is.

[Zee]

"and didn't tak as many Sch C deductions as he could have"




.........For my own curiosity, is it improper to not list all the deductions one is entitled to? Same idea as being able to itemize, but taking the standard deduction instead.

Good question. What was the intent? The intent was to defraud the INS. As already indicated, showing a profit might increase EIC. Or, showing a small profit might be an attempt to avoid hobby loss determination. Or again...not listing all deductions to show a greater profit can be used to defraud investors, or banks.

I'm sure most of the preparer's here have had a taxpayer that doesn't want to take a deduction because they just don't want to increase their risk of audit for nominal gain. A good example is the office in home deduction. Although I've had more that want to take an office in the home deduction when they aren't entitled to it, I've had others that could but chose not to. I'm sure there are many other examples that others can offer. What about them? If the intent isn't to "hide" or "mislead" others, I don't view that as the same situation. Others might.

I would, however, make sure I documented the client's decision in writing.

[Kong]

Zee

I never said it was correct to prepare fraudulent tax return. Just pointed out what this friend of NyCPA wanted to accomplish. I am only exchanging thoughts. Then its wished upon me to lose my license. How childish.

[Zee]

Kong-

You said, "The attorney did not give wrong advise."

The attorney advised this person to file an incorrect tax return to avoid a negative determination by the INS. In my opinion, that type of advice constitutes fraud, and is very wrong.

You also advised the poster not to correct the situation by filing amended returns, and to "leave things alone." That's also incorrect. It's a preparer's responsibility to communicate the necessity of filing an Amended return in situations where it is necessary.

Kong, are you a licensed CPA? If so, the Ethics CPE required in most states should make these requirements quite clear.

If the purpose of your post was not to condone the actions of the attorney and CPA but simply to indicate why the attorney offered such advice, why did you start the post with "The attorney did not give wrong advice?"

My point is attorney's and CPA's that engage in this type of activity deserve to lose their licenses, there's nothing "childish" about that. It's a serious problem in our profession.

[gkaiseril]

Let's see false documents filed with INS and represented as true forms. Walks, and quacks like a duck. So it is a duck. The client may get the U.S. green card or citizenship revoked. I do not think there is a statute of limitations for false statements on a citizenship or green card application. INS has revoked citizenship for immigrants from World War II that made false statements on their citizenship applications.

So if that happens, professionals assisting in the deception could be charged with conspiracy.

[Black Bart]

This question was explored

"and didn't tak as many Sch C deductions as he could have"

.........For my own curiosity, is it improper to not list all the deductions one is entitled to? Same idea as being able to itemize, but taking the standard deduction instead.

at a University of Arkansas tax seminar I attended in 2000. The findings were ---

ANALYSIS:

...Under I.R.C.1402(a), net earnings from self-employment is defined as the gross income derived by an individual from any trade or business carried on by the individual, less deductions attributable to the trade or business, and certain adjustments specified by law...

Rev. Rul. 56-407, 2 C.B. 564, held that under I.R.C. 1402(a), taxpayers, with the exception of certain farm taxpayers, must claim all allowable deductions in computing net income from self-employment for self-employment tax purposes. Treas. Reg. 1.6001-(a) provides that taxpayers required to file a return must keep sufficient records to establish the amount of gross income, deductions, credits, or other matters required to be shown on the return. Under this authority, the IRS may require a taxpayer to substantiate any amount shown on a return, including both the income and expense elements of self-employment income shown on a schedule C. Therefore, when a taxpayer who claims the EIC reports self-employment income with little or no expenses, the IRS must subtract these expenses when determining the taxpayer's net earnings from self-employment. If the IRS is unable to determine the amount of unreported expenses, it may disregard the claimed net earnings from self-employment for purposes of EIC and self-employment tax.

HOLDING:

In cases where the taxpayer reports net earnings from self-employment without claiming the applicable business expenses, the net earnings from self-employment must be adjusted by those expenses...

[sea-tax]

Sure BB I can agree with all of that.
However it is hard to make me take a mileage deduction when I have no substantiation by way of mileage logs nor can I recreate one.

What I am saying is that every deduction is different. For example if I have purchased cogs then I must deduct those items. But if I use a room in my house to pay company bills and contact clients do I have to take the IHO form 8829? I would think not. But maybe I am wrong.
The same might be said for charitable contributions. I have had a few clients , very few less than 5 who over the years simply said I have all the documentation necessary for the charitable contributions deductions but I don't feel right taking a deduction for this. In there mind they feel it lessons the act if they somehow benefit from it. Now I did not include the deduction , did my client break the law, did I?

[Zee]

Sure BB I can agree with all of that.
However it is hard to make me take a mileage deduction when I have no substantiation by way of mileage logs nor can I recreate one.

What I am saying is that every deduction is different. For example if I have purchased cogs then I must deduct those items. But if I use a room in my house to pay company bills and contact clients do I have to take the IHO form 8829? I would think not. But maybe I am wrong.
The same might be said for charitable contributions. I have had a few clients , very few less than 5 who over the years simply said I have all the documentation necessary for the charitable contributions deductions but I don't feel right taking a deduction for this. In there mind they feel it lessons the act if they somehow benefit from it. Now I did not include the deduction , did my client break the law, did I?

Do you have to claim an Office in the Home on a Schedule C? I think it's an optional deduction. On a personal tax return, do charitable contributions need to be claimed? No. In fact, many people don't bother. Once again, I think the "intent" is important. If there's no intent to mislead, misinform, or defraud anyone, I don't see a problem. However, even if there was no "intent" if the result is a higher EIC payout, etc., there is an obligation to Amend the return.

[WhiteOleander]

On the subject of being required to deduct expenses:

There was an article last year. I can't remember if I read it in Kiplinger newsletter or from NATP. But, a women decided not to deduct all her expenses on Sch A because it kicked her into AMT. So, she took the standard deduction. The Tax Court said she could not do that. She had to file Sch A and pay the AMT.

[Black Bart]

Sure BB I can agree with all of that. However it is hard to make me take a mileage deduction when I have no substantiation by way of mileage logs nor can I recreate one.

I wasn't posting it to demand it be followed; just answering the question ("Is it the law?") that drdino asked. If there's no way to document the mileage, then I suppose it would come down to whether you believed the client and would rely on oral testimony.

...if I have purchased cogs then I must deduct those items. But if I use a room in my house to pay company bills and contact clients do I have to take the IHO form 8829? I would think not. But maybe I am wrong.

A few posts back on this thread Zee brought up that exact point while noting that he doesn't think it must be included (I agree -- it generally doesn't yield much deduction) but noting that some might strictly insist it be taken.

The same might be said for charitable contributions. I have had a few clients , very few less than 5 who over the years simply said I have all the documentation necessary for the charitable contributions deductions but I don't feel right taking a deduction for this. In there mind they feel it lessons the act if they somehow benefit from it. Now I did not include the deduction , did my client break the law, did I?

Most of us have those clients and I don't think it's breaking the law...BECAUSE...as Zee said, it all boils down to intent.

We all know this business is not an exact science, but you have to draw the line somewhere. The immigration lawyer and his CPA buddy obviously rigged the return to pass INS muster. While (some of us) are surprised that the CPA would go along, it's not particularly shocking that the attorney is doing it; if word got around the would-be immigrant community that Lawyer So-and-So insists on true figures which will keep you out of the USA, but Lawyer Such-and-Such does not, then it's not hard to figure who will go out of business first.