Maintaining confidenality

[Chief]

of tax information was brought up in a recent posting. I have no problem with taking records of a client to a Kinko's for photo copying as long as I do it. I would never leave such records for the staff of another business to copy for me. The same thing happened to me once with the spiral binding of a client's tax return and related papers. When I learned I would have to leave the papers for their staff to do the binding I declined. Instead a purchased punch and binding equipment and binders and I offer that services to my clients who have complicated returns. That service has been well received by the comments I have heard.
I share this information in the hope that it will prove helpful to you. We can't take too seriously the confidentiality our clients place with us.

[JohnH]

This confidentiality string has me thinking about an odd situation I have this week. My situaiton isn't one concerning third parties, but rather other parties within the client situation.

An s-corp has one active shareholder and two semi-active shareholders - each one owns 1/3 of the stock in the corp. The active shareholder hasn't yet given me the info to prepare the 2007 tax return which is on extension. I've sent him emails explaining the penalty situation ($225 per month) after Sep 15. He sent an email today saying he's still looking for some info. I responded by repeating the warning about the penalty, and asking if he has advised the other two shareholders of the penalty risk.

If he doesn't acknowledge the email or if his response isn't satisfactory, do I send a notice to the other two shareholders, or just consider that notifying him is sufficient? (He has always been the primary contact for all business matters in the past)

[veritas]

I think

you have done all that is required. You may get calls from their acountants. I would direct them to the managing shareholder.

If you say more it will come back bite you. Your client will most likely say anything to the others to deflect blame.

[Snaggletooth]

Nothing Else

I would certainly document your warning, and say no more to any of the other parties. If assessed, their problem will be with the partner delegated to handle these affairs.

I would certainly feel some sort of obligation as the other partners are innocent (at least with respect to the penalty). But confidentiality is axiomatic.

Sometimes you can see a train coming when you're tied to the railroad track. I think this is one of them.

[erchess]

This puzzles me

How can the tax management officer at the S Corp have confidentiality that trumps the obligation to tell all the shareholders that this individual is putting their corporation at risk of a fine from the IRS? What if he were stealing from the S Corp or putting the S Corp at risk of Criminal Penalties?

I can understand why the guy has confidentiality that prevents the preparer from sharing tax information OTHER than information pertaining to his duties to the S Corp with the other shareholders. But my understanding is that when I do a return for a business all of the owners of the business are my clients.

Let me ask a question that seems similar to me even though I know that the rules may be different. Suppose that I am working on an MFJ or MFS 1040 where all of the information is being brought to me by one member of the couple. Is there any confidentiality between members of a married couple? For example if in the case of MFJ I uncover that the person I am dealing with is cheating on taxes do I not have a duty to inform the spouse? Or if they are MFS do I not have a duty to tell each whether the other itemizes?'

[Snaggletooth]

MFJ confidentiality

How can the tax management officer at the S Corp have confidentiality that trumps the obligation to tell all the shareholders that this individual is putting their corporation at risk of a fine from the IRS?

Is there any confidentiality between members of a married couple? For example if in the case of MFJ I uncover that the person I am dealing with is cheating on taxes do I not have a duty to inform the spouse? Or if they are MFS do I not have a duty to tell each whether the other itemizes?'

I think the tax management officer is in this perspective very similar to an AGENT of the corporation. Although you may think the greater moral good accrues to all shareholders, your professional obligation stops with the agent. It's similar to having a client so dishonest that you withdraw from the engagement -- the greater moral good perhaps would be to turn him in to the IRS, but your professional responsibility maintains confidentiality.

With MFJ: Both parties will sign the return, even though you are interfacing with only one party. You don't have to notify the other party of every item on the return, but that other party has a right to know, and if that party inquires of you, nothing should be withheld. I remember distinctly reviewing a 1099-INT for a woman's saving account that she didn't want her husband to know about, and she begged me not to tell him. My response was that I would not make a point of raising the issue, but if he asked, I would be obligation to tell him since it was a joint return.

For MFS. Your confidentiality stops with the party of the subject return. If this party is making sleazy elections that paint the other party into a corner, you still treat with confidentiality. You might think you are doing a mighty moral deed by informing the other party, but what you are really doing is invoking scientre on that party, and depriving that person of innocent spouse relief.

[erchess]

I need to read up on Confidentiality as it applies

to agents of businesses. I think that based on what I am reading here I have a decent grasp of confidentiality as it applies to individual returns. Where would be a good place to start?

[JohnH]

Good discussion.
Thanks for all the input & ideas.

I finally sent the following to him:

---> We have until Sep 15 to get the return filed, but we are well past the time window I need to get it done on time. In any event, with a $255 per month penalty hanging out there, I'm supposed to notify all affected parties just so there are no surprises. Do I need to follow up with a copy of the penalty info to ___ and ___, or are you keeping them advised? The penalty is not simply a possibilty - it will automatically be assessed when the return is filed. <----

He responded that he will have everything to me tomorrow - we shall see.

[taxea]

Maintaining confidenality

Re MFS
Even if all the docs are brought to me by one of the clients, I maintain the confidentiality of both. Same applys to family members. My standard response is, "if the taxpayer choses to share information with you that is however, I can neither confirm, deny or provide information to anyone other than the taxpayer for which I am preparing the return.
i.e. mom brings in son's documents then asks me later what his refund is...what it is is confidential. taxea

[JohnH]

Interesting discussion on the different approaches to confidentiality. My view has always been that both parties to a joint return are equally entitled to know anything & everything about the return. That's spelled out in the latest version of my engagement letter, which seems to get more & more involved as time progresses. Pretty soon it's going to be longer than the tax return.

[thomtax]

For MFS - I agree with taxea. Since the other party is not signing and is not on the return, they should have no access in theory. Of course, we all know that in everyday practice, many times one party just doesn't care or want to know so they hand it over to the one that is willing to handle it.

JohnH - Agree with you where the filing is MFJ. As I understand it, each party is held responsible for any or all of the information, so nothing should be held back from either party.

LT