The Round Man

[Black Bart]

Taxpayer brought in his "C" expense list last week:

31,850.00-- Fuel
1,770.00 -- Phone
1,250.00 -- Car Insurance
1,850.00 -- Truck Insurance
13,840.00 -- Parts and Repairs
2,100.00 -- Taxes and License
3,800.00 -- Interest
1,735.83 -- Misc.*

* (I don't know where that one came from)

So anyway, I make the speech I'm obliged to make:

BB: Your list looks a little...uhh...well...a little funny. It's obvious to me, and certainly to IRS, that these figures are estimates. Seven out of eight are round numbers -- it just doesn't happen that way in real life. I have to have the exact amounts. Take this back home and add up your bills; then they'll know it's the real thing.

TP: Uh...oh...ohhhh...yeah, yeah, I see...I get it now. Okay, no problem; I'll be back in a few days.

Yesterday (returns with revised list):

$ 31,850.70 -- Fuel
1,770.60 -- Phone
1,250.30 -- Car Insurance
1,850.50 -- Truck Insurance
13,840.40 -- Parts and Repairs
2.100.00 -- Taxes and License
3,800.35 -- Interest
1,735.83 -- Misc.

I just about fell out of my chair laughing.

[JohnH]

Everything looks OK to me except that total for the "Misc" category.
I've never seen a "Misc" end with ".83"

[Jiggers]

Similar

I had one like that.

Except everything ending in 000:

Sales - 123,000

Purchases - 78,000

Advertising - 1,000

Utilities - 12,000

Telephone - 1,000

Repairs - 3,000

Equipment - 6,000

Total Mileage - 20,000
Business Mileage - 18,000

You get the drift.

All in his handwriting and on my organizer that he completed.

And he signed the statement that he could verify each amount and hand the proper substantiation.

I did the return that year, billed heavily. Gone!

[taxxcpa]

Dog business

I had a guy who was raising dogs as a sideline. He listed dog food at around $ 15000 along with a lot of other expenses. He had a job that paid about $ 100,000 and his dog business losses amounted to about $ 98,000.

[erchess]

To all earlier posters in this thread

Given the new preparer accuracy related penalties would you do these returns if they came up in 09?

[Snaggletooth]

Penalties

I spent a lot of time whining about new application of penalties in a previous post.

However, if I filed a return for Bart's customer based on the information he provided, and got penalized I would deserve it. This is blatant neglect.

Preparer penalties should be assessed in situations like this -- NOT because the preparer does not perform compliance testing on an employer's health savings account.

Shifty-eyed Sam prepares taxes like this all the time and never seems to get caught. They say a cockroach can survive a nuclear war.

[Black Bart]

Taking a chance

Given the new preparer accuracy related penalties would you do these returns if they came up in 09?

So far, I haven't -- knock on wood -- had any penalties assessed to me and I don't plan to change methods/practices for the new ones. I -- and maybe you too --- have done returns something like that, but not quite so blatant. Lists may be mostly odd numbers, but often include a few round sums and you're pretty sure it's guesswork. You might ask, but it's not enough to demand a complete revision.

What I mean to say is that I'm not a 100% strict disciplinarian operating in an ivory tower and if you want your business to survive, sometimes you just have to work with what you've got. I couldn't live with that particular guy, but I've held my nose and cut through some shaky stuff at one time or another.

[Black Bart]

Hey taxxcpa,

I had a guy who was raising dogs as a sideline. He listed dog food at around $ 15000 along with a lot of other expenses. He had a job that paid about $ 100,000 and his dog business losses amounted to about $ 98,000.

If you did this one, you've got more guts than I do.

[gkaiseril]

I spent a lot of time whining about new application of penalties in a previous post.

However, if I filed a return for Bart's customer based on the information he provided, and got penalized I would deserve it. This is blatant neglect.

Preparer penalties should be assessed in situations like this -- NOT because the preparer does not perform compliance testing on an employer's health savings account.

Shifty-eyed Sam prepares taxes like this all the time and never seems to get caught. They say a cockroach can survive a nuclear war.

They do get caught, but unless they are EAs, CPAs, or attorneys, the pay their fine and are back in business.

A number of years back, one these artist was arrested 2 weeks before the due date and his answering machine said he was very ill. but he was in the federal Metropolitan Correction Center down the street from the IRS district office. He clients that came is were now very concerned about their tax situation for the prior years. Where they subject to repayments or fraud charges. All of a sudden they did not know about their past dependents or rental expenses.

It is not only the tax "artist" but also the clients that want this service becuase they need the edge that the big tax avoiders get or they think those people get the break.

[Nashville]

Sqeaky Clean Clients

and if you want your business to survive, sometimes you just have to work with what you've got.

Bart you are bringing to us the hard cold truth.

If you consider this message board as a community, you will read profusely of "firing" clients, walking away from engagements that appear to be slightly tainted, and drawing lines in the sand where "we will NOT take clients who..."

It's like we are to serve a public who must first divest themselves of any moral turpitude before entering our sqeaky clean doors.

Bart, seems like you don't live in a world like this, and neither do I. We all have our standards and yes, I have had to "fire" a few clients. And I wouldn't file taxes for "The Round Man." But I think if we're honest with ourselves we generally do not walk away from returns and will go down the road with our people as long as we can give them the benefit of the doubt.

[DaveO]

So what if the numbers are estimates?

Not so much in the case of "round man" but in filing multi-year returns for self employed persons I often see some round numbers. If an estimate is used shouldn't it be a round number so it doesn't appear you are trying to disguise it?

On a current year return I'm in total agreement with the opinion that precise numbers are required. I'm curious how others deal with the multi-year "round man".

[Black Bart]

...in filing multi-year returns for self employed persons I often see some round numbers. If an estimate is used shouldn't it be a round number so it doesn't appear you are trying to disguise it?

When dealing with old returns I see round numbers too (frequently, estimates are all they have), but above maybe three or so it starts getting sticky. If you don't change them (down, I suppose, would be the prudent direction) a dollar or so, then you have (I think) increased audit risk. If you're audited anyway, then you might need an explanation for the agent as to why you disguised them (I can't think of a good one). I don't know what to do about that and even if you do round up/down, you might end up with a page full of ones or nines.

To me, a submitted estimate sheet is sort of a slap in the face -- indirectly saying "This is not worth my time -- I don't care enough to even bother looking it up...AND FURTHER...I don't particularly think YOU are ethical enough or important enough to worry about either."

...I'm curious how others deal with the multi-year "round man".

Yeah, me too.

[David1980]

Not so much in the case of "round man" but in filing multi-year returns for self employed persons I often see some round numbers. If an estimate is used shouldn't it be a round number so it doesn't appear you are trying to disguise it?

On a current year return I'm in total agreement with the opinion that precise numbers are required. I'm curious how others deal with the multi-year "round man".

An interesting aspect. I see this too, prepares that are strict when it comes to current year returns but if you ask them to do a prior year return or an amendment they're much more lax as far as their standards. It seems like for these people an amended return is an opportunity/challenge to get the new taxes owed as small as possible in order to be a hero in their clients eyes while on the original return it is what it is.

[joanmcq]

Yknow I just got in an audit that turned into an NOD which turned into a bill for a huge sum of money because the original preparer didnt report the sale of a home, and didnt fix it when the taxpayers thought she was doing so. So I'm reviewing the return, and the Sch C has big round numbers for everything but income. So I pointed that out, and the client said, we gave her actual numbers, (wife said I spent hours adding up all the reciepts!) and the preparer said to round them, the IRS doesnt care about exact figures, so we did.

I said they dont want to see cents but that's about it. Audit started because preparer said she efiled and apparently she didnt. Interestingly, the agent I talked to today said that since the original audit was for a missing return, an SFR was filed even though it never got beyond the request for return stage (well then after it was filed they got the notice saying oh and by the way you left off 365K in income off the return). Wierd; I didnt think an sfr was filed that fast.

[ChEAr$]

What's funny

sometimes, is when I'm looking at income to the penny (1099's), and rounded
expense figures. I ask client about those even hundreds and he says that each
category is at LEAST that, and he has receipts to back them up "just in case."
then he tells me not to worry.
And I get to tell him where to go.