Discussion:"Dummy" return
From TaxAlmanac, A Free Online Resource
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.
From TaxAlmanac
Discussion Forum Index --> Tax Questions --> "Dummy" return
| 15 August 2007 | |
| I have a client for whom I prepared their 2006 1120S. Client owns a franchise and provides additional services other than those offered by the franchise. Client would like a "dummy" return prepared showing only the franchised segment of the business. This dummy return will be provided to the franchisor presumably for the calculation of royalty fees. My suspicion is that the franchisor will not be made aware that this is not the actual return filed with the IRS. How do I protect myself? Will specifics in the engagement letter be enough? Should I just decline? | |
Actionbsns (talk|edits) said: | 15 August 2007 |
| Tras, having been through a criminal investigation involving one of the CPA's I worked extensively for about 12 years ago, I'd recommend running away from this as fast as your legs will carry you. At the heart of that investigation were returns of this nature, and others, that were prepared by that CPA for a variety of reasons. You have no control over what your client will use this return for or where it will show up and it will have your name on it and your contact information. You are stating on that return that you prepared it, you prepared it correctly and that it is the return that has been filed. Why can't you provide a financial statement for the franchise part of the business? That should be sufficient for calculating royalty fees. | |
| 15 August 2007 | |
| I recommend splitting the books between the franchise and the additional services part. What kind of franchise is it? | |
Taxcurmudgeon (talk|edits) said: | 15 August 2007 |
| Has your common sense gene gone AWOL that you'd even consider doing this? | |
| 15 August 2007 | |
| I recommended providing separetely states financial statements, but apparently the franchisor will accept only a tax return. My gut feeling is to run, like actionbsns suggests. Thanks | |
| 15 August 2007 | |
| Additional information just attained - their previous CPA (reputable local firm) did it last year and wrote "DUMMY RETURN" across the top. Apparently, the intent is not to mislead the reader as I originally thought. | |
| August 15, 2007 | |
| Client should have thought of this before. Even if no tax fraud is committed, how do you know that you're not helping him commit fraud against the franchisor? If his contract requires royalties on ALL income, then you would be. And if it isn't, then why worry about sending a complete return? There's something fishy here. Don't be sued by the IRS or the franchisor would be my advice. | |
Death&Taxes (talk|edits) said: | 15 August 2007 |
| Back in the days of coated paper copiers, your 'client' could have easily taken "DUMMY" off the top. | |
| 15 August 2007 | |
| Don't know if you are a CPA or not, but if so, this would not be considered a "tax return" which was not subject to the SSARS standards, since, although prepared on tax return forms, it is specifically not intended to be filed with a taxing agency. Therefore it would be subject to reporting and disclosure standards.
Don't care what the predecessor did, don't do it. | |
To join in on this discussion, you must first
log in.
