Discussion:Client bring summary - you suspect none/insufficient records
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Discussion Forum Index --> Tax Questions --> Client bring summary - you suspect none/insufficient records
| 13 March 2009 | |
| All those of you with a little more experience under your belt, please, advise.
1. A client brings you a summary of his income/expenses. Schedule C - gross 45K. While chatting to him you realize that he didn't keep a mileage log. (Last year, your specifically explained it to him). What do you do? Just put the number of miles the client gives you? (The number of miles is not unreasonable, though...)
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Death&Taxes (talk|edits) said: | 13 March 2009 |
| Does the firm have its own office? Or does he work from home. Computer in the work place is not subject to the same rules. | |
| 15 March 2009 | |
| One client once told me "if there is an audit there will be a log". He was in outside sales, made over $150,000 in commissions. I went along.
As for a computer, if you are a lawyer and you make a $75,000 profit I think 100% s not going to be questioned as today a computer is necessary for legal research, court filings, etc. Other businesses that are not so computer/internet dependent may be another matter. | |
Death&Taxes (talk|edits) said: | 15 March 2009 |
| If the home office is the principal place of business, the listed rules should not apply. | |
| 15 March 2009 | |
| Take what the client says on both issues. If the mileage seems reasonable and not a contrived number such as "same as last year" or exactly 20,000 miles, take it. If you get rid of all of your clients who don't keep a mileage log, you won't have any clients. Most IRS agents I've run across are fairly flexible on the mileage log thing any way. If it seems reasonable, they generally don't mess with it too much. I'd also take 100% on the computer. You are talking about at best a $1,000 asset. If an IRS agent wants to reduce the business use to 80%, you are talking about a $200 adjustment. The tax on a $200 adjustment is not worth an agent's time. They will pass on the small stuff, unless there's a lot of small stuff. The bottom line is that you are not an IRS agent, it's not your job to audit every single detail on the return. | |
| 15 March 2009 | |
| For an experience preparer alot of it is in the way you ask the questions. You are not in the business of auditing the clients figures. If I see something that looks like it will draw attention of the IRS I explain why it looks fishy and give the client the pros and cons of including the item in their return. It is their option, it is their penalty and interest when they are caught. If I have no reasonable or actual knowledge of deception I include the item. In cases where I know better I advise the client that I cannot in good conscience include the item in the return and they are welcome to go elsewhere if they don't want to deal with a preparer that is not willing to skirt the tax laws. taxea | |
| 15 March 2009 | |
| What Taxea says. Using charitable contributions as an example. Call client saying I need charitable contribution. Last year was $1,400
C: Oh, just use what I used last year. Me: Ummmm, can't do that, all numbers in tax return must be from you and in the case of an audit, you will need to provide back up documentation of every charitable gift given. C: Oh, in that case, $200 | |
Southparkcpa (talk|edits) said: | 15 March 2009 |
| I agree with BJETER almost 100 percent.
CPA's that come from big firms like myself and BJeter usually are big picture and use terms like "exposure", "cost effective" etc.. (and we get brow beat on this board sometimes) the reality is I make it VERY clear to clients their responsibility on their tax return. ALL clients that use a schedule C, D or E sign an engagement letter acknowledging their responsibility to the revenue and expense numbers. BUT, if they don't have a log, I have no problem helping them determine a reasonable number. Many times I lower the number they provide. | |
| 15 March 2009 | |
| I tell them the rules, then they tell me the facts. Sometimes, the facts change. If he says he drives his truck 90% after I explain the rules, I take 90%. Usually, they just opt for a few miles using the mileage rate. I have no problem with summaries as long as they acknowledge they have receipts.
I like to see their expressions when I explain the exclusive use test for their home office. | |
Wonder Woman USA (talk|edits) said: | 15 March 2009 |
| I don't mind summaries of the client's income and expenses, but I hate like h#ll when they have nothing written down and just tell me numbers. I really don't trust those clients, and usually don't do their returns a second year. | |
| 15 March 2009 | |
| If a Home Office and computer use is 90% business is it still a qualified home office. | |
Taxalmancer (talk|edits) said: | 15 March 2009 |
| I'm akin to Southpark. I review their numbers and questions items that look out of line to me. If their detail information is available and they can provide an adequate explanation, fine.
They must provide me with the information in writing and I require all business tax returns (including Schedule Cs) sign a rep letter acknowledging a whole host of things not the least of which is that the numbers are theirs. | |
IDrinkYour Milkshake (talk|edits) said: | 16 March 2009 |
| People! This is why we do engagements letters. I am not in the business of auditing my clients' records. They give me a summary and I use those numbers, unless I see something that may subject me to a penalty in there (gym memberships, I'm talking to you!). | |
| 16 March 2009 | |
| Fsteincpa...I agree and I do the same only now I let them know that a receipt is required if questioned by the IRS. If they don't have a receipt or say they don't then I don't record the donation.
I also get donation receipts with no amount on them. If client doesn't provide an amount...I don't record the donation. I got this in the IRS newsletter today: Reporting Fraud If you suspect a client is providing fraudulent information, you should report it to the IRS. See Publication 3857 to find out what may indicate fraudulent activity and where to report it. | |
| 17 March 2009 | |
| fraud is a big word. I don't consider putting down a donated amount that the client actually did but has no receipt for fraud. I also don't consider putting down a mileage amount for a client who doesn't have a perfect mileage log fraud either. They actually drove the miles, they actually donated the money. They just don't have the records in perfect order. I let them know the rules of what will happen if audited and that they may owe taxes.
Fraud, and I start by saying I haven't looked at the pub but will later today, in my mind is the guy who has a business pulling in $500,000 and you know he is reporting a lot less, say $400,000. That's fraud and knowledge of fraud. If you want to get into the nitty gritty, I guarantee you. Yes, guarantee, that 95% of every small closely held business that takes in a lot of cash is hiding some of it and not depositing it. If you want to tell me that none of your clients do this, then fine. I know it happens and I can't prove it and I don't care to prove it. That's on them and I make sure they know that. If expenses are way out of whack, I'll give them an educational lecture. Again, the above is also qualified by saying that if I now of fraud in that regards, I will eliminate them as a client as I did to one last year who just said make mine look the same as last year. I just want to pay a little for soc sec purposes. Told them they should find someone else to do their return. | |
| 18 March 2009 | |
| Fsteincpa once again I totally agree and do the same. I only mentioned the IRS site because there have been so many posts on the issue of reported suspected fraud. If I choose to report it will be someone who I am reasonably sure of and not nickel and dime stuff. i.e. Madoff and obvious fraud on the part of preparers..like padding the Sch A. If they do it for one they do it for all and I have found that their prior clients are the ones that tend to say "you have last year's figures" taxea | |
