Discussion:Ethical Question ?

I've done my best friend's sister's taxes for years when she was single mom. She was finally married off in '07. I don't really know the husband but my best friend once told that the husband plays in a band at local bars. During the interview I asked the husband about any income he might have. He has no W2's. He told me flat out that he was unemployed. Remembering what my best friend once mentioned in passing, I pressed the issue and was told again and again that he had no income and he unemployed.

As it is, they rate EIC. The client has repeatedly told me that he has no income. Do I except him at his word? Do I end run him and confer with my best friend (kinda blows confidentiality out of the water)?

How recently was that?

The best way to confirm that is to find out where the band plays - and spot check the band one night, or two.

I think you have to have them both sitting in front of you, and if they did during your interview, then at least you know something about your best friend's sister! I have found that often it is the spouse that starts the ball rolling towards a semblance of honesty.

I'm just a big pansy. I was getting hungup on the fact that I have information about a client from a personal source. The bottom line is that I have information and need to pursue it. I'm going to ask him point blank - "Do you play in band?". If the answer is the "No", I'll let him know that I know and I can't proceed without addressing the issue.

I have another client that published a book during '07. I read about in the paper. I even kept the clipping in his file to remind yself to address during his consult. It doesn't matter how I know something, I know something.

Hell, if Bill Gates walked in here telling me he had no income I would better. If Bill Gates walked in here you know my rates would skyrocket as well.

Unless your band has a steady gig, then you sometimes spend more money than you make. When I had steady work with my band, we played minimum 2 to 3 times a month. I made close to $10K that year. I spent most of that money in gas, drumsticks, equipment, you get the point.

I'm not defending the guy, but it could be he's telling the truth.

Tom

Get it documented. I have prepared returns with people sitting across the desk from that I would have bet the farm that they were lying but I wasn't about to follow them home to verify it. That is not my job.

I think alot of us who would never qualify for the EITC (and would cringe to take it if we did) are a little miffed that there are those who work the system.

Hillary and others in DC want them to work the system, it keeps people pulling the lever for her and the others who aren't willing to do what is necessary to stop the fraud.

FairTax...haven't really studied it but I like a consumption tax. With that program, these people wouldn't pay any taxes and the issue would be closed. Dang, I started that discussion again. Doh!

Heck, in this case, truth be known, if he has a legitimate business, earns income from gigs, he may actually not be a hobby, and have a loss, generating further tax benefits.

Once the question is asked & answered, you can't do anything more.

Conferring with your best friend is definitely out of the question, in terms of confidentiality.

If the client still makes you nervous, you can always disengage for next year.

If he still plays, I really doubt he is raking it in.

I strongly, strongly disagree with the answer given which says "if the client still makes you nervous, you can always disengage for NEXT year". If you don't believe the information on the tax return is correct, you don't prepare the tax return THIS year.

I have done so on two occasions. Once, I did throw a client out of my office and on the other, I refused to take a deduction for business use of the home where a client claimed that she had a 1000 sq ft. room devoted strictly to business. I ended up not preparing that return at all.

Remember, this information is not first hand. It's second, could be even third hand. You went to the source, he gave you an answer. Steve's right as well that you shouldn't prepare the return if you don't feel the information is correct.

My experience as a musician (more off than on these days) and D&T's point is the guy could be not working or not making it right now or even in 2007 and the wife is taking care of the freight. I have a couple of musicians who because I see them physically perform, I know they get paid and they declare the money. It's not much, they have expenses and in the end, one year the pay a small amount of SE tax or they don't pay at all the next. They also have day jobs and wives who work. I am more than satisfied I am capturing their income.

Sometimes information you get from others can be incorrect, outdated, etc. Years ago, I was once told by a client that they suspected the volunteer board treasurer was embezzling. He showed up at a board meeting one day in a new car. He also wound up with a beach house for an unexplained reason. I knew the person well. I told the client I couldn't believe them. The rumors started flying and I had to intervene. It turns out the guy had a relative who died and left him some money, about $100K. He bought the car and the beach house was left to him and his family by the relative. Case closed.

Sometimes a cigar is just a cigar.

Tom

I was never good enough at any instrument to have to worry about that angle personally, except for maybe as a comedy routine. This, of course, does not include my scheme to publish music practice books&exercises that I ran by D&T for his imprimatur (grudgingly given I think). Boy, had I just invested all that money wasted on music lessons, lol.

Any help will be much appreciated!