Discussion:Power of Attorney related actions

I am not sure if anyone can guide me in this area but I am going to give it a shot. I am going to speak with an attorney in a few days regarding some collection(myself collecting from some of my clients) issues that I have. One client in particular(Mr. X) had just called me regarding a follow-up letter I had sent to him and his wife(Mrs. X) offering them two payment options on their underpaid invoice(roughly $1,400) from me. My letter also said that if they do not pay under either option then I will be forced to seek other payment options, that being collections. Mr. X said that if I take further actions then he promises he will file charges against me for extortion. Mind you, I have never done anything illegal or unethical in all my ten years of tax and accounting preparation. I strongly feel that him and his wife are just trying to get out of paying for all the work I did for them. (And I know, shame on me for not having them sign an engagement letter.) To briefly summarize, what Mr. and Mrs. X asked me to do was to look at their 2004 1040 because they felt that their previous accountant(Mr. Z) had made them pay too much, ~$20,000. It involved the taxable and nontaxable portion of some substantial 2004 IRA withdrawals resulting from a QDRO transfer to Mrs. X. After looking at it I discovered that Mr. Z had forgot to report 2004 stock sales totalling ~$254,000. I immediately informed Mr. and Mrs. X of the potential consequences to them and said that I would need to calculate cost bases in addition to the other IRA work. I also informed them of my hourly rate, which I do with all of my clients. I did finish their 2004 return with the correct cost bases and recomputed taxable IRA amounts and informed them that they would owe another $3,500 to $4,000 based on my calculations if they were to file an amended return. Also, Mr. Z had filed extensions valid through October 15, 2005.

To finally get to my point, does anyone know if I am allowed to request a transcript of their 2004 Form 1040 from the IRS(I do have a valid and signed Power of Attorney from Mr. and Mrs. X for the 2004 tax year)? I would so solely in anticipating that I may need it to justify my position in the event of any legal action. Or would doing so alert the IRS as to Mr. and Mrs. X's unreported 2004 1099-B transactions? In my opinion I had fulfilled my obligations under Circular 230. Mr. and Mrs. X are just choosing not to file an amended return. Any guidance or suggestions would be appreciated.

Thank you!

You prepared an amended 2004 return which the client apparently has not filed. It also appears that the client has not paid you because ostensibly, he expected you to tell him that he overpaid his 2004 taxes when in fact you told him that he underpaid them.

You sent a letter to the client asking for payment of your outstanding bill, to which the client responded, "stick it".

You're now asking if it is okay to get a transcript of the client's 2004 tax return (or an account transcript) from the IRS.

Answer...you did your job as a tax professional correctly. You prepared an amended return and informed your client that he owed additional tax. You are NOT responsible for your client's actions after you give him the amended return.

You are also correct in pursuing your client through collections. You did the work and you should be paid, regardless of whether he likes the results.

However, I do not agree that you should get transcripts of any sort from the IRS. In effect, I believe the client has constructively revoked Power of Attorney even though he may not have used those words or filed any papers and any actions you take with respect to the IRS at this point could become VERY problematic for you. You have the return he said he filed. You have the amended return you prepared. Sue him in small claims court and handle it in the proper manner.

If you can get it taken on by an attorney, don't be surprised if the contingency fee is %50. I would only take such a case on hourly, myself (i.e. if you are just handing over one account).

If there is any way possible to settle this matter, you should do so. Most judges are distinctly uninterested in such matters, and will encourage you to settle in the hallway. Why not do it from the comfort of your office, get what you can, and forget about it? Or take it to mediation (you can ask the judge to send it to mediation after suit is filed also, note: mediation, NOT arbitration).

Don't try to get personal revenge in any way. Use the legal system if you must, but don't get your hopes up. I concur with Skass. I will also add that the idea of taking it to small claims by yourself is good, if you are confident you can hold your temper. Even if you goof this case, it's good experience when you go to sue the next one. There is always the risk of a counterclaim, it goes with the territory, so take that into account.

As to getting an IRS transcript to show non-filing of the amended return. No, No, and No. Valid power of attorney or not, you would requesting the transcript to suit your own ends, not acting as the representative for the client.

The bill is not enough to interest an attorney working on contingency. Your realistic choices are to turn the bill over to a collection agency or sue the client yourself in small claims court.

Once again, thank you all very much for your time!

If these clients have been sued previously, and you can look at the actual pleadings, you can also see if they are the type to file counterclaims. A counterclaim, no matter how spurious, still must be defended against, and it's a favorite tactic to hit a professional with one on a debt collection case. Might want to check the courthouse records of the jurisdiction where the clients live (i.e county of their street address will usually do it).