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Discussion Forum Index --> Basic Tax Questions --> Preparer made up deductions redux
Discussion Forum Index --> Tax Questions --> Preparer made up deductions redux
Robi (talk|edits) said:
| 25 January 2008
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| This refers to my post of several days ago about the preparer, now deceased, who "creatively" made up numbers for Schedule C and capital losses for clients. Since the first post, more of deceased preparers clients have come to see me. Seems he was giving my phone number out "in case anything happend" to him. One client asks me if I will continue to write off as an "uncollectible loan" the $200/month the client's wife sends her mother in Peru. Another client comes into the office with his tax records back to 2003. He, as with the first client I wrote about, has a capital loss carry forward of $3K/year since before 2003. He admits it is bogus and felt "uncomfortable" about it from the get go. His 2005 tax return shows ~$24K in s/e net income with the maximum SEP contribution taken as a write off. Also, there is ~$19K in bank interest on the tax return. I start looking through his papers and see that in 2005 he added another CD in addition to the SEP. This CD is for $50K. I ask if this money came from a gift(s) or transfer. He says, "NO, I EARNED THAT MONEY." I ask how he has $50K to invest if he only made $24K in net profit. He admits that former preparer made up deductions on the Schedule C so only a certain tax liability would be paid. Ahhh, the life of a tax preparer. We should all write a book about our experiences. We could retire to paradise on the royalties.
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JAD (talk|edits) said:
| 25 January 2008
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| There's a guy who worked down the street from me who is in jail for doing that sort of thing.
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DZCPA (talk|edits) said:
| 25 January 2008
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| Nice referral source!. Now you can look like a star and do their returns correctly.
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Bottom Line (talk|edits) said:
| 26 January 2008
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| Fortunately for this guy it's too late for him to see the inside of a jail cell (but where he is may be worse). Sounds like there's going to be lots of hand holding for these new clients. I had one cry on me a couple of weeks ago because of what her prior CPA had done. I'm helping her with bookkeeping and cleaning up the mess from the prior CPA. Client's new CPA says the old one should lose her license. I didn't tell the client but I had already had the same thought since I'm cleaning up her mess. You may want to load up on Kleenx.
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JEllegate (talk|edits) said:
| 26 January 2008
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| I'm betting we've all run into prospective clients that would like us to "help them out" and I'm also guessing we all have heard of some preparers in town who are a little shady. These folks seem like they were a little extreme (some more so than others). Whenever I need to resist the temptation to do something I'll regret later I take a look at this link:
http://www.irs.gov/compliance/enforcement/article/0,,id=162989,00.html
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Bottom Line (talk|edits) said:
| 26 January 2008
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| In my client's case there wasn't anything shady, it was simply incompetent. Somewhere on here there's my venting of the mess that I had found. Houses sold years before still showing on the balance sheet. No interest vs principal split for mortgage payments. Bank accounts not reconciled. Payroll tax deposits not made on time so client got large penalties and CPA made client pay the penalties. etc, etc, etc.
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JEllegate (talk|edits) said:
| 26 January 2008
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| I was responding to Robi's initial post...that situation looks a like a bit more than incompetence. The reason for the IRS link was two fold (at least for me). One it's a reality check and refreshing to see that they actually take some action to ferret out bad practitioners. Two, back in the day (10 years ago) when we used to have staff accountants we'd sometimes run into a preparer or two who had taken it upon themselves to inflate some deductions and we'd have to sit them down and talk about the pros and cons of doing so...as you might see from the IRS cases some of the folks involved didn't appear to do real bad things ...I think there's one poor SOB who ran up some mileage and charitable contributions on a few returns and got twelve months and a day jail time then of course you have the hard core types with extensive jail time. I'd tell the unweary staff accountant of ours...it doesn't take much to get in trouble...what are you going to get for taking this risk a few extra dollars, an additional client or two who's going to keep expecting you to push the envelope? You might enjoy three squares a day and getting away from it all but, this isn't the way to do it." Some of them got the point and some of them didn't and those that didn't weren't with us very long.
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