Discussion:Too honest
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Ksnoopytax (talk|edits) said: | 17 April 2008 |
| I thought i'd share this with some of you who may have had similar experiences.
During tax season my boss walks into my office and tells me that one of my clients came into the office and while signing his e-file documents made a comment half jokingly that I was "too honest." This client is one of my clients that I do a decent chunk of work for including quarterly financial statements, a corp and personal tax return. He never complains ever about the bill we send him but often complains about his tax bill. When I go out to look over their accounting records, I always find some amount buried as a "reserve" account or something else that I need to back out of his accounting and then I feel like I am the IRS trying to convince him that he can't do that (even though we have the discussion every quarter). I don't have the client list where I can just drop the business but I get pissed sometimes when I have to defend why he can't take a deduction for something. I don't even think i'm that hardline. Just thought i'd share. Between clients like this and all the clients around April 15th that I have to deliver bad news to, I feel beat down after the tax season like I personal kicked their dog. | |
Nancyshoemake (talk|edits) said: | 17 April 2008 |
| Remember that he is hiring you for your professional expertise. While he may like many aspects of your services - not everyone likes the news they don't want to hear. Part of being a professional is somehow learning to get a thicker skin - easier said than done. | |
Southparkcpa (talk|edits) said: | 18 April 2008 |
| You are doing the right thing. In my practice, when doing on site work I review credit cards and other things and in that capacity occasionally find things I do not like. You are helping them by showing them that it is easy to find and that they would really be hurt on audit. One of my favorite lines is....If you got audited, you would be angry with me if I let you do this. Imagine what you don't find. Stick to your guns | |
| 18 April 2008 | |
| I don't let this bother me anymore for the most part. I'm proactive enough to inform my clients IF there is a better way to structure their business to lower their tax bill, but I know that there is only so much that can be done. I also remind them to call their congressman the next day to let them know taxes are too high. I'm still waiting for the first one to tell me they did! LOL. The ones I have no mercy for are the ones who could easily put money into IRAs, etc. but choose not to and expect me to 'find' a way to make it less. No way Jose! The one that got to me this year was where he dropped off their papers and told me he just became unemployed. I told that I'd have theirs done ASAP as they usually get about $3k back. Upon enterering the W2s they owed $5k. Wife entered workforce and made good money, but claimed M5, as was he. Talk about having to drop bad news, ugh. | |
| 18 April 2008 | |
| I really dislike it when I think clients bury personal expenses in their books, hoping I won't catch them.
What happens if they're audited and expenses are disallowed that you didn't catch, complete with extra tax, penalty, and interest? Will they blame you for not finding the problem? I got so annoyed about this kind of client that I ended up adding a sentence to my engagement letter asking the client to represent that he knows of no personal expenses included with the business deductions he's giving me and that "Our goal is to prepare an accurate tax return. I can't do that without your full cooperation." The problem isn't yours, it's your boss's. He should really consider resigning from the client, as I've done a number of times in the past. Good staff is so valuable that your boss is making a mistake in not backing you up on this. | |
| 18 April 2008 | |
| By mutual agreement one of my clients is going elsewhere next year to prepare their corporate tax. He also feels "I'm too honest" and not agressive enough. He doesn't understand the difference between agressive and fraud. I can't look the other way like he would like me to do.
He still wants help with his bookkeeping. I was thinking of doing his bank rec, payroll reports and Quickbook consulting only. Is there a problem with that since I know his books are "cooked"? | |
| 18 April 2008 | |
| It's very depressing when there are so many legitimate ways to minimize taxes, but cleints don't have the patience, or will not come in, to develop a longer term strategy.
My usual speil is that they can pay a reasonable fee and appropriate taxes now, or pay a huge fee and a huge amount of taxes/penalties later to clean it up. I try my best to educate them, like most of us do. That usually works, if not, we part company. Some enjoy playing a game of cat and mouse. Plus, they hear their friends bragging about what they "got away with." Problem is, the friends never 'fess up when the *##! hits the fan, do they? The braggarts get real quiet when that happens. I remind clients of that. | |
| 18 April 2008 | |
| Karen258 - if you don't trust the guy, then why work for him at all? Even if someone else prepared the return you could be construed as a "preparer" under 230 if you prepared the books they relied upon. It not worth looking over your shoulder. | |
| 20 April 2008 | |
| I only do tax preparation, and every year I have to let go one or two clients because I refuse to do a fraudulent return.
I have some low income clients that pay every penny that they owe, and I am not going to "help" others with higher income to get away paying a lot less than their fare share. Also those with cooked up books are the ones I fear the most since they will be suing me for "bad" tax advice in case of audit. | |
| 20 April 2008 | |
| How about the convenienc store and restaurant owners who routinely understate their taxable sales! I am sorry to say I have given up on this and flatly told them they are on their own when in case of an audit by the sales tax folks. Secon bigest issue I face is pernoal expenses paid by the business account. I tell them if they can not justify an expense that I question, it is going into "loan to shareholder" account. | |
| 21 April 2008 | |
| Don't you love the clients in cash businesses who ask you "How much income should I report"?
(The answer being "All of it, of course.") | |
| 21 April 2008 | |
| Karen258 and Szptax - I started working with a client about a year and a half ago doing only bookkeeping and payroll but have flat told him I will not do his tax return. It's one of those almost brainless, routine engagements that pays quite well (wish I had 10 of them and that's all I'd do). I know that I will prepare the payroll properly and above reproach/question. I know that I will record and reconcile properly and above reproach/question. I will provide a TB to the tax preparer that includes everything needed to prepare a proper, correct, above reproach/question tax return and have no qualms whatsoever in doing so. I have done my job right. What that tax preparer does with that information is not my concern or responsibility. The reason why I have adamantly refused to prepare the tax return is because having used HRB for many, many years this client is comfortable with them and I know - and have carefully told him - they will be aggressive and allow deduction that I would never take. I know that they have in the tax returns I have looked at. I don't think what they are doing is blatantly wrong, but is much more aggressive than I ever intend to be. I've never questioned whether what I am doing is okay, but...any thoughts? Thanks. | |
| April 21, 2008 | |
| LJA, I'm interested to know what the tax preparer is doing that you think is too aggressive? If you are presenting a trial balance that you think to be correct, then the preparer is either reporting it correctly or not. | |
| 21 April 2008 | |
| I'm curious too. If I client came in with what you've provided, I would use those numbers on his return, unless I found something to be questionable, but I usually only get that stuff when the client does their own bookkeeping, or when they send it to someone who only does the books off of the bank statements and never asks the client any questions. | |
| 21 April 2008 | |
| The trial balance has all expenditures listed and the tax preparer should use his/her judgement as to deductibility - I would and I would ask questions. This client's home/business are located at same location and I think the HRB preparer is being very, very aggressive on what is being deducted and how much. Also, 'guard dog' expense, I wouldn't take it at all. There are just some things that I wouldn't even stretch to deduct but I know that's not always the case. Wouldn't y'all ask? I've titled the accounts well enough (and I know the previous bookkeeper did not) because I know what should be questioned. I offered several times to answer questions and/or provide additional detail, not one question asked. And, there should have been. | |
| April 21, 2008 | |
| I can relate LJA. I would certainly ask what those expenses are for. | |
| 21 April 2008 | |
| I admire you Ksnoopy. The profession needs more like you.
The ones that beat me down are those few that somehow wrangle the return away from me (I have a strict payment on delivery of return policy, yet I trust and forget sometimes), then complain about fees after they have filed it, and I have to beg and wait for payment. I usually then jack there fees up in later years hoping they will go away. However I never feel good about it. I had one the last day that did this. I called to see why they did not leave a check, and they expressed surprise that I was serious about my policy, I asked them if they had gone to Sears and picked up a Washing Machine and did not pay for it, what would Sears do? They of course had no answer. Clients! | |
| April 22, 2008 | |
| LJA, ok I've got your drift now. So it sounds like your client thinks everything they spend is related to generating their self-employment income. If you have a line item for dog food, then I understand how you are leaving it up to the preparer to make the call on deductibility. Reminds me of the client who had a W-2 job as a social worker and had 2-3k of SE income doing social work and wanted to deduct all her dog food and vet bills for the "therapy" dog. ...."the only reason we have the dog is to help in my social work".... blah blah. I wouldn't let them deduct any of the dog expenses and said no dice on her cell phone and auto expenses because the expenses just didn't make sense. Sounds to me like you need a tete a tete with your client and that you should explain that there is absolutely no way that the "guard dog" scam would fly. I would resign from the engagement. I agree with Karen and think there is a CLEAR line between being aggressive and outright fraud. | |
| 22 April 2008 | |
| LJA, are you presenting "guard dog expense" as an expense or a capital draw? "Guard dog expense" tells me that the CPA that prepared the TB thinks the guard dog is really a deductible expense. The poor untrained HRB person preparing the return is hardly in a position to second guess the CPA that prepared the TB. | |
| 22 April 2008 | |
| Jdugan - I see your point, and I would perhaps hesitate to disagree with a CPA, but that probably wouldn't be enough to stop me from questioning or disallowing deductions, even though I am not an accountant. After all, there are also accountants that do not do taxes or know much about how to do them. I recall running into a friend from high school that is a CPA and when I asked her if she was interested in working with a couple of my clients on their taxes, she said she hadn't done anything with taxes in years.
LJA - I just got a new Schedule C client that came in 4/15 to file an extension. I've just begun to look through his paperwork, but one thing stuck out like a sore thumb. His previous accountant had been deducting a home office - at 51% of the overall house. Gross revenues were over $300K, net profit was $32K. I'm already nervous. I'm going to be questioning the work of a CPA, and I don't have nearly the credentials, but I sure don't think I'm going to be ok with a home office that takes up 51% of the house, outbuildings or not. I have a feeling this will be a short-lived relationship. | |
| 22 April 2008 | |
| I have home office clients that use high percentage of the home as office. If they meet the rules why not? One is a hairdresser, home on a high traffic volume street is two story, the entire first floor is business, they live upstairs and consider the property a retirement asset. They meet all zoning requirements in a residential area, and it has been reviewed by code compliance. Dont't rule it out until you know all the facts. If your instinct tells you the client smells then that is another issue. | |
| 22 April 2008 | |
| I am still amazed with the concern over this and was not even considering resigning. All I am doing is recording the activity, not holding myself out as anything and to say "poor untrained HRB person" is unreal. This person has been doing this tax return for years and for her to not even ask for more detail or have questions at all tells me something. If someone is preparing taxes and working for one of the biggest chain preparers, doesn't the public have an expectation that they are trained and have the knowledge to prepare a return? I have my own opinions regarding these preparers, but how can these chains stay in business if they aren't prepared to be preparers? Some of these comments seem to say that I have a responsibility to review/monitor/direct how the return is prepared. I have voiced my concerns to this client and no amount of money is going to make me do something that I know is wrong. I always appreciate the feedback I get here, but still am having trouble seeing what I am doing wrong. Maybe I should simply tell the client that I cannot continue unless I also prepare the return and that if I do it will be done in my conservative, correct way. I'll concede that. | |
| April 22, 2008 | |
| I agree it is up to the preparer to determine what is deductible, not the person who assists with the trial balance. Simply because an item shows up as an expense does not make it deductible, no matter who did the bookkeeping. Penalties is one example. | |
| 22 April 2008 | |
| LJA, I am not saying you did anything wrong. However, if you were to prepare a financial statement for this client, would you present "guard dog expense" as an expense of the business knowing the guard dog was the owner's 2 lb lapdog, or would your post such expenses to capital draws (assuming it is a proprietorship)? So either in a financial statement or a tax return, the "guard dog expense" would be a personal expense and properly reflected as a capital draw, not an expense. Whether the poor HRB person has adequate training or not, I don't know. But it is quite likely their level of training is less than yours. They may or may not be intimidated by your credentials. Who knows what the client is telling that person. | |
| April 22, 2008 | |
| We don't have all the facts here....for example, I can see taking guard dog expense if client has a barn full of inventory of goods that could be stolen. But, from the tone of what you are saying LJA, it sounds like it may be a lap dog and the preparer is taking things that you would not even consider taking. Jdugan makes a good point "who knows what the client is telling the preparer". Sometimes when one person does the company books and another the tax return, or someone does the business and another person does the personal return, the client may be manipulating the situation to their advantage. I think it would be a good idea for client to sign an authorization for you to speak with the other party to make sure necessary communications are occurring, and nothing falls through the cracks. If your client balks at your request to authorize communications, that's a sure sign they are not committed to getting the work done correctly. | |
| 22 April 2008 | |
| LJA - I agree with you 100%. If you're hired to prepare a Trial Balance, what you need to do is to clearly categorize the expenses, not do the research as to what is or isn't deductible. | |
| 23 April 2008 | |
| Gosh, thanks, I was about to resign (maybe)! To clarify, I have spoken with the tax preparer, she knows that I'm a CPA and I have offered any and all detail that she would need and never got one inquiry. Maybe I'm too conservative on the guard dog issue. These are very, very protective Huskys, 100+ pounds each. Lots of expensive equipment located at home/business. However, I would still have asked some questions (one dog is 12 years old). P.S. I do not feel sorry for the "poor HRB person". If they're preparing tax returns, they'd sure better be qualified to do so (and quit charging more than I do if they aren't). NO FINANCIAL STATEMENTS EVER for anyone, my rule. | |
| April 23, 2008 | |
| LJA, calling you to ask questions would cut into HRB's profit margins. While some of us would take that time, HRB is really a factory, and they have to keep those returns moving along the assembly line. (That's not an excuse. I just think it's part of their business model and any questionable expenses are part of the risk they take.) | |
