Discussion:Zero return filed.
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Discussion Forum Index --> Tax Questions --> Zero return filed.
| 17 January 2008 | |
| I just had a client return to the fold, who had left me for "someone better", a local enrolled agent. When the client couldn't pay the enrolled agent their fees, the EA filed a 2006 1120S and 1040 for the client filled with zeros. And billed $600 for it. The client had multiple 1099s, W-2s, and K1s. I have never heard of this "strategy" for avoiding a late filing penalty, it sounds completely whacked to me. Any opinions as to why the EA did this? | |
| 17 January 2008 | |
| It probably had more to do with the $600 than late filing penalties. | |
| 17 January 2008 | |
| Unsigned by the t/p? In either case, I have to believe that is a crime. Since it could involve Title 18 also, best that an attorney properly research it. | |
| 18 January 2008 | |
| The EA just blag dang can't do that. What the EA should have done is a proper fee quote, collecting a retainer for half the fees up front. That way, the client and the EA could hash out in advance whether or not the client "couldn't pay", leaving the client free to return to you if they prefer and the EA free to not waste his or her time. What the EA did was unethical regarding the care of his client from a business point of view. Now he's got two people badmouthing him about town. The other way would have resulted in no negative word-of-mouth.
From a legal point of view, it sounds like the EA had figures available, but perhaps these were incomplete. In that case, one files with the numbers one has. One does not make up the entirely new number of zero when one has actual figures to support another number. The EA could lose his or her license over this. The EA faces fines and penalties for filing an fraudulent return. Do you hate the EA? Would you like to put him or her out of business? Then follow this up by reporting the incident to the IRS. If you aren't that cold-hearted, follow it up with an email or anonymous letter containing a link to this forum question. That should rattle the cage enough so that s/he doesn't do this again to anyone else. | |
| 18 January 2008 | |
| The EA cannot file a return for a client on his own, the client has to sign SOMETHING. It is probably a bluff by the EA, but I think it is an unethical business practice to say "If you don't pay me, I'll send in zeros". | |
| 18 January 2008 | |
| I'm confused about something. I was not aware that a preparer could file an actual return without the TP's signature. Business or personal. You can file an extension w/o signature, but not a return? Even with a POA, you can't go that far? | |
| 18 January 2008 | |
| That's my point - the EA is bluffing.
(and with a POA with specific permission, a representative CAN sign the TP's return) | |
| 18 January 2008 | |
| Thanks, I learned something new. I agree, the EA is bluffing, or the TP is not telling Greg the full story. | |
| 18 January 2008 | |
| If the TP can not pay the EA, would you think the TP can afford to pay Greg? I'd stay away IMO. | |
| 18 January 2008 | |
| IRS has (and uses) the statutory discretion to accept full-paid returns w/o signature. Except for a criminal case (rare), it is not prejudiced in doing so. A blank 1040, though, shouldn't fall into whatever criteria they use to accept or reject for signature. Since a preparer wouldn't know what would happen, with any further correspondence going to t/p, I'm skeptical also. | |
| 18 January 2008 | |
| Thanks for chiming in. My understanding is that the TP had an office manager embezzle funds, and was seriously short on cash. The EA had done the accounting but was not happy about waiting for payment. I'm just trying to figure out why ANYBODY would propose filing zero corp and personal returns-- to avoid some kind of late filing situation? Isn't the understatement penalty going to be just as big or bigger? Plus it might attract IRS attention, thinking the TP is some kind of tax protestor.
I just thought someone might have some insight as to what "strategy" the EA was following, obviously sending in a zero return with W-2s etc is a false statement, what's the upside? | |
| 18 January 2008 | |
| you say 'strategy' like this hasn't happened yet
"proposed" did you ever verify whether the taxpayer ever signed a return??????? You may be chasing invisible rabbits | |
| 18 January 2008 | |
| "...trying to figure out why ANYBODY would propose filing zero corp and personal returns." Stupidity perhaps? For t/p to do it, it's a crime. For anybody to advise t/p doing so, it's a crime. For anybody to file even an unsigned return for them which is knowingly false, there's a generic statute in the general criminal code which Martha Stewart is well familiar with. | |
| 18 January 2008 | |
| I should have filled in more info. I have no reason to think the tp failed to sign the returns. Yes, they were filed. However the idea to file the returns with zeros definitely came from the EA.
To me the idea has nothing but downside. So why on earth did the EA propose it? Maybe I'll get a chance to ask her. She also uses "accounting" in her ads (illegal in Cali if not a valid CPA) and put the wrong FEIN on the corp return. Yet she has many clients in LA. Oh well. | |
| 18 January 2008 | |
| and so our main curiosity is whether you will ask for a retainer up front since you know that she has been known to leave at a whim? | |
| 18 January 2008 | |
| I get 50% upfront. Also the tp is an old friend of mine. I don't worry much about getting stiffed, I have written off maybe $3,000 bad AR in 17 years. People just rarely give me problems on my fees. That probably means I don't charge enough! | |
| 18 January 2008 | |
| Did the EA sign the returns as a paid preparer? It puts visions of IRC 7602(b) violations dancing in my head. Big zero returns also get you a bill for a IRC 6702 penalty. I have a client I had to set straight about that one too. | |
| January 18, 2008 | |
| I have a client that recently had funds stolen, incorrect returns filed, tax payments not made even though the checks were signed and lots of other fraudulent activity going on for 2.5 years. She just told me the other day that the IRS is going to let them refile the 2006 returns to include the theft as a loss on those returns. My understanding is that penalties are also going to be waived. Perhaps this EA just didn't know what he/she was doing and needs a some education. | |
| 18 January 2008 | |
| The return clearly cannot be filed as is, so as was stated by Kevin it's a bluff. There is NOTHING to report to anyone because until the return is actually filed by the taxpayer...and with the wrong EIN it can't be filed anyway so there isn't anything to report.
It's a billing/payment dispute between an EA and a client. The EA got pissed off at this client and this is how he/she handled it. Not the way I would have handled it, but I'd be willing to wager that is what we're talking about. | |
| 19 January 2008 | |
| The returns were both filed electronically, I have the confirmations. There's already been an IRS penalty for the wrong 1120S ID number.
I was just trying to understand any possible benefit to the zero filings. Maybe if I meet her I'll ask her. I'm guessing I'll get a confused answer. | |
| 19 January 2008 | |
| First, let's remember that the ultimate responsibility for the information on the return is with the TAXPAYER. If the return was erroneous, false or fraudulent, your client was a damn fool for signing it. Second, the only plausible rationable for filing a return with -0-'s would be to avoid a failure to file penalty. I've never heard of IRS stating that a filed return was not a filed return and asserting a FTF penalty. However, if the return was audited, your client could and should be hit with an accuracy penalty, a negligence penalty (and perhaps a fraud penalty) as well as the standard failure to pay penalty and of course, interest. That would far exceed the failure to file penalty. Fourth, the EA is clearly a jerk, but if I were the EA I wouldn't talk to you. Fifth, you have to represent the best interests of your client. It is NOT in his interest for you to discuss this case with anyone at the IRS until and unless an amended return is filed and accepted. What you should do is prepare an amended return immediately and file it. Do you really want an IRS employee asking why your client signed an obviously BS return? | |
| 20 January 2008 | |
| "I've never heard of IRS stating that a filed return was not a filed return and asserting a FTF penalty."
Because few t/p' are so stupid to file a false return with a bunch of zeros, to avoid FTF/FTP but they don't have all the return #'s yet. Criminal false return (tax perjury) does not require any understatement of tax, and what the t/p is doing here is meeting what DOJ calls the DiVarco test, better than Mr. Divarco did. He only lied about his occupation on a return with no understatement of tax! | |
| 20 January 2008 | |
| Could this be a software "oh sh*t"? Either the EA or someone in his/her office trying to print a set of forms as completed to date and manages to also e-file the return? This could also explain the erroneous FEIN ... just trying to get it to print. Was there an 8879? However, this can even be signed mechanically now.
If this is not a mistake, then the EA has some serious Cir 230 violations and needs to be reported. I am not sure why Skasselea says "if I were the EA I wouldn't talk to you." It is in the interest of the EA to clear this up if a mistake. Also, the client's defense would be he relied on the good faith advice of the EA ... again see Cir 230. The client would still have to pay the taxes but maybe not interest and/or the penalty. | |
| 22 January 2008 | |
| TxSrv, that is on the taxpayer. Forget the preparer right now. Why would a taxpayer knowingly file a false return? Answer, he's very foolish for doing so. Thus, my suggestion still holds. File an amended return and do so right away.
As to Snowbird, the preparer of the -0- return is NOT the issue. The taxpayer signed the return and its the taxpayer that Greg is representing. The taxpayer is on the line regardless of anything else. Here's the bottom line....file an amended return and do so as fast as possible. AFTER the amended return is accepted, then and only then should Greg have any interest in the EA that prepared the original return. | |
