Discussion:What would Kevin do ???

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Discussion Forum Index --> General Chat --> What would Kevin do ???


Pink Pearl (talk|edits) said:

5 April 2010
Long time client comes in today...two kids, wife has nail business (business way down) with 7K loss, W-2 of 18K (laid off for most of year) and family is living on their savings to get by. Entering the 1099-INT and the total is exactly $3,100.59. Would Kevin round up to $3,101 and the client loses ~ $4,600 EIC or sort of fudge it? Any other comments???

Gotta love the tax rules I guess..lol

Kevinh5 (talk|edits) said:

5 April 2010
I do hope this isn't a 'nail her' joke.

Trillium (talk|edits) said:

5 April 2010
Doesn't your program round everything to the nearest dollar as you enter it anyway? 3,100.59 rounds up to $3,101 any way you try to do it. Don't ever truncate instead...

And if you'd like me to edit away my two prior posts, please ask.

Kevinh5 (talk|edits) said:

5 April 2010
or mine

Trillium (talk|edits) said:

5 April 2010
Do you have multiple 1099-INT forms, or only one? If multiple, what's your total if you round each one prior to adding them up, as opposed to your total if you add up the dollars and cents and then round the total? Sometimes that'll be different by a couple of dollars, and I would see either of those methods as completely appropriate.

I've edited out my first two joke posts - they just didn't seem quite so funny after the first day or so...

"Shoebox" (talk|edits) said:

5 April 2010
This is actually an interesting question.
How many times have you seen a wage and income transcript show an amount that is one dollar off from what the source document shows. I've seen in many a time.

Pink Pearl (talk|edits) said:

5 April 2010
He has 8 1099's and if i round down on the 200.42 ones and round up on the 200.56 ones he comes up with one dollar under the limit. If I add using the change it comes to 8 cents over. The biggest kick in the A$$ is I amended his 2007 return last year and got him back around 400 bucks...and $21.00 interest income from Uncle Sam.........go figure!

Pink Pearl (talk|edits) said:

5 April 2010
As Harry would say "gotta go the fridge, get a PBR and think about it"

Fsteincpa (talk|edits) said:

5 April 2010
Whenever I get an IRS notice detailing amounts, they never round, they simply truncate.

And it's not the total Interest statements, don't you enter each one individually, and then the amount will be fine. That is doing it the IRS prescribed way.

Round up and down on the individual 1099-INT's as you enter them.

Pink Pearl (talk|edits) said:

5 April 2010
I just got curious (it was so close). I round up on .50 and down on .49 like everyone does I guess. But the concept is...I really know ! Oh well, I think I know which way I'm gonna go.

JR1 (talk|edits) said:

April 5, 2010
YOu have too much time on your hands if you even notice that. I enter what I enter and it is what it is. If you never knew what it could have been, you don't care...and she won't know either. Hmmm. One dollar. IRA! Yep, that should work.

Kevinh5 (talk|edits) said:

5 April 2010
NO, JR1, it's not AGI, it's a matter of disqualifying income

Fsteincpa (talk|edits) said:

6 April 2010
Hmmmm, and the ethical thing to do would be what?

JR1 (talk|edits) said:

April 6, 2010
Nominee distribution!

JR1 (talk|edits) said:

April 6, 2010
Tho' perhaps it's worthy to note that this is Federal Felony territory, to help someone get an EIC that shouldn't.

AEM CPA (talk|edits) said:

6 April 2010
I would enter the 1099s individually like I always do. I wouldn't have even noticed. The IRS obviously allows that method of reporting.

Fsteincpa (talk|edits) said:

6 April 2010
Interest amounts are supposed to be entered individually.

Pink Pearl (talk|edits) said:

6 April 2010
BUT....it's only 10 pennies...the price of a 1960 snicker bar...

JR1 (talk|edits) said:

April 6, 2010
10 pieces of Bazooka! with free comics!

NMexEA (talk|edits) said:

6 April 2010
Where can I buy my WWKD license plate frame and bracelets?

Pink Pearl (talk|edits) said:

6 April 2010
Well....I just hit the send button on this one...it's all over but the shoutin'

Death&Taxes (talk|edits) said:

6 April 2010
It is quite simple: when doing data entering in bunches, IRS drops pennies because there is no thought involved.....think about it....we were always taught when approximating to round the '4' to the next dollar.

Kyea (talk|edits) said:

7 April 2010
Kevin can use this as a case study in one of his ethics classes.

Fsteincpa (talk|edits) said:

7 April 2010
That is a tough one. And the IRS instructions do tell you what to do in regards to cents. They say to round up and down accordingly. The argument here is that the preparer followed the IRS instructions in that regard.

The fact that it is the IRS's practice to just drop the amount after the cents shouldn't enter into the argument. Same rationale for excluding the summing of the entire amount.

Pink Pearl (talk|edits) said:

7 April 2010
I'm kind of amazed that no one took a firm stance..one way or the other..but it would make a good scenerio for Kevin's ethics class...(or would it?)

Kevinh5 (talk|edits) said:

7 April 2010
the part that makes interesting discussion is that you folks are all talking

'procedure' and 'technical mechanics'

and no one is talking

'what is right for the taxpayer, what is right for the system, what is right for the preparer' which is the ethical discussion. You've missed the ethics completely.

Pink Pearl (talk|edits) said:

7 April 2010
ummm...is that your final answer???

Fsteincpa (talk|edits) said:

7 April 2010
Right for taxpayer-right for system?

Is that THE individual taxpayer? or taxpayers as a whole? Different discussion as taxpayer vs system are virtually polar opposites.

Right for the preparer is the other discussion. If you follow the rules, abide by the IRS guidance and can argue your point reasonably, then the best scenario is the most tax advantageous for your client.

I don't know if their is a cite or a regulation regarding how to handle rounding, but page 21 of the 1040 instructions details that you should round up or down depending on the cents. Also, that if you must add amounts together, use the cents prior to rounding.

Sch B we list interest amounts individually, so you would round them individually.

So, barring any other definitive literature, their is no ethics violation on the part of the preparer.

If we as preparers are individually determining morality and ethics, then we are again walking down a bad path.

Kevinh5 (talk|edits) said:

7 April 2010
we as preparers are not individually determining morality and ethics

we as preparers are 'upholding' morality and ethics

Fsteincpa (talk|edits) said:

7 April 2010
That is how we are supposed to be. It is when we take it upon ourselves to determine what is morally and ethically right that problems arise.

A preparer should not forgo a credit for a client because they don't believe in it.

Pink Pearl (talk|edits) said:

7 April 2010
I'm sorry Kevin for puttin' your name in the heading..should have been "What would YOU do ?".

Fsteincpa (talk|edits) said:

7 April 2010
lol. Where are the former IRS people? I am curious as to how they view this issue. Cuz this one is very close.

Another wrinkle is that you are only using interest recorded from 1099's. Do they have a bank account where they earned less than $10 and no 1099 issued?

See, that would put them over the edge completely and SHOULD be listed on the Sch B disqualifying them.

AEM CPA (talk|edits) said:

7 April 2010
I don't think the ethical point was missed, I think Fred's line of reasoning was assumed as the starting point, which went unstated because it went unchallenged. Our obligation is not to the "system" but to the individual taxpayer; we have to take all allowable measures to arrive at the most advantageous outcome for our clients.

Pink Pearl (talk|edits) said:

7 April 2010
would have been...could have been...should have been...They make the mortgage payments thru withdrawals from savings account. If the payment could have been made two weeks earlier they would have gotten at least 10 pennies less in interest earned.

Kevinh5 (talk|edits) said:

7 April 2010
Oh, AEM, I beg to differ. We have a HUGE obligation to the system as well as to our clients. Otherwise, what are the 'allowable' measures? I'm pretty sure we both agree that 'allowable' means 'within the system'.

TexCPA (talk|edits) said:

7 April 2010
here is a link to an IRM:

3.24.38.4.4.14.16 (01-01-2010)Money Amounts

However, if the Tax Tables can be rounded by $50.00 , then ...

TexCPA 12:05, 7 April 2010 (CDT)

MWPXYZ (talk|edits) said:

7 April 2010
Are ethics involved here? It seems OP is dealing with an arbitrary cutoff of an arbitrary type of income and determining how to round off numbers based on IRS instructions/methodology (or not) and a rule that probably makes no sense when one considers the purpose of the credit and the rules regarding the credit; IF there IS a stated specific purpose to EIC.

I'm not sure there is a "system" that we have an obligation to, would that system include the courts? I wonder when the requirement to register as a tax preparer takes place, if there will be a loyalty oath (to the IRS)(to the US)?

In this case, I would be thinking if Appeals would let this go to Tax Court or they would split the difference or let it pass. And I think of Appeals, since agents can make decisions without a great deal of thought. (I suppose Appeals could as well.) I would make the issue known to the taxpayer.

And I would research to see if this issue was ever addressed in a court already, stranger issues have been to court.

Fsteincpa (talk|edits) said:

7 April 2010
What I'd like to know is who would consider using the individually rounded numbers per IRS instructions and then discuss with the client the possible ramifications?

Me, I'd round the numbers, qualify the client and let them make the decision.

Kevinh5 (talk|edits) said:

7 April 2010
let's see:


$3,000 refund if you round or

I owe $1,000 if you don't round


what should I choose?

AEM CPA (talk|edits) said:

7 April 2010
We have an obligation as professionals to "obey" the system, not to look out for its best interests. As far as I'm concerned, the government is the adversary. It makes the rules, and I have to follow them, but I certainly have no fiduciary responsibility to The Man. In this case, I think the obligation to the system is satisfied by applying the method I always apply in calculating Schedule B interest, and to not apply for the credit would be to create a false superobligation to the government and to fail in my obligation to my client.

Like I said, I probably wouldn't even have noticed this.

Kevinh5 (talk|edits) said:

7 April 2010
AEM CPA, I'd suggest you read the AICPA's SSTS 1-8 linked here for your reading pleasure

especially 1-8 explanation 6 on page 10

the AICPA clearly states that CPAs have an obligation to the SYSTEM

Kevinh5 (talk|edits) said:

7 April 2010
I suppose if you don't agree, or don't like it, you could surrender your CPA designation.

Fsteincpa (talk|edits) said:

7 April 2010
Kevin, I know in most of this you play devils advocate, that and you like rubbing the CPA nose when you can. But, while explanation 6 <the only one I read at this point> says CPA's owe the system, it specifically says that the taxpayer has no obligation to pay more than are legally owed. and a member has a duty to the taxpayer to assist in achieving this.

To me, that reads that in areas where it is beneficial for a taxpayer to take a reasonable and arguable position, then it is our duty to present that position to our client.

This is easily a defensible position using the IRS's instructions for both the Sch B and their instructions on rounding.

Curious as to what you specifically would do in the situation described. Again, I am assuming that you are playing devils advocate because you enjoy these discussions and the need for all of us to think ethically and morally in regards to our practices.

Rounding each individual interest amount puts you under the limit. Adding them all together and rounding puts them over. Show us how you would present this to your client?

Or, would you just make it $3,101 and the client never knows?

I'm a gambling fool and I think you would do as I would and explain it to the client and let them make the call.

Kevinh5 (talk|edits) said:

7 April 2010
I am truly only playing the devil's advocate. I truly don't care, as this isn't my client.

Kevinh5 (talk|edits) said:

7 April 2010
"In addition to a duty to the taxpayer, a member has a duty to

the tax system. However, it is well established that the taxpayer has no obligation to pay more taxes than are legally owed, and a member has a duty to the taxpayer to assist in achieving that result. The standards contained in paragraphs 2, 3, and 4 recognize the members’ responsibilities to both taxpayers and to the tax system."

Fsteincpa (talk|edits) said:

7 April 2010
I figured that, but if it were your client, how would you handle it? I'm still thinking you take the EIC.

And I like when you play DA, it makes me think and bring forth arguments. Also helps me avoid work.

Kevinh5 (talk|edits) said:

7 April 2010
(I offer the above evidence only to refute AEMCPA's claim that he owes no obligation to the system.)

Kevinh5 (talk|edits) said:

7 April 2010
And as for an answer to the question 'what would I do?', this thread would be absolutely no fun if I gave an honest answer. Much more fun to pick apart the whys and why nots.

Fsteincpa (talk|edits) said:

7 April 2010
LOL. Are you sure you aren't a politician Kevin?

As for the obligation part, I don't believe that we have the obligation to be police officers of the system. If and when that happens, I will regretfully turn in my CPA designation.

We have an obligation to provide our services in an ethical fashion. That is what I believe my "obligation" to the system warrants. Nothing more.

Kevinh5 (talk|edits) said:

7 April 2010
clearly under that statement, if the taxpayer had also told you that she had earned $8 in interest on her checking, but it was under $10 so she didn't get a 1099, you would have reported it. But if she did not tell (and you did not ask), I'm assuming you would do what I would do.

Fsteincpa (talk|edits) said:

7 April 2010
Clearly, if it was the above situation and she had interest of $8 on a checking account that did not issue a 1099. I'm telling the client I must report it. See, in that situation, I am committing fraud.

Clients don't bring in their bank statements and I don't ask if they have any others, but if they bring them in, they go on the return.

I believe in obtaining the best possible tax situation for my client, but it has to be done right, or be able to argued.

And since you won't tell me what you'd do, I can't assume that I'd do the same.

Pink Pearl (talk|edits) said:

7 April 2010
shhhhh...I won't tell either

Kevinh5 (talk|edits) said:

7 April 2010
OK, then I'll tell --- I'd do the same as you, FsteinCPA.

MWPXYZ (talk|edits) said:

7 April 2010
An aside, at this point, but don't the AICPA standards just apply to AICPA members and not CPA's as a whole.

Kevinh5 (talk|edits) said:

7 April 2010
I agree, that makes an interesting side discussion!

Death&Taxes (talk|edits) said:

8 April 2010
does anyone here use one of the scanners that read documents and populate your software with the numbers/ my daughter-in-law says her CPA firm in West Orange uses them. I wonder if they round up the number. Just curious.

Rod7896 (talk|edits) said:

8 April 2010
To expand on what MWPXYZ said (and possibly to state what everyone already knows), a person's CPA license is granted by the applicable state board, not the AICPA. AICPA membership is voluntary and only AICPA members are subject to their standards.

If anyone cares, I would round up and or down on each 1099 (as I normally do) and take the EIC. I never would have added them all without rounding in the first place.

David555 (talk|edits) said:

10 April 2010
Death&Taxes, that's called autoflow. It enters each 1099-INT individually, so I would assume it would round each individually.

CathysTaxes (talk|edits) said:

10 April 2010
Here is what I would do. Like some others suggested, I would enter each 1099-INT and enter the pennies and let the system round up or down. If it qualifies them, then great, if it doesn't, well, unfortunately, that is the rules. I have a somewhat similar situation that I will start a thread on and seek out suggestions.

Fsteincpa (talk|edits) said:

11 April 2010
I yell at my staff when they put pennies into my system. Bookkeepers use pennies, not accountants.

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