Discussion:Ethical? Cast your vote!
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| Revision as of 18:21, 21 October 2008 Michaelstar (Talk | contribs) (Vote : No - bad) ← Previous diff |
Revision as of 22:06, 21 October 2008 Cporter1 (Talk | contribs) (WOW! Thank you f) Next diff → |
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| {{ForumReplyPost|UserID=Michaelstar|Date=21 October 2008|Text=Vote : No - bad decision! You have been advised by the group wisely.}} | {{ForumReplyPost|UserID=Michaelstar|Date=21 October 2008|Text=Vote : No - bad decision! You have been advised by the group wisely.}} | ||
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| + | {{ForumReplyPost|UserID=Cporter1|Date=21 October 2008|Text=WOW! Thank you for your input. I will <u>'''NOT'''</u> reduce his deductions for purposes of the EIC. That was my original instinct until I asked a fellow tax professional who said that he and others he works with have done this before and he convinced me otherwise. I stated that I was strongly on the "YES" side to try to see if I could generate a negative response and their obviously was a very strong one. | ||
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| + | I have never done this before and, after reading your responses and sources, will continue to make it my practice to not reduce deductions for the purpose of receiving the EIC. THANK YOU for helping a fellow tax guy not to be led astray by others who are obviously less informed.}} | ||
Revision as of 22:06, 21 October 2008
Discussion Forum Index --> Basic Tax Questions --> Ethical? Cast your vote!
Discussion Forum Index --> Tax Questions --> Ethical? Cast your vote!
| 21 October 2008 | |
| I have a client who has about 70K in gross receipts and 75K in ordinary and neccessary business deductions (repairs, office expense, interest expense, contract labor etc...). He has no other earnings but has a qualifying child for the EIC. Is it ethical to disreguard some deductions in order to receive an EIC? I vote YES! I see no reason he should feel obligated to take every deduction possible if it does not improve his position. He even told me that he was thinking about not taking a $9K deduction because he couldn't find documentation for it. What am I supposed to tell him, "If you are able to find documentation, GREAT, if not, too bad because your refund will go up!?!?"
CAST YOUR VOTE! | |
| October 21, 2008 | |
| Ethical = pertaining to right and wrong in conduct.
So, let's analyze this. Your client has a loss of $5k from his business. If it were not for the EIC, he would surely report all expenses he is able to (regardless of whether that receipt is in the file or not). Hmmmm. So now we have EIC and the potential for more money if he reports income when in fact he had a loss. Well, in my book that would not be ethical. | |
Donniecastleman (talk|edits) said: | 21 October 2008 |
| Well I guess you could ethically depreciate as much stuff as possible over 7 years instead of doing a 179 if that enters into the equation, not so much to get his earnings up this year but to offset the coming financial profits for the next few years, that's the way I would phrase it not even considering the EIC, you should be willing to do whatever to save taxes for your client, the 5K loss is sort of a waste of a good deduction for another year. | |
| October 21, 2008 | |
| Ethical my arse. It's illegal my friend. Read the EIC rules. You can go to jail. Enjoy the food. | |
Death&Taxes (talk|edits) said: | 21 October 2008 |
| All questions have been asked before, Chris: see Discussion: Does one have to claim deductible expenses . There is another discussion where Fred pontificates on using or not using 179 for the opposite reason, to get someone into a EIC situation.
This is obviously the same gentleman you wrote about yesterday. I note 'Contract labor' which could be payroll, interest which might be mixed use of a credit card, and the fact that apparently he has no other source of income. | |
| 21 October 2008 | |
| CCA 200022051 specifically addresses this issue in reference to EIC. The CCA updates Rev Ruling 56-407 which states you must deduct all expenses.
Section 179 is an election. You are not required to elect that treatment. Don't confuse that issue with what you are proposing. You are proposing taking a position which is contrary to stated authority - I see no way you could argue against the preparer penalty under §6694. | |
Death&Taxes (talk|edits) said: | 21 October 2008 |
| And this is a different person from the one you mentioned yesterday....my error. I vote with Natalie, JR & NYEA. | |
| 21 October 2008 | |
| Chris,
Follow Death&Taxes link and read Riley2's response closely. Riley2 is a TaxAlmanac guru here and when he speaks, we listen. Here is the link to CCA 200022051 that NYEA referred to: [1] It's pretty clear on page 3 what the Service will do if you don't take all the expenses. They will. Disregarding deductions in this case, isn't a great idea. This is why the EITC rules are different. If you doing it in an attempt to "defraud" the government, that is looked upon differently, than if you choose not to take expenses for various reasons. Basically, the client doesn't qualify for the EITC, from what you say. If he doesn't qualify, then he doesn't and move on. Don't be foolish. Further, I doubt you will look good in prison orange. I join Natalie, JR1, D&T and vote NO. Tom | |
| 21 October 2008 | |
| Tax fraud. It seems well established (see NYEA's post) that net earnings for self-employment must be reduced by all applicable business expenses for purposes of EIC, WHETHER OR NOT they are actually claimed on the return. | |
Death&Taxes (talk|edits) said: | 21 October 2008 |
| Which of the Monty Python characters keeps saying, "Nod Nod, Wink Wink" when something sleazy is going on?
Ooops, here it is: http://www.jumpstation.ca/recroom/comedy/python/nudge.html | |
Death&Taxes (talk|edits) said: | 21 October 2008 |
| And it is 'nudge', not 'nod.' | |
| 21 October 2008 | |
| This is interesting, becuase, going with what Jbc said, you can easily end up in Pink Pearl's dilemma.
Just how far must you go to prove, look into, research, a possibly valid expense in this particular circumstance? | |
| 21 October 2008 | |
| David,
Great sketch! And now for something completely different, the 16 ton weight will drop on your head for being stupid to think you qualify for EITC! Tom | |
| 21 October 2008 | |
Chris, the votes are in. It is highly unethical. Don't do it. The profession needs ethical preparers, and we intend to seek out and destroy those who are unethical. Well, at least get them barred from preparing returns any more.
It is hard to compete with a guy who will cheat. The only way to compete is to get him off the street. So there's my fire for your two little feet. | |
Death&Taxes (talk|edits) said: | 21 October 2008 |
| Tie this discussion to Discussion: Reducing deductions to convert a loss to a profit so the client can collect EITC. | |
Donniecastleman (talk|edits) said: | 21 October 2008 |
| And oh yeah, my vote is NO with the 179 election being simply noted, so if he bought a big giant $200,000 whatever for his business in the grand scheme of being a franchisee already being depreciated over 7 years to get the loss then he is S.O.L. | |
| 21 October 2008 | |
| While it is unethical not to take deductions, many are "grey" and we agressively take them to reduce tax. There is no reason why you can't aggressivly NOT take a grey area deduction. Grey isn't just sec 179 vs. MACRS vs. ADS. Other messy grey areas include travel and entertainment expenses where the purpose may have been partially personal. Personal use of company assets and company products. Office in home where the office is NOT exclusively used for business. The list is long. You can't eliminate all expenses, but you can remove the grey ones. | |
Michaelstar (talk|edits) said: | 21 October 2008 |
| Vote : No - bad decision! You have been advised by the group wisely. | |
| 21 October 2008 | |
| WOW! Thank you for your input. I will NOT reduce his deductions for purposes of the EIC. That was my original instinct until I asked a fellow tax professional who said that he and others he works with have done this before and he convinced me otherwise. I stated that I was strongly on the "YES" side to try to see if I could generate a negative response and their obviously was a very strong one.
I have never done this before and, after reading your responses and sources, will continue to make it my practice to not reduce deductions for the purpose of receiving the EIC. THANK YOU for helping a fellow tax guy not to be led astray by others who are obviously less informed. | |
