Discussion:Would you prepare a tax return for someone with a 'morally objectionable' source of income?

For instance: stripper, gigalo, prostitute, drug dealer.

List could include: pay-day loan provider, porn website host, sex-shop/sex-club owner, or please name the most objectionable source of income and tell us whether you did prepare, or refused to prepare the return.

A few years back I had a client in the publishing business. I never knew for sure, but based on my suspicions, I thought they might be a neo-Nazi group. I did prepare the corporate return, but only asked enough questions to get the return correct. I am wondering now whether I should have found out for sure and what I would have done if my suspicions were confirmed.

And YES, I have prepared the returns for various 'exotic dancers'. I never offered to barter services with them, though.

Also for a priest who had a 'full release massage' business on the side. No barter there either. Why do they tell us this stuff? And after they do, do you still shake their hand?

Mr. Pure went into a fit at which the little siege mortar said, 'you oughta go into my Korean massage parlors....you'd better be packing when you walk in there.'

Anyone who emails me can get my story of the drug dealers and little ole me.

I also will not do a return for someone who is crooked, regardless of their profession.

Strippers wouldn't bother me, I suppose. Drug dealers, escorts, call girls, gigolos, prostitutes, yes.

I did have a client who was arrested once. It was a big deal it made the evening news. Not that his business was illegal, but they made him out to be Al Capone. The media coverage was pathetic. There are two sides to every story. Eventually, many of the charges were dropped, if not all. It was quite a joke.

Tom

I then declined to work on that job.

I know the IRS does not care but if you witness or know of a crime and do not report it, doesn't that make you an accomplice?

It would seem like you'd better do the tax return contracted by their lawyer, right?

Met her Tuesday. To my surprise, was more organized than most of my self employed clients, she presented me her P&L and my eyes nearly popped out of their sockets when I saw her assets...err...income. I asked her "is there any other income you earned besides this?" - "no" she said. Finished her return today, called and asked her for "co-worker" referrals. She said no problem, plenty to come.

Completely opposite from my expectations, looking forward to meeting more "entertainers".

Wildcat

As a lawyer, I've had some really scary appointments over the years, but very few of these types have slipped into being clients. The captured crooks are a real delight compared to the ones who get away.

Quoth Illini: "It would seem like you'd better do the tax return contracted by their lawyer, right?" Illini, I think you have the concept there right, but the timing all wrong. A lawyer can't hire you on behalf of a client to do a fraudulant return (which I'm sure you wouldn't do anyway), and then expect the whole affair to be privileged. The return itself is never privileged. Lawyers do hire accountants on a forensic basis when humpty dumpty falls off the wall, and an attempt is made to put the pieces back together again (and privilege would attach in the latter case, under the right circumstances).

However, there seem to be a couple of ethical caveats though.

1) As Crow said, Client communications aren't privileged. Even if you are an attorney, I don't believe communications relating to preparation of the return are privileged either.

2) You'd have to know enough to find out if you'd run a foul of §280E, and I guess such knowledge could put you in legal jeopardy.

3) It would suck to be involved in white collar crime.

I was talking about a similar issue with my brother who is making a career out of political campaigning. So far he only works for causes and candidates he believes in. I'm a lot more mercenary then he.

Exit question: What PAB code would you use?

I've done tax returns for "entertainers;" maybe they were doing more than dancing, but if I don't mind having them in my home office, it's none of my business, so long as I get the numbers right on the tax return.

Wonder Woman USA <one of those loonies in California>

Now, that's spoken by the me who lived a wild & crazy life when I was younger, and feels the like a hypocrite if she judges people for engaging in a less-than-savoury lifestyle.

However, if you look at the new Circular 230, TD F 90-22.1, 5471, 3520, etc., penalties and regulations, we preparers will be massively whacked upside the head if we assist our clients in hiding income. Now, you can say all you want that s/he gave you some good P&L statements, but really, do you honestly beleive every cash payment appears on the statement? Given the nature of the client's profession, you are almost guarenteed that they omitted something. And since you *should* have known that they would omit something by the very nature of the illegal activity, then by helping them prepare their tax return, you have helped them omit the income you *knew* was probably there but didn't have actual proof or evidence. And since you aided and abetted, the penalties will put you out of business.

So it's not a morality issue, it's a business continuation issue. If you take on clients who could bring about the downfall of your business, you are not exercising due care and diligence for your clients who do not engage in unsavoury acts and you are putting your family at risk of losing their home and facing public ridicule. It's unwise to take on a client of this type no matter how nice or how organized they seem to be.

Lizzit