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Just transfer the records as long as you have the authorization. The client wants to go to someone else, so let them. They won't be happy if they're forced to stay with you because you won't let their records go. Clients move on for all sorts of reasons--maybe they found someone closer to them, think your prices are too high, decided to try someone a friend or colleague swears by, whatever. I get really angry when a new Sch C or E client can't get depreciation schedules from their former accountant. Why make their lives (and mine) miserable? They've already left you and aren't coming back. Be the grown up, act like a professional, and help with the transition. If that's how you conduct yourself, new clients will soon take the place of the former ones. I never withhold depreciation schedules, NOL worksheets, claim of rights histories, or anything except my own research and notes. What's the point?

Taxed, Not sure where you are going with this answer, but you seem to be suggesting to ignore the cash income. Not only is this illegal (the words Tax Fraud immediatly come to mind), it is certainly not something that we as preparers should be suggesting or helping a client with. Thinking that you would then be party to the tax fraud and maybe even a conspiracy charge!. Joan cannot tell him that and I am sure she is not even inferring that in her question. In fact she added that her client is "...being rigorously HONEST" (emphasis added)!

That brings back many memories, doesn't it? Loved those cartoons!

>>never withhold depreciation schedules, NOL worksheets, claim of rights histories, or anything except my own research and notes. What's the point?<< Sometimes that lowball offer they were chasing gets away when they come in with the details! I only deliver documents to clients directly. They can give them to the third party. All I release is what was already in their packet anyway, including carryover worksheets. If the current year isn't complete, then it is simply the source documents. If they need a prior year, after January 31 I generally charge a copy fee.

Wile E Coyote versus Acme Corporation http://boomslanger.com/CoyotevsAcme.htm

I think you are allowed to hang on to your work product, but you cannot refuse to return the paperwork the client provided you to prepare his return. And that is specifically stated in Circular 230, Section 10.28.

No, it is considered unethical to "hostage" the records in demand for payment. If the client requests the records be returned, the CPA is to give them back.