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Reading the posts on this and other blogs, I wonder if some of us are trying to be all things to all people and not recognizing our limitations. Some questions are so basic that you wonder if the poster should even be attempting such a return. And some topics are so out of my league that I am grateful that I am not doing such a return. I believe the most important thing I learned during months of study for the SEA is that there is a heck of a lot I don't know, and probably never will. I have shunned some returns that I felt I could not complete correctly. I am not comfortable with foreign citizens with US income unless they are on the most basic visas, because I know they can be deported if I check the wrong box or rely on certain treaty provisions. I have done a few nonprofits but I am never certain if I am listing their raffle proceeds in the right places. I've done corps too, but I don't like them and am unsure of whether I did them right. Fortunately, I work in an office where I can pass these on to someone else. (In the case of foreigners and foreign trusts, we pass them on to somewhere else.) We also refer new EITC clients elsewhere. The due diligence standards have become so demanding that these clients are better served by preparers with appropriate training. We all know that the tax code is wildly complex. My hunch is that each of us who prepares tax returns will eventually have to come to specialize--whether it be regular individual returns, small businesses, certain professions, corps, trusts and estates, investments, partnerships, noncitizens, whatever. We gravitate to what we like, take our coursework there, and should be willing to acknowledge that certain returns are over our heads and decline to do them. (Works best if we have a large enough network so we can refer these rejects to someone rather than show them the door.) Thoughts?

I agree completely. Learning when to say "no"'is extremely important. I haven't always made the best decision in this area and have taken on work from time to time which I should have declined. In recent years I have gotten better at passing on some projects, but it's a never-ending process. Just had a conversation this weekend with someone over preparing a return with a large casualty loss as a result of a house fire which they claim was only partially insured. After looking over the scope of the project and potential size of the loss, I decided to tell them they need someone who is more familiar with this type of return and has deeper pockets if they make a mistake. As I see it, the decision to decline work can be based in several factors. It might be a matter of not being up to speed on the particular issue. It might also be a matter of not being willing to invest a lot of time on a type of return you don't see very often. Or it could be a simple decision to mitigate preparer risk.

I concur, to a degree. During tax season I try to stick with what I know, as I do not have the time to do extensive research. But after tax season, I enjoy the challenge of doing the research and learning new things. I have declined returns after researching the subject and deciding that the situation was too complex for me. Most clients appreciate my honesty when I tell them I don't have the expertise to deal with situation and come back the next year for their "normal" return. I have had a few that were mad they had to go elsewhere and pay the higher fees that most "specialists" charge. As a one man show, I really appreciate having forums like this where tax pros with more experience and knowledge are willing to share that knowledge and experience with those of us who want to learn and grow.

Not sure I am in total agreement. When I started my practice, I was committed to doing whatever it took to make it work. As it turns out, I am that jack of all trades - master of some. Of course, my starting point was a Master of Taxation degree from a reputable school and experience of several years with one of the big four. So I was well in my comfort zone to take what came. Now that said, as time has gone on, I more and more hear that voice in my head stating "a man has to know his limitations". I can afford that now. Back when I started my practice, I knew no limitations. I would take the work and use whatever resources were at my disposal to get up to speed to get the job done. I appreciate that some of the questions posted on these list servs seem elementary; but so did mine when I was still wet behind the ears. We are all trying to eke out a living and doing what it takes to get the job done. Now....all of that said, I still break out in a cold sweat when I am forced to do a 1040EZ. And I am not in the least joking about that. I avoid EZ and 1040A s like the plague. A man has to know his limitations.

I agree with you, Rita. Some people should not prepare returns. If I am not comfortable doing a return for a client, I send them away. I like my "off season" best when it is not colored with letters and errors coming back at me. I do basic 1040's with every aspect. I'm plenty busy with that. The "simple 1040's" are no longer "simple" because if they truly WERE simple, those people don't pay to prepare them. When a new client says it's simple, it isn't.

I agree with at least part of what everybody has said. I like to take on new things. But I will sure as ^&*% wear out the Pubs and Google before I will post a question. There are some people who should not prepare taxes. In an EA exam study group, I recently saw a participant struggle because there was no % key on her calculator. She had no idea how to cope with that. I almost cried. I have seen others answer a question incorrectly that had already been answered correctly. IN THE SAME THREAD. RIGHT BELOW THE CONFIRMED CORRECT ANSWER. WITH THE "YIPPEE, YOU GOT IT, CONGRATS" RIGHT THERE. That hurt me. I wanted to hug them.

I agree. I'm trying to limit my work, especially new clients. No more businesses with multiple owners (unless two spouses), just sole shareholder or smllc types. No business startups with heavy debt, things like that. No prior year returns (I have a couple of existing clients I'm trying to get caught up but no new ones). I'm getting older and I want 'easy'.

I agree with Sara and rfassett that when a return is out of your league and you know your limitations it is time to pass it on. I remember my first (easy) SCorp. Before I tackled it I took a short SCorp course just to be sure I had the basics down pat. But what happens with many clients they grow and get more complicated, now it becomes tricky, do you stay on (because they want you) or move on for the client's benefit. You really need to know those limitations, do what is best for the client. Like Rita, I will research and Google and learn as much as I can about a subject I don't know, then make the decision to say, this is not for me, which I have done at times. This is better for your own peace of mind. We don't need more stress, we already have ACA for that. And Lion, you're not old, I think mature and wise. How else would you know that your baby granddaughter is more important than all of this. You just made me remember there are things more important than work, life is short, let's make the best of it.

Sometimes we learn our limitations by doing a (simple for its type!) return. I did a couple of 1040NR's about a decade ago - for two sisters here on some special learn-and-work visas; I don't really remember the details. For that type of return, they were dead simple. I researched and fretted and fumed and went 'round in circles and tied my hair in knots and went nuts with them. Got them done; clients were happy and went back to Taiwan happy. I was and am as certain as I could have been at the time that they were correct. And never again will I touch a 1040NR. Great learning experience. (Had they been *any* more complex I would have handed all the paperwork back with an apology and a good luck wish.)

I prepare ALL individual returns on Form 1040, even those that qualify to file on EZ or A. It's easier for me, knowing where everything belongs, where to look when proofreading. And, it doesn't make a bit of difference in efiling or to the IRS. I, too, make things easy on myself. I do want to get as far along as Randall. I'm not sending enough returns elsewhere. Doing only a handful of trusts, an occasional estate, a few S-corps, etc., slows me down. But, they come from existing 1040 clients who create a trust or spouse opens a biz or.... I'm old and have a baby granddaughter in another state and want to spend less time on each return, not more. Gotta work on this!

Thank you everyone for your thoughtful and supportive comments and advice. I will be sticking to my professional responsibilities on this matter and using your suggestions to be as fair and accurate as possible. I still have until October to try and help him as I feel the need to give extra efforts, not so much that he is a friend, I would do this for anyone. What is at stake is a 6 figure amount with a 3 in front, so this is serious, as is any other tax return. I read this thread before bed last night and must report to you that because of all you said I slept well, no tax nightmares. You should all have RTST after your names, Registered Tax Sleep Therapist. Thank you. Grateful in MA, Bill

I agree with Sara. Reference for the step up is IRC 1014(b )(1). https://www.law.cornell.edu/uscode/text/26/1014

The stock receives stepped up basis. Calculate the mean of the high and low sales prices on the date of death for basis. (If the client died on a weekend, see my earlier posts on how to calculate basis.) If the sales proceeds are more than $600, a 1041 is required, even if the net gain is less than that. This can be a benefit to the beneficiaries because you get to deduct probate fees, attorney fees, and accounting fees (even if not paid yet!) If these deductions are more than the capital gain, the excess is passed to the beneficiaries in the final year of the estate. They can deduct these on Sch A without the 2% haircut.

Sleep is a wonderful gift..........

Just because he is your friend does not shift the responsibility for these matters to you. All the replies so far have sage wisdom in them. YOU are not responsible for their irresponsible actions or lack of. Keeping in mind the current environment of the IRS holds you responsible for the tax returns you sign. Keep your professional stance, go forward and sleep well.

Look at the balance sheet. Is total equity negative? When I don't have prior basis, I just use balance sheet equity or zero if total equity is negative. since all shareholders are supposed to take proportionate distributions, the only difference in shareholders will in their capital contributions.

FDNY, I would tell my friend, with sincere concern, that there is nothing I could do except what is documented in my hand. He would be the primary to get his situation resolved, either by a shareholder meeting, or attaining legal advice with a possible internal audit. I would not lose sleep over it FDNY, The situation as it is, you have, nor had any control over..... I know very well just how exasperating situations like this can be. Best of luck to you... Just remember...It's not in your control..... Sleep well my friend...

I agree with SaraEA that we should know our limitations but If you start doing returns and you limit yourself to do returns only that match your ability, you will never learn and you will never make a living out of this profession. I have noticed that the best is to have honest people as clients. When they come with a new additions to their return, don't let them go.... but rather adjust yourself to the new challenge and you will learn a lot from your research. That's what I do for my clients and since they already trust me, I tell them "Since this year, you have X item that is new on your return, I will need a couple more weeks to do some research because I want to make sure we start correctly with this new addition to your return. I will call you later on and ask you a few more questions". I was happy when the IRS was going to match skills with the kind of returns we could prepare. That was going to force us to take extra courses and pass new tests. That was the idea behind preparer's examination that thanks to the Love case is on hold. What do you think about my motto: "If my EA credentials, some how, authorize me to prepare American Airlines return, then the sky is the limit" I never understand (I am sorry if I sound harsh), why if someone has been preparing taxes for 10 or more years, he/she cannot pass the EA exam? I do want to hug those people.

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I thought his reply looked odd for some reason, especially for a first-time post. Didn't bother with his link.

What helps me sleep at night: nobody dies when I make a mistake.

I would take Abby's suggestion one step further. Before reworking any figures, if you have the S corp's return in the first year you bacame your friend's tax preparer, I'd first compare your original starting basis from the company's accountant to that year's tax return. If the two are in close agreement then I'd explain to your friend that you've done the calculations to the best of your ability with the information that was, and is, currently available and try not to lose any more sleep over the matter.

My statement here does not help at all but....I totally despise not tracking basis, whatever the excuse maybe. I have had many of these including partnerships and S-Corps. I have a few companies that brought me on at the beginning of their business and all basis is tracked every single tax year. Matter of fact, one partnership bought out one of the partners and their were no questions or disputes over basis. My only suggestion is as you say, is to try to re-create the shareholder basis. I think we all go into this knowing the accuracy is just not there but like you and others, I have had to do the same. I like Abby Normal's suggestion using the balance sheet figures. But... who's to say those figure are a true representation of the equity accounts unless you can see every entry. At best this should be an accumulation of income and loss. However, it may be as you said, all you have. I would keep good notes on how I arrived at the shareholder basis. As far as your client/friend goes, just explain to him that is all you have to work with. Good luck with this and get some rest. It shows the person you are and the desire to do the right thing by your concerns. Again, get some rest my friend.

For transparency to the membership in case anyone saw the post, there was a response from a new member above that listed his state as NY while the IP address of his registration and post indicates those originated in India. The post included a link that was to his cloud services company.

I asked at the IRS Forum in Chicago last month. No plans for at least 5 years to allow electronic filing of 1040X. I think it is a plan to keep the USPS in business.

It's not an ATX thing. It's an IRS thing. At this time, the IRS does not accept efiled amended individual returns. No plans for it in the near future, as far as I've read.

Fortunately, the late filing penalty for partnerships can be automatically removed under Rev. Proc. 84-35 and code section 6698(a). Just file the 1065 with the correct short year dates and when the penalty notice comes, you get to be a hero by getting the penalty waved. Also, gives you the opportunity to chastise your client for not keeping you in the loop when anything substantial happens. Be sure to bill them for the penalty removal! Here's the wording I use: Please remove the penalty for late filing of a partnership return under Rev. Proc. 84-35 and code section 6698(a). The partnership is a domestic partnership with 10 or fewer partners, each partner is a natural person or an estate, each partner’s share of each partnership item is the same as such partner’s share of every other item, the partnership has not elected to be subject to the consolidated audit procedures under IRC 6221 through IRC 6233, and all partners reported their share of all pass through items on timely filed individual returns.

Summer isn't ready to wane around here! 90s at the coolest; humidity meets or exceeds the temperatures.

I only update when I open the program and there is an update. Or I update from within the programs. I barely read emails and if they contain links, I really think about that email before I click on the link. My rule is: If I will sleep well after refusing to click on a link, I don't click it.

I got one of these before the warning went out. It told me to update my Taxwise software, so I knew something was fishy.