Slappy Tax

He can't have the IRS take her tax refund. That's pure hogwash. Even though he can't intercept her tax refund, he wouldn't have to if she would pay her debts.

Eli, Just have him give you written authorization to obtain the FEIN for him, then you can spend about 5 minutes at the IRS website, obtain the FEIN, and charge the attorney a healthy fee for your time. Attorneys are very acquainted with someone charging for his time. (I'm pretty sure the IRS requires you to have from him a signed SS-4, even though you will apply online for the FEIN on his behalf. I'd do up an SS-4, fax it to him, have him sign and fax it back, then go online and obtain the FEIN. Problem solved. Easy money.)

To continue, if he is actually treating employees as 1099-MISC contract labor, the other posts are quite correct. He'd better not fire any of his workers or make any of them mad. If he does, all it will take will be one of them to file an SS-8 with the IRS and/or use the new Form 8819, and he'll find himself paying the employment taxes for that person and for similarly situated personnel for this year and most likely 2 additional years, plus hefty penalties. I had one client who had almost the identical circumstances except that she was the worker, not the law firm. She worked as a receptionist for about 8 months, and at the end, the firm handed her a 1099. She had no idea what that meant until she was sitting in my office. We submitted a Form SS-8 and she won, i..e, was classified by the IRS as an employee. In discussing it with the IRS agent who was arbitrating the matter, I told her how dumbfounded I was that the law firm would even be contesting this one. It was not even close to being a close call. The agent said that law firms and attorneys are the worst when it comes to this. They think they know everything, and if it comes to something they don't know, they just assume they can BS their way past it. So I know exactly what you're describing.

It looks like you're going to have to dumb it down for him. See if he can understand this. By using his SSN on the 1099s, he is disclosing his Social Security Number to lots of people who should not have it. Plus he's probably disclosing it to the boyfriends, girlfriends, friends, and who knows who else of the people he issues the 1099s to. An FEIN is free and instantaneous via the IRS website. What possible reason could he have for not obtaining one? If these reasons aren't good enough for him, he's obviously intent on hanging himself with his own rope. I'd leave him twisting slowly in the wind. Also, your post doesn't make it 100% clear whether he's using contract labor (i.e., employee leasing) or is treating his own workers as independent contractors.

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Also, be sure to review eligibility for a credit for retirement savings contributions via Form 8880. Your post indicates that you and/or your wife may be eligible for a credit. There's not enough information to know for sure, but there's enough information to make it worth looking into.

http://www.taxalmanac.org/index.php/Discus...nt_For_Training

http://www.irs.gov/efile/article/0,,id=97147,00.html

It's not a problem if the check turns out to be good. The point is that if the check bounces and the writer never makes good on it, you can submit the check to the state's attorney for prosecution. What this really means is that the bad check writer's information is entered into a database, and if the check writer ever encounters the police for any reason (usually it's a traffic ticket), the police check the database and haul the bad check writer in for a night in jail. However, when you forward the bad check to the state's attorney, you have to sign a statement to the effect that the check writer did not ask you to hold the check for any amount of time (even for an hour or so). If you indicate that you were asked to hold the check and you accepted it, then the check becomes criminally unenforceable. I'm not sure of the legal theory underlying these procedures, but that's what they are in Florida.

http://www.thetaxbook.com/updates_view.asp?ID=94 I hadn't picked up on that requirement that the mother forego the EIC to free the dependent up for the boyfriend.

Just received my first IRS ACK and my first bank product authorization. If you're waiting for some, keep your eyes on the horizon. Yours should be here soon.

Thanks for the clarification, KC. One more thing I thought of after posting is that the client should consider informing the IRS of the thief's loot. I'm betting the crook isn't going to file a tax return or won't claim the stolen money if she does. As we all know, stolen or illegal income is still taxable (ask Al Capone). The client might be able to turn the IRS onto the crook to see whether the crook reports the stolen funds (what would you guess she will do?), plus the client might be eligible for a reward from the IRS once all the dust settles. Just a thought. PS: The most cogent thing written in this whole thread is Joan's subtitle to her post: "ALWAYS read your statements"

As they used to say on Perry Mason shows, you're assuming facts not in evidence. Vanguard is a pretty sophisticated company, and I'm quite sure it would not have moved $100K+ without adhering to contractual and standard safeguards to protect the account holder's funds. The point is, based on the original post, I don't know the facts and didn't pretend to. I made that clear. Somehow you read the same post and decided that an obviously knuckleheaded client did nothing to cause or contribute to Vanguard's release of those funds. You're reading alot into the original post to come to that conclusion. For instance, we don't know whether the client provided the thief with a power-of-attorney which would have empowered her to perform such transactions. If a POA was issued, we don't know whether it was a General (i.e., blanket) POA, or a Special (i.e., specific) POA. If it was a Special POA, we don't know what authorizations it conferred. I've never known of a nationally recognized fund administrator such as Vanguard to release or transfer IRA funds without a written authorization. So we don't know whether the thief forged the client's signature, deceptively had the client sign a form (the original post made it clear that the client was asleep at the switch when it came to these things), or exactly what happened. I'm as sure as I can be based on the information so far that the money was not transferred based purely on just a phonecall. Then you have to consider whether the client provided the thief with data that would have enabled the thief to assume the client's identity vis-a-vis Vanguard, such as account numbers, PINs, and personal data that Vanguard could reasonably use to "confirm" the identity of the account holder. If the client provided that information, or failed to protect it adequately, she cannot then transfer her negligence to another party. If you're unsure of this rule, go re-read the account information from your bank regarding the protection of PINs and passwords. For instance, if someone steals your ATM card and gets your PIN because you keep it written in your wallet and cleans out your bank account, the bank won't refund your money. Hopefully, it will come down to this: Vanguard relied on a written authorization in which the thief forged the client's signature, and Vanguard failed to exercise reasonable judgment in discerning whether that signature was forged. If so, the client might stand a chance against Vanguard. On this point, KCJ and I differ. KCJ writes, "Unless the thief also forged [the client's] signature, Vanguard is liable for putting the money back." I conclude the opposite. I believe that the client's only chance with Vanguard would be if the client's signature had been forged and Vanguard failed to compare the signatures or was sloppy in its comparison. But there is too much unknown to leap to the conclusion that Vanguard is on the hook here. That might turn out to be true, but based on the incomplete facts available so far, I'm betting that Vanguard will say, too bad, so sad. Of course, everyone's sympathy will naturally lie with the victim, but sympathy's not worth much, if anything, when it comes down to the legalities.

To state the obvious, there's alot going on with your client's situation, but I think insofar as the IRS is concerned, she's going to end up with a casualty/theft loss. I drafted a big long response, which I can still post if you'd like me to, but it boils down to a casualty/theft loss. (It looks as though your client's mother may have one too. I know that casualty/theft losses are usually a joke on a tax return, but that's what this is.) Also, it's not clear from the facts presented that Vanguard is responsible for making the stolen IRA good. It may be so, but it's not a given.

Where is customer support? I think you're looking at it.

1000%? that would have been silly

Thanks, KC. I was going to reply in the same way, but the whole thing is so stupid I didn't know where to begin. I echo what you said. This is more than just a case of, "What was I thinking?" Hopefully, the taxes that can't be paid don't include sales taxes or payroll taxes. If so, it won't be long before the fat begins to hit the fire, and your client will be personally liable for them. Please at least tell us that the professional crook wasn't from Nigeria. There's no magic wand for fixing this mixture of greed, money, and stupidity. And don't let Roni Deutch tell your client otherwise. I know she'd be licking her chops over someone with so much money and so little sense.

That's ok, Teri, so long as you know that, legally, if you "hold" a check or accept a postdated check, the issuer of the check cannot be prosecuted if the check turns out to be bad. I imagine this rule differs by state, but that's the way it works in Florida and I'm pretty sure that's the general rule. I'm not sure whether that means you wouldn't be able to proceed with a civil action, but the state's attorney (that's what they're called in Florida) would not pursue criminal actions. This is true even if the payer asks you to hold the check for just an hour or so, i.e., any amount of time. Of course, all of us, including myself, have held checks for clients. And knowing when the refund is going to hit their account makes it pretty safe, but not certain, that you'll be able to collect. But I accept that there's risk involved anytime I agree to hold a check. Of course, I guess there's risk involved anytime anyone pays you with anything other than cold hard cash.

I poked around for as long as I have time for, but I came up dry. I could not find any software company that offers TIN verification for 1099s as part of its package. This isn't to say they aren't out there. I just couldn't find them. I'm not really sure how it would be done anyway since you have to have access to the IRS' TIN database to perform such verification, so you're right back to the eServices route anyway. Here are the options that I see: (1) Issue the 1099s to the recipients by 1/31/08. If the client has to issue more than 250 1099s, then it must efile the 1096/1099s with the IRS anyway, so that extends your 1096 deadline to 3/31/08. This means that you will have until 3/31/08 to renew your eServices registration and register the client company. You would then be able to perform the TIN verification, make any corrections, and still efile the 1096/1099s by the 3/31 deadline. (2) Issue the 1099s and efile the 1096/1099s without verifying them. I had one company do this itself about 3 or 4 years ago. It was a title company with about 3,000 1099s, many of them to foreign investors. The company received a nice little bill from the IRS for about $1,500 for all of the mismatched names/TINs that occurred. She provided the IRS with copies of the W-9s that the payees had provided, and the IRS waived the entire penalty without any fuss whatsoever, including those 1099s with clerical errors (such as a mistyped SSN). Once the IRS learned that she was diligent about collecting the information from the payees and hadn't just thrown bad 1099s into the system, it said fine, all is forgiven, go in peace. Of course, it didn't hurt that we advised the IRS that her company had immediately enrolled in eServices and would verify each TIN right up front. The point here is that if the company was diligent in obtaining W-9s from the payees and diligent in filing the 1099s, the IRS will likely waive any penalties for mismatches. But the best plan would be to get the company enrolled in eServices so that its personnel could check these TINs as they come in, rather than leaving a big mess at the end of the year. Make sure that you're charging enough money for all of this. No matter what, it will be labor-intensive and time-consuming. If someone else has a better approach that I haven't thought of, please chime in.

Let me do a little research and see if I can get back to you with some tips. In the meantime, someone else might come along here with a good answer.

Here's my opinion, and it's probably worth about what you're paying for it. I'd follow your original plan (file now, amend later) and wouldn't give it a second thought. The "information" from NATP (which admittedly I haven't seen) seems awfully vague and sounds more like someone trying to fill up space in a newsletter than anything to be concerned about. Besides, you're not an IRS-hating wacko (you aren't, are you?) doing this on a widespread basis as some strategy to inundate the IRS with time-consuming, unnecessary paperwork. I agree with KCJ: the IRS is not going to drop everything and make an example out of you for amending a return. I say, go for it and wish the couple bon voyage.

Plus remember that if you efile your 1096s/1099s, you have an extra month (until 31/31/08) to efile them with the IRS.

I read somewhere that the IRS wants to ban such tactics on the basis that it induces a taxpayer and/or preparer to cheat on a return since they have audit protection anyway. I know there must be a whole lot more to it than that, but that's the broadbrush summary.

Thanks, Ken. That helps. And it means that the first IRS ACKs won't start percolating all the way through the system until later that day of that evening (once again, assuming no problems with the system).

Maybe someone else has the specific answer about ATX, but I'm a little confused by the question. Maybe I just don't understand what you're asking for. My guess is that you're asking whether it's possible to confirm TINs (SSNs and FEINs) for the purpose of issuing 1099s. The answer is yes, but the only way I know to do it is via the IRS eServices website. You have to be registered with eServices (which you can do online), but it's not an instantaneous registration. The IRS will "check you out" and send you a password by mail. I long ago lost interest in the details of the eServices procedures (too restrictive, too cumbersome), so I might not have the latest rules. There might be an easier way of doing it, but here is how it works for me. First, you have to register yourself (i.e., yourself as an individual, not your company). Then, once you're in the door, you have to register your company and the companies that you want to prepare the 1099s for. In other words, if Company A is paying me to verify and prepare its 1099s, that company has to show me as an authorized user on its account, and I am restricted to verifying the TINs only for the recipients of those 1099s. In other words, I cannot go onto the website and indicate that I am verifying TINs for 1099s for myself since I'm not the issuer, even though I am the one preparing them. (See what I meant by too restrictive, too cumbersome?) Once you've jumped through all these hoops, you enter the TINs and recipients' names, and the system gives you instant verification. If the names and numbers don't match, it doesn't tell you why. You have to resolve the errors yourself and resubmit the corrected info for verification. Next, you mentioned that you want to verify FEINs for 1099s. Typically (although not always), 1099s are issued to individuals via their SSNs. There are exceptions (LLCs choosing to be disregard entities, attorneys, etc.), but in most cases 1099s will bear an SSN, not an FEIN. My point is that if you're planning to issue 1099s to a bunch of FEINs, doublecheck to make sure you're required to issue them and are not issuing them to S-Corps, C-Corps, etc. It's technically not wrong to issue them to corporations. It's just not required. Compare this whole ordeal with the SSA BSO website which lets you right in to verify SSNs for W2s. This response is becoming a little tedious, I know, but there is one more point. To verify TINs via IRS eServices or SSNs via SSA BSO, you have to have the payer's written authorization. I haven't found a specific government form for this authorization so I just have my clients sign a statement authorizing me to utilize the government websites for purposes of TIN and/or SSN verifications. Sorry the response is so long. I guess it really is long considering that I don't know the answer to the question you asked to begin with.