ed_accountant

I have a client, scorp owner, single member and no other employees, that thinks they can deduct the per diem travel rates. I believe the rule is that stockholders could not deduct the per diem travel rates and only deduct actual travel expenses. Is that correct? Thanks

I agree you should get paid first! Receive the pastdue payments before you make any additional copies for him. I would not give this guy your files but offer to photocopy them for a fee. If you start to do things for free he will keep coming back.. Good luck!

If this were my client, I would advise them to hire an estate/probate attorney to devise an estate plan. I am always careful not to provide legal advice due to the liability. The liability of giving bad advice will surely exceed any fee obtained..

Please read IRS Revenue Procedure 2009-20 http://www.irs.gov/pub/irs-irbs/irb09-14.pdf

This case is listed in the fall 2009 CA Board of Accountancy (CBA) newsletter that is sent to Ca Cpas. No officer compensation was the main act of negligence that the IRS discovered during an audit of years2004 -20006. She was also found negligent on other issues.. http://www.dca.ca.gov/cba/discipline/index_w.shtml#507 Ms. Wong admits the truth of each and every charge and allegation in the Accusation No. AC-2009-26 with the exception of the charge of gross negligence and repeated acts of negligence regarding the corporation reporting minimal to no officer compensation. For the purpose of resolving the Accusation, Ms. Wong agrees that, at a hearing, Complainant could establish a factual basis for the allegation noted above and that the allegation constitutes cause for discipline. Accusation No. AC-2009-26 contains the following allegations: Ms. Wong was grossly negligent and committed repeated acts of negligence in preparation of the complainant's corporate tax returns for the years 2004 through 2006. Ms. Wong reported minimal to no officer compensation for those years even though the corporation had substantial income and the complainant was the sole shareholder and performed all but a minimal amount of the work for the corporation. The corporation is an S-corporation. Ms. Wong allowed nearly all of the corporation's profits to pass to the complainant as distributions without paying the required employment taxes. The complainant and his corporation were audited by the Internal Revenue Service (IRS) and as a result the corporate tax returns were adjusted to report additional officer compensation of $63,000 in 2004, $64,000 in 2005, and $75,000 in 2006. Penalties were assessed. Ms. Wong also reported a $20,700 bad debt deduction on the 2005 corporate tax return even though the corporation reported its income on the cash basis and had not reported this amount as income on a previously filed return. Ms. Wong also reported a pension deduction on the 2005 corporate return in excess of 100 percent of its employee compensation, even though a deduction of only 25 percent of employee compensation is allowed. Upon IRS audit the bad debt deduction was denied and the pension deduction was reduced. Ms. Wong also earned commissions on an annuity sale and mutual fund sales she made to the complainant and failed to disclose to the complainant in writing that she would be receiving a commission. Ms. Wong also practiced under the unregistered name of BC Services while performing services for the complainant.

Over the years, I have done similiar letters. Stick to the facts and do not state an opinion. Please be advised that OWNER is the president and 100% shareholder of the Company Inc. OWNER has total access to the bank accounts of COMPANY Inc. OWNER can draw and deposit money from the COMPANY Inc without affecting the ongoing flow of the business..... Here are two standard example letters: CPA Letterhead Level 2 Sample Letter Date To Whom It May Concern: The purpose of this letter is to attest that _____________________________ Social Security Number _______________________has been self-employed for the past two years. His/Her business name is _______________________________. His\Her business is located at _________________________________ and has been for at least two years. This attesting has been done by the review of his/her past two tax returns (2004 and 2005 years). These tax returns were prepared by ____________________________________. I have verified that the tax returns I have in my possession, have been filed, accepted and processed by the Internal Revenue Service. This letter is only intended for use by the above person. It has a specific ID number and it is _________________. I have permission from the taxpayer to provide you with copies of the tax returns that are in my possession, if you desire. If you intend to extend credit to the taxpayer based on the amount of self employment, you should do your own independent procedure, as I am only attesting that He/She has reported self employment to IRS, but not to the amount. If you need to reach me for any reason, please call at the number above during the day from 9:00 am to 5:00 pm. Sincerely, Sample 1 Example Response To Lender’s Request For Verification Of Client’s Self-Employed Status Date: Dear Lender, You have requested that we provide you with certain information regarding [Client] (hereinafter referred to as “our client”). Our client has consented to our provision of the requested information. We have prepared the income tax returns for our client during the period from __________through__________. Those income tax returns have each included a Schedule C and Schedule SE, Self-Employment Tax computation. We prepared the income tax returns noted above based on the documentation and other information provided to us by our client. We did not audit, review, or otherwise verify the accuracy of such documentation or information at any time, and we have not and do not express an opinion or give any other form of assurances regarding the same. By providing you with this letter, we have not established with you any direct or indirect client, contractual or quasi-contractual relationship. We do not understand or anticipate that you or any third party will rely on the information contained in this letter as a basis for entering into or continuing any contractual or other relationship with our client. We fully expect that before you or any third party decides to enter into any such relationship with our client, that you and/or that third party will exercise an appropriate level of independent due diligence. Accordingly, and use of this information is solely your responsibility and judgment. By accepting this letter, you acknowledge all of the above, and also that we are under no obligation to provide you or any third party with any additional information at any time, including but not limited to any changes or corrections to any of the information we have provided in this letter concerning our client. Thank you. Very Truly Yours, Certified Public Accountant The above example would be a perfectly appropriate limited response to a lender or broker’s request for credit-worthiness information. However, the most protective thing for the accountant to do, especially in a state like California (with very restrictive law on the ability of third parties to sue accountants), would be to decline to respond to the lender’s request. In California, unless the third party can demonstrate that there is close and direct contact between itself and the accountant, it will be difficult to establish the requisite standing to bring a lawsuit alleging detrimental reliance on the accountant’s work product or representations. By responding to the lender or broker’s request for a credit worthiness letter, the accountant would be helping the lender build its case for close and direct contact. So, unless this is a client that the accountant does not want to lose, and would lose if the accountant didn’t provide the requested response, we advise against responding to the request, and advise the accountant to direct the lender or broker to the client for the needed information.

You may want to contact the IRS auditor and ask him to fax his questions to you in advance so you can have the necessary paperwork. I am sure your meeting will be longer than 15 minutes.. Good luck

You may want to consider an online backup system to backup your data... I use carbonite.. http://www.carbonite.com/how_it_works/

You should consult with a local computer tech that can come to your office. We are experts at income tax not computers. A local computer expert can offer advice and support at an affordable hourly rate. It makes all the difference when the computer tech come to your office so he can see your setup. I hired a local tech to network my two computers and it came out perfectly. I paid the Tech for hourly services only and orded the equipment from Dell.

I am interested in hearing who is using tax research programs and how they like them. In the past, I susbcribed to Klienrock research before it became ATX and then CCH. I have also suscribed to CFS tax research but discontinued each of them since I do less research and more information is free on the internet.... Thanks

What does this subscription cost ? thanks

The POA fax # is 801-620-4249. This is an IRS dedicated fax for POAs. It takes about 1-2 days to process.. Thanks

Check with the 2008 IRS instructions for form 709. From memory, you can not file a 2009 gift tax return until the IRS issues the new 2009 forms. 2009 Gifts must filed with the 2009 forms.. You need to wait until forms are out which will be after Jan 1. The IRS instructions explain this.. Thanks

Have client sign form 2848, fax to IRS and then call the IRS tax practitioners hotline to request the Wage and Income report on client...

I would just have them sign a separate form 8879.

Good points.. You are right. Thanks

I got the same email and marked it "SPAM" I love the line. This is not spam or a joke.. Here is their email: "We have received your company information from the Internal Revenue Service in order to ask for your help in finding out what is happening in the tax industry. This is not spam or a joke. The mission of this project is to collect valuable data regarding your tax business which we are planning on “SHARING WITH YOU”! We ourselves are fellow tax preparers and accountants so we know that you are a successful tax preparer in the “area” so we have prepared a special website which will explain in greater detail. Click the following link [url="http://taxmarketingguru.taxmarketingforyou.com/' which we have especially for you. With tax season rapidly approaching, we have a limited amount of time to ascertain this information. The Deadline is October 1, 2009. Special Gift for those who complete this simple 5 minute survey, we will have a special webinar where we will share the results to the issues confronting the industry. Click [url="http://taxmarketingguru.taxmarketingforyou.com/' , complete the survey and we will send you the information on how to find out the results. We wish you much success this coming tax season. Your Tax Coaches,"

Sounds like California is pushing the problem forward..

Thanks, I just wanted to confirm that the previous accountant's strategy was wrong and in violation of IRS rules.. Thank you everyone who responded

He says his accountant is too busy and he is not happy with his services... Thanks

I would think the fine and jail time would be longer !

Hi, A potential client just call me to request a quote on an Scorp and LLC return. He explains that the LLC business does IT consulting and has outside employees and the Scorp sells some type of IT product with only shareholder employee. He explains that his previous accountant set this as so that owner wages are on the SCorp to maximize a pension contribution and on the LLC there is no pension plan. He states that the businesses are very different but both are under the same ownership. In summary, employees have no pension or 401k in LLC and owner has pension on Scorp. I told this potential client that this wrong. I would like to confirm that this is against pension rules.. Comments.. please Thanks

I suggest that you do not prepare a personal financial statement for this new client unless you are qualified, insured and authorized by your state! There are huge liabilities and risk in preparing personal financial statements. You can assist the client in preparing it himself but the client is actually preparing the statement. Good luck

I use Tenenz also. I buy 2 years of folders at a time to get the price down..

Sounds like a small amount of SE tax to dispute. I would not spend too much time on it. I would probably have the taxpayer pay the IRS invoice, reimburse them for penalties/interest and move on to making money... If you really wanted to dispute it, you could amend the return to recaculate without the SE tax. Then send a letter with the notice and amended return back to IRS.