JohnH

Did he take a distribution of the entire amount? In that case he will owe tax on the earnings. But if he took a partial distribution, then the non-taxable contribution comes out tax free. There's no tax until he dips into earnings.

Direct form entry is vastly over-rated. I think it's wasteful of time and resources. Besides, most of what we call direct form entry is really just a link to a data entry sheet anyhow. There are very few instances in which the data is ACTUALLY entered directly on the form. If you'll lose that dependence on form entry, then with the right software you'll gain incredible speed. Since time is money in our business, speed is extra money in your pocket. But if money isn't your main business concern, then...

If the client is too much of a wimp to call the former accountant, tell him to send them an email.

Here's a pretty good starting point - IRS chart: http://www.irs.gov/Businesses/Comparison-of-Form-8938-and-FBAR-Requirements I have one client who has an active foreign account which always stays below the FBAR limit, but he tells me he has always filed the form anyhow. The risk is so high and there is no downside to filing, so he takes the safest path.

When I served in the Air Force working on radar systems with high voltage and climbing up and down aircraft ladders, one could get into serious trouble for wearing any type of jewelry on the flight line. We joked that the main purpose was to protect the jet engines from ingesting foreign objects such as rings, watches, caps, fingers, etc, but the rules really were in place to protect us as well.

I don't think you will need to walk away from this. Once you explain what will be involved in straightening it out, both in terms of accounting costs & tax liabilities, they are probably going to decide to make "other arrangements".

Lots of things in childhood turn out not to be what we thought. Just last week I finally apologized to my daughter for having told her all those years that when the ice cream truck was playing music, that meant it was out of ice cream.

In this situation, I'd probably call IRS with the client conferenced in on the call. There's a 50-50 chance the IRS person will handle it on the phone, and probably a 75-25 chance they will at least stop it from going into ACS for 69-90 days to afford you a chance to send a fresh letter (via Express Mail) summarizing all prior correspondence.

Here's one that Consumer Reports provides. They also have lots of very helpful printed info on the whole subject. http://www.consumerreports.org/content/news/wheeling/worksheets/documenting_the_deal.html

I think Michael is referring to the state Professional Corporation (PC) rules, rather than the IRS Personal Service Corporation (PSC) rules. In most states, all shareholders of a PC must be licensed in that profession. I think that would automatically cause it to be a PSC subject to the 35% rate. The only way for a PC to bypass the PSC would be to make the S-corp election. But if a non-professional can be a minority shareholder of a PC under the rules of the state, or if the corp is a regular C-corp rather than a PC, then having the requisite amount of stock owned by the non-professional would avoid the PSC rules. I've also read that only a CPA comes under the PSC rules and an EA doesn't, but I don't remember what the reasoning behind that was. Perhaps it had something to do with the fact that the EA designation applies to tax preparation, not accounting, and tax preparation is not one of the professions listed under the PSC rules.

As already stated, S-corps are not affected by the PSC rules. But even the PSC rules for a C-corp can be side-stepped by having a spouse as a shareholder (provided the spouse isn't working in the business).

Until 2020 you say? That's probably long enough for me

That's so true. In the early years I had one set of custom spreadsheets (which I bought, rather than design myself), which required me to choose a different spreadsheet for each filing status (S, MFS, HOH, MFJ). There wasn't any error trapping either - if I discovered at the end that I had chosen the wrong spreadsheet, there was nothing to do but enter everything again on the correct one. I was thrilled when a lookup table made it possible to combine all the tax calculations on a single spreadsheet that made the calculation based on a "Filing Status" code entry.

Only dual? I vote for the capability for 3 or 4 monitors

I remember formatting spreadsheets in Appleworks running on an Apple II Gs computer, which I then printed on a dot matrix printer and then photocopied using an overlay. Even made my own overlays on special acetate paper.

In addition to the tax subject matter, I've always enjoyed reading anything Julian wrote. Where else would you find "ecdysiasts" and "vituperative" in a tax article? The man has a way with words. Made me get out my personally signed copy of one of his books from a past decade.

It is a case which has been hanging around for a long time. But just the same, thanks for the mammaries.

This year it has become even easier. There's no paper form to file (unless they have to attach the 8938 to the return) Just give them the link to file it online and remind them of the penalties. You're done...

Yes. But then, Señoritas have always been meaningful to me.

Eric: Do you have any words of wisdom to offer on choosing passwords? I've always tended to use foreign language words which are meaningful to me, but I' wondering if there is a good system that is fairly easy to remember and increases the difficulty of someone figuring them out.

I can say one thing for certain about every client I ever lost over fees -> . . . . . they needed to go.

I understand your point, Michael, but this is an extreme situation, IMO. And it requires extreme measures because I'm in 100% CYA mode at that point. This isn't about notifying a client of an error - it's about a lying cheat dragging me into his scheme. If a client told me he had deliberately cheated on his taxes for 5 years, and had made me a part of the pattern, I want to send a clear signal. I want him to know that I'm washing my hands of him and that I'm giving him the means to correct the problem. I'm not even sure I WANT to be paid for this. I'm certainly not going to waste time talking with him about retainers, what he ought to do, or anything else requiring thought or action on his part. Chances are he won't send in the amended returns and he will keep lying to his next preparer. But my name is always going to be on those returns in question. If he gets caught and the IRS comes knocking on my door, I want air-tight proof that I gave him everything he needed to get it right.

Yes, KC. Thank you. I just could not recall which thread it had appeared on and I had been randomly searching. http://m.youtube.com/watch?v=pdkucf6wxU4

I was giving this situation some thought as I was driving home, wondering exactly what I would do if a client told me he had been deliberately giving me bogus IRA deductions for 5 years running. I decided the only thing I'd know to do is give him 5 years of amended returns, all at no charge, and a goodbye letter. The only other thing I might do is ask him if he has any of my business cards in his possession - and if so, I'd ask him to give them back to me.

I'm pretty sure this differs from state to state, but a lawyer friend told me years ago to be very careful with interest charge assessments on past due invoices for personal tax returns. This comes under consumer protection laws and the penalties for even the slightest deviation from what's allowed can be huge.