To Dump, or Not to Dump...That is the Question

[MsTabbyKats]

I had a client for about 10 years that I always had issues with.......

Example: He needs to take his 2nd apt as a deduction because his wife is a frail little thing, and cannot take the subway to work. So, they need a 2nd apt by her job. (No...I didn't........)

Moving on...last year:

He had a 1098-C showing cancellation of credit card debt of $40,000. Of course he got mad when I told him he had to pay tax. I called IRS just to triple confirm I was not hallucinating. I did the return...etc....and then he said he was going elsewhere, to someone who would leave it off.

Oh...how happy I was. I wouldn't have to bother with him again.

Lo and behold...he just called me (left a message...I was out) and said he wanted me to do his return....he had to go to a CPA last year etc........but he wanted to come back to me

My choices:

1. Not responding

2. Raise his price and tell him he has to pay upfront

BTW...this man is almost 70 and still hasn't paid back his student loans, which is why he needs the injured spouse form!

[Lion EA]

If there's an amount of money that makes this client worthwhile for you, then 2.

If it's final that you don't want him, then instead of 1. call him to tell him that you have a full schedule of clients and no longer have time to take him on as a client, something like that. Be firm. Don't argue. Thank him for his business over the years and wish him well with his new preparer and hang up!

[Bart]

Ask to see his last years tax return and see if he got someone to leave the COD income off the return.

[joanmcq]

See how much he was charged!

[gfizer]

I would dump him. If he really didn't report the 1099-C income last year, either by finding a less than honest preparer or just failing give the information to another preparer, then he wouldn't have any qualms about lying to you if he felt it necessary, especially since he knows you are playing strictly by the rules. I would have a hard time trusting him again so he would get my "I'm sorry but I'm not accepting anymore clients at this time." Just my two cents worth....

[HV Ken]

Did you check to see if he would qualify as insolvent as a way to handle the Cancellation of Debt ?

Perhaps that is what the CPA did for him. It is not a trivial process and if this did happen, it would have come with a pretty nice return fee.

See Form 982 - http://www.irs.gov/pub/irs-pdf/f982.pdf

Purpose of form: Generally, the amount by which you benefit from the discharge of indebtedness is included in your gross income. However, under certain circumstances described in section 108, you can exclude the amount of discharged indebtedness from your gross income.

[MsTabbyKats]

Did you check to see if he would qualify as insolvent as a way to handle the Cancellation of Debt ?

Perhaps that is what the CPA did for him. It is not a trivial process and if this did happen, it would have come with a pretty nice return fee.

See Form 982 - http://www.irs.gov/pub/irs-pdf/f982.pdf

Purpose of form: Generally, the amount by which you benefit from the discharge of indebtedness is included in your gross income. However, under certain circumstances described in section 108, you can exclude the amount of discharged indebtedness from your gross income.

Yes...I checked for an hour with IRS. It was taxable....no question about it.

The guy is a big PIA. It really got old to hear him tell me how to do my job every year.

[HV Ken]

Yes...I checked for an hour with IRS. It was taxable....no question about it.

The guy is a big PIA. It really got old to hear him tell me how to do my job every year.

The IRS would not know if he was insolvent and will say by definition that cancellation of debt income is taxable.

Form 982 is what is used to determine if his cancellation of debt income could be excluded. This is work that is done by the tax preparer.

[MsTabbyKats]

The IRS would not know if he was insolvent and will say by definition that cancellation of debt income is taxable.

Form 982 is what is used to determine if his cancellation of debt income could be excluded. This is work that is done by the tax preparer.

I went over "everything" with the IRS. The man's wife works and makes about $75,000 as a NYC employee. He is able bodied, but chooses not to work. They don't own anything....just tenants. They have no expenses...other than rent and food on the table.

I just checked the return from last year...and the debt was actually in his wife's name. It was $32,000.

The debt wasn't discharged as a result of bankruptcy.

He said..."they were looking at real estate...and were offered a line of credit".

I said...."but did they tell you that you had to use it?"

The $$$ was spent on just typical nonsense....and probably sent whatever they bought back to the wife's family in China.

There is no way the debt could be legally excluded. There are no obligations...other than his student loans from 45 years ago.

He just didn't want to pay the tax. Period.

This was all discussed when I spoke to the IRS.

If the CPA used Form 982 he obviously didn't know how to use it properly.

FYI-I'm very thorough. If I'm not sure of something I'll spend hours researching it. I just don't blindly fill out forms...because I don't want anything coming back at me.

Obviously I don't remember who I spoke to at IRS...but it wasn't "the 1st rep who answered the phone". Most likely it was the dept that specialized in debt cancellation.

[Lion EA]

But, what was the result when you filled out Form 982? Was his debt all taxable or partially or all excluded? He had credit card debt and student loan debt and what else as liabilities? And, no house; what about a car or savings account or any assets at all? Maybe they were insolvent or partially insolvent....

[kcjenkins]

Give it a rest Lion. She told you she checked everything, why are you so determined that she overlooked the most obvious? That is not like you, dear friend.

[MsTabbyKats]

But, what was the result when you filled out Form 982? Was his debt all taxable or partially or all excluded? He had credit card debt and student loan debt and what else as liabilities? And, no house; what about a car or savings account or any assets at all? Maybe they were insolvent or partially insolvent....

The result...when speaking to the IRS....about his "assets"...was...."Tell him to return the "junk" he bought and he'll have money to pay the tax. (And that part I remember distinctly.)

I think you don't get it....this man has been avoiding "financial responsibility" all his life.

And I was sick and tired of wasting my time in aiding and abetting his annual nonsense. I was happy to lose him. I don't want him back. But then again, in normal years his return is very easy money (1 W-2 and innocent spouse forms).

Please don't be naive. I can just about guarantee that he went to someone else and did not show him the 1098-C....or the CPA filled out the return checking the box that the debt had been dismissed in a bankruptcy. Not everyone has the time or patience to do the research that I do. It takes one second to "click an X". I'm sure the 982 wasn't filled out, because there was nothing to fill out.

He's a deadbeat. He's always been a deadbeat. He'll always be a deadbeat.

[MsTabbyKats]

So...here's the update on an e-mail I just got:

Hi Bonnie,

We've done our short form exclusively through you for 8 plus years now.

Last year you turned us away due to our tax needing an extra form to cover the Credit card buy out settlement agreement with BA in 2012.

We pounded the pavment absent a referral to a CPA.

Well the complicated joint filing was done last year at no small cost to us.

You've never not returned my call promptly thus I fear tell you or you husband are ailing.

Hope its not serious.

Looking to get our short form done again by you or a referral if you have re-tired.

Please advise.

Best Regards

This "I turned him away due to an extra form" is just nonsense. I guess I'm either retired of dead. You see how unusual it is for me not to get back to someone within 5 seconds!

[JohnH]

How's this for a reply?

Thanks for your concern about our health.

My husband and I are fine.

Hope you and your wife are well.

And I hope your new tax preparer is also well.

Sorry, I don't have a referral to give you.

Best Regards,

[MsTabbyKats]

Actually...I sent him this: (and i'm going to put his response in the next post)

Hi Al-

My husband and I are both alive and well.

I'm not going to get into "last year"....and what was ultimately done. I prepared your return based on the information I was given in accordance with IRS rules and regulations.

If you would like me to do your return this year, please e-mail or fax me your wife's W-2...etc.....

I'll give you a price, but I'm going to need payment in advance of any work being done.

Bonnie

[MsTabbyKats]

And here is the response I just got: (note...his wife is Asian...but I never discussed his wife being Asian)

re: I'm not going to get into "last year"....and what was ultimately done. I prepared your return based on the information I was given in accordance with IRS rules and regulations.

Senior moment? You DID NOT Prepare my return last year!

Bonnie you are so full of yourself. It is I who got into last year to bring all things current!

You did get into last year my declaring yourself incompetant to do the filing necessary.

And ya turned a brother Jew and human (HURST is my Patriarch name lineage) out to the cold---My cash has been good for 8 steady years

Now you demand cash up front?

How offensive and crude you have become in your old age- OBAMA CARE learned corporate not for prophet manners-

May God forgive you this passover--

Only The catholics may demand cash up front in an offering basket at Mass-- from a loyal customer. It is customary in professionally run off the books businesses to refer out those accts you choose not to service--And NOt Throw them to the Lamb Eaters--

Always sensed your Asian American Racism demeanor!

I over looked your deed last year--of refusing to do the proper filing and yet not refer us to a CPA to get the job done you declared yourself incompetant to do.

Easy bucks only hey?

And seeking to raise the instantly price? lol

What a foolish bitter old woman you've become-- Perhaps rich!

Your locksmith is your greatest asset--- Always has been---

Consider yourself terminated from TAX contract work for this family.

AFG

[HV Ken]

I went over "everything" with the IRS. The man's wife works and makes about $75,000 as a NYC employee. He is able bodied, but chooses not to work. They don't own anything....just tenants. They have no expenses...other than rent and food on the table.

I just checked the return from last year...and the debt was actually in his wife's name. It was $32,000.

The debt wasn't discharged as a result of bankruptcy.

He said..."they were looking at real estate...and were offered a line of credit".

I said...."but did they tell you that you had to use it?"

The $$$ was spent on just typical nonsense....and probably sent whatever they bought back to the wife's family in China.

There is no way the debt could be legally excluded. There are no obligations...other than his student loans from 45 years ago.

He just didn't want to pay the tax. Period.

This was all discussed when I spoke to the IRS.

If the CPA used Form 982 he obviously didn't know how to use it properly.

FYI-I'm very thorough. If I'm not sure of something I'll spend hours researching it. I just don't blindly fill out forms...because I don't want anything coming back at me.

Obviously I don't remember who I spoke to at IRS...but it wasn't "the 1st rep who answered the phone". Most likely it was the dept that specialized in debt cancellation.

Well this is much more information from your original post! I wasn't trying to imply anything - there was no indication originally that you put in all this effort.

My vote is for TO DUMP. There is peace of mind that comes from parting ways with a PITA. I am willing to bet you put way more into this client than the fees you have received.

[MsTabbyKats]

Note-The referral to locksmith is my husband's business.

We live in the heart of NYC....there isn't a shortage of CPAs etc here.

He probably had to look far and wide to find someone willing to do what shouldn't be done...at a high price.

[Catherine]

Why are you even considering taking this guy back? Lying, verbally abusive, happy to commit tax fraud, self-righteous, financially irresponsible....

"I am not taking new clients, nor do I accept back former clients who left."

[Lion EA]

My choice was and has been and still is 1., but with less arguing and more closing the door. (I mentioned 2., in case she wanted them back.) And, I thought from her first post that she had filled out the 982, but her subsequent post said she had spent her time asking the IRS if his forgiveness was taxable, something they would not know absent 982 -- that's why I asked her what was the result from her 982 as opposed to the result from the IRS, which as we all know stands a much smaller chance of being correct than Tabby. I never criticized Tabby's work! In fact, I wanted to learn her results even though her client left, as has been mentioned by others, to see what that other CPA did compared to Tabby's conclusions and to see if her client might be returning with his tail between his legs because the CPA filed 982 with the same results as Tabby. Now, her clients' words show that not to be the case! Tell him Good Bye and hang up.

[MsTabbyKats]

My choice was and has been and still is 1., but with less arguing and more closing the door. (I mentioned 2., in case she wanted them back.) And, I thought from her first post that she had filled out the 982, but her subsequent post said she had spent her time asking the IRS if his forgiveness was taxable, something they would not know absent 982 -- that's why I asked her what was the result from her 982 as opposed to the result from the IRS, which as we all know stands a much smaller chance of being correct than Tabby. I never criticized Tabby's work! In fact, I wanted to learn her results even though her client left, as has been mentioned by others, to see what that other CPA did compared to Tabby's conclusions and to see if her client might be returning with his tail between his legs because the CPA filed 982 with the same results as Tabby. Now, her clients' words show that not to be the case! Tell him Good Bye and hang up.

I did his tax return...as it should have been done. I can tell you exactly what happened...no senior moment here (I have his 982 in front of me that I did for him).

I called the IRS to discuss what I had to do to "make it go away".

It seemed that if this had been "a business card" it would been forgiven (for the business)...but it wasn't....which is why the rep told me he should sell "the junk he bought" and pay the tax. We went over the 982 line by line...for an hour.

There was no line....not even anything close to a line....that applied to his situation.

Gee....I really feel like answering his last e-mail...just to vent...with his 982 attached!

[jasdlm]

I would not respond again in any way. Ever. (Unless he requests a copy of a prior year return; he can bring payment for the same and pick it up from your husband or staff.) This person is not mentally stable. It's hard to accept, but no matter what you say, it will fall on deaf ears.

NEXT client.

[Lion EA]

It would be fun to see the return the CPA prepared, but not worth more stress! Maybe they filed MFS to give him fewer assets and make him insolvent or partially insolvent or maybe they didn't give the CPA their 1099-C or maybe the CPA prepared the return exactly as you had but charged them a lot more. (By the way, I too would demand upfront payment if I were to take him back, as you did all that work last year without pay.) But keep it for your fantasies, and move on with your nice clients. You can vent here. Write your Dear Client letter here.

[MsTabbyKats]

The CPA could have done one of two things:

1. Not entered the 1099-C

2. Clicked on something on the 982 that should not have been clicked on....and charged a hefty fee for this click

As I said earlier...there is no "CPA shortage" in NYC. The fact that he had to "pound the pavement" to find a CPA...."at no small cost" to him....kind makes me think that many CPAs showed him the door.

[jainen]

>>They don't own anything...There are no obligations...other than his student loans from 45 years ago.<<

That with a 32K credit card sounds like insolvency to me.