Cathy Posted June 18, 2013 Report Share Posted June 18, 2013 You are so far over your head you don't even know you're drowning. Your client needs knowledgable and qualified representation, and you aren't even attempting to educate yourself on the issues you are clueless about. Have you even reviewed the 19 pages of documents that were sent by your client? Have you read the tax treaty (if there is one with Columbia) to see if the dividends are taxable? It's a de minimus amount, but providing proof for your position on them could go a way towards convincing the auditor that you are competent, for which you'll need all the help you can get, because you certainly are not convincing me. Case law, facts & circumstances are what will prove or disprove the deduction. IMHO, Joan, you have plenty of knowledge to share (as we all do) and your 2 cents is worth as much as mine. In sharing that knowledge, we can be civil with one another or we can be down right ugly. I thought we had left behind those that blasted fellow members. Evidently, we didn't. Please think before your write. Thanks! 1 Quote Link to comment Share on other sites More sharing options...
jainen Posted June 18, 2013 Report Share Posted June 18, 2013 >><we can be civil< This thread is interesting in more than one way. To my mind, the income and deductions are not the most important matters because we really have very little evidence about them anyway. But we often discuss professional issues in this forum, and agreement is not something I particularly look for. Client relations, audit strategies, and tax authority are all good topics for the kind of "banter" we have been having. 1 Quote Link to comment Share on other sites More sharing options...
ILLMAS Posted June 19, 2013 Report Share Posted June 19, 2013 Ms Tabby, how did go so far? Quote Link to comment Share on other sites More sharing options...
SaraEA Posted June 19, 2013 Report Share Posted June 19, 2013 Cathy, at first I thought Joan's post was a little harsh too (although I agreed with every word). I think we are all getting frustrated with MsTabby because she hasn't absorbed a single word of all the well-meaning advice that so many posters have taken the time and trouble to offer. She titled this thread "seriously incompetent auditor" and has failed to see any light that we have all tried to shed that just maybe the auditor is right. Ms Tabby is coming across as a know-it-all who didn't really come here for advice but for sympathy for her position. She has fought all the good advice that was given her because it didn't agree with her preconceived notion that the auditor is wrong. If any good has come of this, it is that a number of other posters said they really learned a lot about the audit process, what it takes to prove a case, what to do and what not to do. Everyone who hasn't already done so should read Circular 230 (and even those who have, as a refresher), and pay attention in those mandatory annual ethics courses. Ms Tabby especially needs to do this. To clarify for the OP, the responses of many very knowledgeable posters to the issues you raised have led to the following conclusions: 1. An MBA QUALIFIES the taxpayer for a new position. The IRS and many courts have taken the position that the cost is therefore not deductible. It does not matter that he does not go and get a new position, just that he is qualified for one. 2. A scholarship that CAN be used for living expenses, educational materials, etc. is taxable income, regardless if it was actually used for tuition. (Even the pubs say this.) Was this fact perhaps in the 19 pages that were faxed to the auditor and unknown to the OP? 3. In an audit (unless a criminal case), the burden of proof is generally on the taxpayer. His or her representative must gather that proof. Dismissing the auditor as incompetent and relying on nothing but pubs (and not even reading them carefully enough to realize that they say "qualified" for a new position instead of "taking" a new position) avoids gathering the substantiation the taxpayer needs and hands the auditor an easy win. 4. Representation is a serious obligation. Know when you are over your head and hand the case to someone more qualified. This is not an admission that you are incapable. CPAs and EAs routinely do this when they sniff that something a client has done verges on criminal because they don't want to have to testify against their client (which they will have to, whereas communications with an attorney enjoy attorney-client privileges so they send the client there). 4. Don't ask rhetorical questions on a serious message board such as this one. Many people tried to help before they realized that the OP was convinced she was right and didn't really want any help. Doing so leads to the type of crtiticism voiced by Joan (and some will say me as well). 2 Quote Link to comment Share on other sites More sharing options...
jainen Posted June 19, 2013 Report Share Posted June 19, 2013 >>communications with an attorney enjoy attorney-client privileges<< Attorneys do NOT have any client priviledge concerning tax preparation, since a tax return is intended for a third party (the IRS). For tax planning advice , CPA's and EA's have exactly the same priviledge as attorneys in dealing with audits, appeals, collections, and other IRS administration (but not, of course, in criminal investigations).. Quote Link to comment Share on other sites More sharing options...
Gail in Virginia Posted June 19, 2013 Report Share Posted June 19, 2013 4. Representation is a serious obligation. Know when you are over your head and hand the case to someone more qualified. This is not an admission that you are incapable. CPAs and EAs routinely do this when they sniff that something a client has done verges on criminal because they don't want to have to testify against their client (which they will have to, whereas communications with an attorney enjoy attorney-client privileges so they send the client there). I am an EA, and I would refer a client to another professional if the area for representation was not one that I am familiar with. For example, I have never done a 1040NR and I don't have much experience with tax treaties. So I would probably have handed a case like this to an EA in our area that used to work for the IRS in their international division if he was willing to take it. I don't mind doing some research to prepare an unfamiliar form or even return, but in a representation situation where I am unfamiliar with the rules of engagement, I feel like the client is entitled to more competent representation. I have learned a lot reading this thread, but I still would not feel competent to take over representation on a case like this. I will be the first to admit that I don't know everything there is to know about tax law. IMO, there is just too much of it to know it all. And not enough hours in the day to do the research required for an area I am totally unfamiliar with. 4 Quote Link to comment Share on other sites More sharing options...
JohnH Posted June 19, 2013 Report Share Posted June 19, 2013 From time-to-time people will bring me unusual situations or downright messes and when I look at it I immediately know how to fix it or where to get good, solid answers. It is rewarding to be able to help move a worried, fearful client into a state of calm and relaxation. I've also been handed situations which were such a mess or so far outside my area of experience that I couldn't get a good handle on the situation, or I found that I needed to do one-time research that I'd never use again. Not a good use of my time or my client's funds. So I learned over the years that it's equally rewarding to simply tell the client this is outside my area of expertise or experience, and recommend that they find someone else. As far as I'm concerned, BOTH situations gave me a sense of control and assurance that I'm doing what is in my client's best interest. If the potential client thought less of me because I admitted my limitations, that's his problem, not mine. (Incidentally, I learned this in part from my mechanic. I had a problem with my car one time that he just could not resolve. He finally suggested that I take it to a dealer, who had fancier testing equipment and more experience with my year and model car. They found a wierd anomaly unique to that vehicle and fixed it at probably twice what my mechanic would have charged, but all 3 of us benefitted in the long run. And I remain a loyal customer of my mechanic going on 20 years because I respect his judgement. ) 1 Quote Link to comment Share on other sites More sharing options...
Guest Taxed Posted June 19, 2013 Report Share Posted June 19, 2013 I think one of the challenges of any online forum or blog is that the complete and accurate facts are rarely posted in the first go. It comes out in drips and by that time others are commenting, based on their understanding on facts that may not be accurate or completely irrelavant. I do agree with you completely that if we find ourselves "over our head" it is far better to make the appropriate referral than get into a malpractice situation. I hope all of us are using some sort of engagement letter with complex tax situations that tells the client what we will and will not do? Just this season I refused to take a referral from another client once I became aware that the taxpayer had not deposited trust funds and was under audit. I am not an EA this is beyond my pay grade! Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted June 25, 2013 Author Report Share Posted June 25, 2013 So..an update. First...I've got to say that I have a hard time dealing with people who "are afraid to challenge authority", cannot "think outside the box"....and have absolutely no "sechel". (Google it...but basically, common sense) 1. I spoke with the "Practioner Priority" dept...and the supervisor there basically laughed at "taxation of scholarship applied directly to offset tuition" and said I should write a letter to "wherever" and have the client sign it asking for audit reconsideration. 2. I left messages for the auditor. I left messages for her supervisor about "audit reconsideration". 3. The auditor finally called me. She said...and I quote: "I'll be honest. I'm inexperienced at this. Please send me everything (which now includes copies of checks showing he paid the tuition and a letter from the sponsor of the loan...indicating he will repay) again and please don't ask for "reconsideration" or "an appeal". I want to go over the again and this time I'll work with my supervisor. I was unaware that a scholarship isn't taxable and I'll look up everything you're citing. I really just want proof that he paid everything for his education. I'm sorry this became a mess, and please feel free to call me if there are any future problems." So...my dear friends...I was far from over my head. I was correct. We are not going to "tax court". We are not appealing. All is well. (This is what happens when you know that you are right. You go by your gut..and you use your sechel.) Oh...and I hope those of you who get all "A"s in your tax classes learn to use "your sechel" when dealing with people in the real world. A bright person will always challenge "authority" when they know they are correct. Only a dull person would take someone's word for it...because "the teacher said" or "Circular 230 blah blah" BTW...My fee to the client...$0. Quote Link to comment Share on other sites More sharing options...
joanmcq Posted June 25, 2013 Report Share Posted June 25, 2013 Scholarship is one thing, the deduction is another. The deduction is what most of us were talking about as far as being over your head. Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted June 25, 2013 Author Report Share Posted June 25, 2013 Scholarship is one thing, the deduction is another. The deduction is what most of us were talking about as far as being over your head. Apparently I'm a good swimmer. Why would a deduction be over my head? If tuition is deductible "based on certain things"...and if the taxpayer meets the criteria....and has bona fide proof...it's a deduction. If the auditor disagrees....you go up a notch. You don't need to be a PhD in taxation to figure that one out...although the PhD in taxation would sure like to charge and pretend "it's rocket science". IMHO...experience is the best teacher. Nothing gets me going like "fixing the CPA's (from the prior year) mistakes"....and charging much less for it. Quote Link to comment Share on other sites More sharing options...
Richcpaman Posted June 25, 2013 Report Share Posted June 25, 2013 Tabby: This: "BTW...My fee to the client...$0." Why? Sorry, two or three hours of my time? Even posting here for clarification/information? $500. Your not out of the woods yet. Rich Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted June 25, 2013 Author Report Share Posted June 25, 2013 Tabby: This: "BTW...My fee to the client...$0." Why? Sorry, two or three hours of my time? Even posting here for clarification/information? $500. Your not out of the woods yet. Rich My fee is $0....because I feel that if I prepare a return...I should stand behind it. If I can't stand behind something I do...them I would consider myself incompetent. He paid for tax preparation.....he gets follow-up. (He is actually sending me something...probably a fruit basket.) Why am I not out of the woods? Why am I even in the woods? Quote Link to comment Share on other sites More sharing options...
Guest Taxed Posted June 25, 2013 Report Share Posted June 25, 2013 >>> The auditor finally called me. She said...and I quote: "I'll be honest. I'm inexperienced at this. Please send me everything (which now includes copies of checks showing he paid the tuition and a letter from the sponsor of the loan...indicating he will repay) again and please don't ask for "reconsideration" or "an appeal". <<< That got to be an original. In all my years I have never had an auditor say those words even though they gave my client a no change letter! Too bad it was not in writing! Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted June 25, 2013 Author Report Share Posted June 25, 2013 >>> The auditor finally called me. She said...and I quote: "I'll be honest. I'm inexperienced at this. Please send me everything (which now includes copies of checks showing he paid the tuition and a letter from the sponsor of the loan...indicating he will repay) again and please don't ask for "reconsideration" or "an appeal". <<< That got to be an original. In all my years I have never had an auditor say those words even though they gave my client a no change letter! Too bad it was not in writing! Neither did I....but it's absolutely what she said. She was very apologetic and humble. I don't think she wants this to go to "reconsideration" or "appeals" because it would show her "shortcomings". If I knew it was her before I picked up the phone, I would have let the machine pick up...and tape the conversation (OK...give me the lecture about that being illegal.). Quote Link to comment Share on other sites More sharing options...
jainen Posted June 25, 2013 Report Share Posted June 25, 2013 >>Please send me everything<< Lovely words. I HAVE heard them before, and in my opinion the appropriate answer is, "Thank you. I've got everything ready for as soon as the 90-day letter is rescinded." 1 Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted June 25, 2013 Author Report Share Posted June 25, 2013 >>Please send me everything<< Lovely words. I HAVE heard them before, and in my opinion the appropriate answer is, "Thank you. I've got everything ready for as soon as the 90-day letter is rescinded." Yeah...sure...if you want to drag something out. I'd rather go to the beach! Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted June 25, 2013 Report Share Posted June 25, 2013 Yeah...sure...if you want to drag something out. I'd rather go to the beach! I am speechless at the lack of professionalism and client service in that answer. 2 Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted June 25, 2013 Author Report Share Posted June 25, 2013 I am speechless at the lack of professionalism and client service in that answer. Jack from Ohio...give it a rest. I'm happy. The client is happy. The auditor is happy. Are you unhappy because the client "didn't need to get someone with proper authority to represent him"? Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted June 25, 2013 Report Share Posted June 25, 2013 Jack from Ohio...give it a rest. I'm happy. The client is happy. The auditor is happy. Are you unhappy because the client "didn't need to get someone with proper authority to represent him"? No. The flippant attitude about situations. Quote Link to comment Share on other sites More sharing options...
jainen Posted June 26, 2013 Report Share Posted June 26, 2013 >>I am speechless at the lack of professionalism<< Relax, Jack. MsTabbyKats never claimed to be a tax professional. In fact, he has mocked and denigrated our profession before. But this time he out-did himself; we dour numberlings have never faced such a troll. Five pages--isn't that a record, Eric? Dancing away from our objections, a hint of racism to get us mad, then a couple of days off to cool us down, he never gave a straight answer 'bout nothin'. Just a weird story, playing so close to our reality we half believed it. Masterful! 3 Quote Link to comment Share on other sites More sharing options...
Cathy Posted June 26, 2013 Report Share Posted June 26, 2013 MsKats, Congratulations! If you see my post to you on the fourth page, I was in complete agreement with you from the beginning! You probably didn't have time to notice as rather than getting some tips or "have you ever seen this before", some fellow posters felt it was their responsibility to tell you how wrong you were. I've said this before and I'll say it again, years ago the Dean and Professor of Tax Law at LSU told me to Never, Ever give up on a position I would take concerning a particular tax law unless and until someone could prove me wrong! I was not a student of his. I had called him at the request of an elderly client to get the Professor's take on my position I took in light of a tax issue this client was faced with. After discussing at length why I felt my position was correct and his (the Professor's) was wrong, the Professor told me to give him some time and he would do some research and get back with me. When the Professor called me back, he began our conversation with the "NEVER, EVER give up, etc....". I was already a bit hardheaded and set in my ways one might say, however, I now saw my "hard headedness" as an asset rather than a liability! Inasfar as representing your client before the IRS without the presence of the client (a fact that is often overlooked), you have every right to as you prepared the return and the return is under examination. The POA that is sent in to the main POA office needs to have those 2 facts documented with the POA application even though that information one would think should be available to that IRS division already. Had you not prepared the original return, a letter in answer to the CP2000 Notice you drafted and had the clients sign usually takes care of the issue if the fault lies with IRS receiving incorrect information, etc... Personally, I think the term "EA" is not a good choice for the term used for the designation of Enrolled Agents. I don't think I would trust one to handle a tax return or questioned matter for me as I would feel that person would be working for the best interests of IRS rather than for my best interest. That is still the reason I have resisted getting that designation....nothing against them personally because I know what an EA is, however, I just feel it confuses the public. Even I see a few of them ACT like they are working for IRS...not all, by any means. At this point, it's just something I would rather not be involved with at the present time. I have gone with clients to audits and each audit I have attended has resulted in a no change audit. Yes, I know the reason I was able to go to the audit is because the client was also in attendance. I don't take on clients unless they do things by the book as I have too many good clients to represent. So I don't take even one or two who want to make their own rules as I don't want my honest clients to be in jeopardy with one or two "bad clients". I feel it is an education for them to attend an audit and they leave knowing they have nothing else to fear from the "iRS MONSTER". The first 10 to 15 minutes usually are spent by the auditor and me discussing (and laughing) how it is so easy to spot a taxpayer who is attending his/her first audit as they usually are white as sheets. All of my clients so far have left any office audit with a whole new outlook on what in life they have to fear....and one thing is no longer the IRS! I won't even go into the appeals where the appeals auditor, even knowing I wasn't an EA, etc... told me he wanted to work with me as he could tell by the letter I prepared for the clients that he could see I was very versed in the particular tax issue in question. The appeals officer ruled in favor of my clients which also set a prescdence for some 600 other employees who worked for the same employer. It would take too long to give the details and I'm sure I might ruffle a feather or two because I don't have the "EA" designation. In closing, from one lowly preparer to another, WAY TO GO!!!!!!! Quote Link to comment Share on other sites More sharing options...
Richcpaman Posted June 26, 2013 Report Share Posted June 26, 2013 My fee is $0....because I feel that if I prepare a return...I should stand behind it. If I can't stand behind something I do...them I would consider myself incompetent. He paid for tax preparation.....he gets follow-up. (He is actually sending me something...probably a fruit basket.) Why am I not out of the woods? Why am I even in the woods? I stand behind my returns as well. But when the IRS asserts something that is wrong, or even right, in some cases, I get paid to deal with it. I might charge alot, or I might charge very little. But I am going to get paid. A taxpayer responds to a CP2000 letter for a return I prepared and gets it all screwed up. Who has to untangle it? Should I get paid then? Certainly. Your billing practices are your billing practices. I prefer to make money, so I bill folks for what I do, and for the knowledge that I possess. Since I *know* how to respond to a CP2000, they need to pay me for that. Out of the woods? No, you are not. A RO is asking you to resubmit all the paperwork to her, so that she can review and then resubmit it to the proper IRS channels. Sounds like your client is out of the woods with that. But it ain't over till you get the letter stating that. And her asking you not to send it to "Appeals" or for "reconsideration" may have nothing to do with something being wrong with the original process, it just may mean that she doesn't want the waters muddied until after she finishs what she has to do. JMVHO Rich 2 Quote Link to comment Share on other sites More sharing options...
Guest Taxed Posted June 26, 2013 Report Share Posted June 26, 2013 We all have our own billing practices based on the markets we serve. I will do the first CP2000 response without a fee as long as my client will cooperate in a timely manner and get me the necessary information. Most of the time it is straight forward and does not require much research. If MsTabbykats wins this one and she does a lot of 1040NR returns, I think she could use this opportunity to market herself in that market. People talk and word of mouth is the best source of referral. It is always good to have a niche market expertise. I do agree that until you get the no change letter you are not out of the woods! Quote Link to comment Share on other sites More sharing options...
JohnH Posted June 26, 2013 Report Share Posted June 26, 2013 Rich: Now there's a novel concept. Are you saying you are in business to earn a profit? Maybe you think that taking the risks of running your own business warrants more than simply earning wages? Wonder how prices would compare among tax preparers if more people adopted your radical ideas. H-m-m-m... 1 Quote Link to comment Share on other sites More sharing options...
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