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Divorcing clients


jshtax
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I like to keep both unless somebody is acting like an idiot.  Sometimes you can't work with both, but I really think it can be helpful to everybody if people are cooperative and act like they have some sense.  Some here will say it's always impossible, and I would agree with that, but then we'd both be wrong.

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I prefer to not do both, but it always comes down to facts and circumstances.  If there are no kids involved or any other "sticky" situations, I'll do it.  It can be a fine line to walk when you can't even tell one person that their ex is or is not a client.  I always tell them that they have to discuss that with the other.  I like to get something in writing from each of them spelling out who gets what - just to know if there are potential conflicts of interest.  I won't deal with the conflicts of interest!

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Like so many other things in this business, it's a matter of making distinctions.  There is no cookie cutter rule to apply in every situation.  It's clear that divorces take many twists & turns, and what starts out amicably winds up with everybody at one another's throats.  Once it goes there, the tax preparer is in the middle with no easy way out.  

 

If I were inclined to work with both, I'd probably also tell them that if they wind up putting me in the middle at some point in the future, I'm PROBABLY going to resign from preparing either of their returns. That leave me free to do what I said at the outset, or anything else I choose to do.

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Have one now.  Last year wife told me she thought they might divorce by year end.  She asked if I'd continue with her returns. She's the one I've always dealt with.  This season her husband emailed me to say they'll be filing MFS.  I called her to ask when she might be sending me her tax information, without telling her that her husband had emailed me.  She said THEY were getting it together, things are getting better, they're in counseling, thinks it's going to work out, etc.  (By the way, hubby has a new email address this year.)  I have no desire to get in the middle:  two states, he's self-employed, kids, house, mortgage, both in sales and usually high income except when he's between jobs, existing IRS installment agreement from before they came to me.  She's always anxious to file on time.  He hasn't gotten his information together until very late each year, but he's been pushing me for when he can bring it in this year.  I've been stalling him.  Even if I should lose her, I don't think I want to keep him as a client.  He's not the one I've worked with, and it's his old business from his father that got them into tax trouble years ago.  I don't know what to do or say.  Your thoughts welcomed.

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Off the top of my head, I think I'd email him immediately and say I'm sorry but I can't prepare his return. No explanation, no excuses. I'd encourage him to find someone else as soon as possible in order to avoid his having to file an extension or settling for a rush job from a new preparer. He deserves an answer if he's pushing for an appointment and is really ready, so if you aren't willing to prepare the return he has a right to know. If he gives you any push-back, asking for reasons, etc you can then stall as long as you wish because you're busy and you've already done him the courtesy of trelling him where he stands with respect needing to find someone else.

He isn't entitled to an explanation, but if he does ask for one, chances are he will admit to some of his shortcomings as a client and you cant turn those back on him if you are inclined to respond. Plus you can add others he omitted. Or you can just tell him his situation doesn't fit your client profile, etc, etc, etc.

Edited by JohnH
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Clear to me you need to lose him this year.  He seems to be telling her something different than he's telling you, so probably stalling her so he can file first.  I'd tell her you are getting conflicting messages, without any details, so only if they come in TOGETHER and discuss it can you do the return.  

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I had two of my divorcing clients come in today. When they first arrived, they both were so tense that I could almost see the daggers shooting out of their eyes when they looked at each other.

The more we talked, I could see both of them became more relaxed with each passing minute. Finally, I told them that I needed to keep them both in my office for as long as I could and maybe they might not go through with the divorce. When they both instantly yelled "NO", I knew it was a lost cause.

As the mom is the parent who the child will live with the majority of the time, and the court order calls for alternating claiming the child, I explained to them both that the mom will need to sign an 8332 for IRS to recognize the dad's ability to claim the child. At this point I also explained that as far as IRS is concerned, the release by her for the father to claim the child is strictly up to her whether she signs the 8332. I also told them both that if she claimed the child when it was his turn, then there was the issue of the dad being able to take her back to court to charge her with "contempt of court" and she should think twice before she would not follow what was agreed on and ultimately ordered by the court.

So for the above reason alone, I'm glad I had both of them for the tax year of 2014. After 2014, if they both come back, they know their returns will be prepared according to IRS rules and regulations. Hopefully, my speech will eliminate one of their "friends" convincing them to disregard claiming their child in alternating years which will eliminate extra work for me....and also less disputes with each other as well.

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Yeah, I'm waiting for her or for both, since she thinks they're filing jointly or comparing to MFS, which I can do only if both agree to give me their info for that purpose.  I guess I'll tell him I will not file his returns separately and not elaborate.  I wasn't going to call her over the weekend since she implied that he has not left, even though I cannot tell her why I'm really calling, that he contacted me re a separate filing only.  I really do not want to prepare both returns, unless they sit with me because we're comparing MFJ vs MFS.  They might reconcile, but not soon.

 

I guess I'll email him that I will not be filing his MFS returns.

 

I will call her with the all too real reason that I'm filling up fast and will be in extension mode soon and she doesn't want extensions (thinks that will nullify their installment agreement) and that I need their complete information sooner rather than later to file on time.  I'd like her to touch base with him and not delay her filings if they are going to be separate, if he's choosing MFS as the only option.  But, I can't tell her that.

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Lion,

Just be alert to the situation where one or both wants to file HOH or MFS...."but we didn't live together since June of last year through December 31st. We're back together now to see if we can make it work" type of situation. It's amazing what they learn at the beauty/barber shop sometimes! Kind of sounds like what the wife was saying!??

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Ah yes, extension drop dead date is looming. For me, it is next Monday. (Actuallly it is this upcoming Friday Mar 7, since I don't plan to work over the weekend)

The client should know that an extension has no effect on an installment agreement. She/He/They can even file an extension showing an estimated amount due but with no payment or with a partial payment. Even that will not afffect the installment agreement. The only time filing a return affects an installment agreement is when a return is filed with a balance due and no payment made.

Edited by JohnH
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Lion:

 

I believe the only thing we can do to protect our shelves in these situations is to be upfront with both parties.  If one of you tell me something, then I am telling the other.  There are no secrets here.  Is that a Circ230 violation?  Maybe.  But the IRS is never gonna sue me, Opposing counsel WILL. 

 

Therefore, I would tell the Wife that Husband is pushing for an appointment.  I would tell Husband that Wife is ready to go.

 

And to REALLY protect myself, I would choose one or the other, and tell the other one to find someone new.

 

Have that going on here right now.  Husband is out of state, and has been for years.  Can't ever seem to file on time.  Last year?  He filed in March.  Guess what?  Never asked his WIFE about that filing, made up numbers for her Schedule C, etc.  As far as the Wife knew there was no filing.  So we filed a MFS return for Wife. 

 

IRS says that HER return doesn't count.....   

 

Her attorney is LOVING this.  Makes Husband look really bad in the local court.

 

Choose, then move on.

 

Rich

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Ah yes, extension drop dead date is looming. For me, it is next Monday. (Actuallly it is this upcoming Friday Mar 7, since I don't plan to work over the weekend)

<snip>

 

My extension date is later but not by much.

 

Does anyone/everyone else have clients that RUSH to get info in by the date -- and have it be incomplete?  Thinking that gets them finished for sure, when my letter clearly states ALL information received by March 15th (or whenever) or no guarantee.  Just your W-2 and nothing else guarantees *nothing*.  

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Yep,  I have a few of those every year.

I take their info, and sometimes I even enter it into the software if I find time.

(Of course I can't do that with the ones who are "getting their stuff together", but I think they believe I can.)

Then when the drop dead date arrives I tell them we need an extension.

Funny how people will try to dictate our operating procedures if we allow them to do so.

 

They will even apologize profusely, but their actions reveal they couldn't care less if we ever have any time with our families.  It's up to us to manage this stuff - the client should have no influence over it.  Personally, I have no interest in martyrdom.

Edited by JohnH
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