Terry D EA Posted March 5, 2016 Report Share Posted March 5, 2016 A couple has been coming to me for tax preparation for several years. The husband was first, then he got married and obviously I have been preparing the joint return. I'm sure you see where this story is going. Now, they are separated. The wife has contacted me asking for an appointment to do her taxes. The husband has also spoken with me and awaiting a K-1 to get his done. I think this topic has been tossed around this board a few times but because they are separated is there some type of conflict of interest if I prepare the taxes for both of them. I realize I cannot discuss any details of the return(s) with either one of them. To complicate things a bit, both of them have been very good friends. Where do I draw the line if one has to be drawn? Quote Link to comment Share on other sites More sharing options...
jklcpa Posted March 5, 2016 Report Share Posted March 5, 2016 I think conflict of interest would depend on their particular situations. Are these returns where decisions need to be made on how to split itemized deductions and who claims the kids, or are these more basic than that? 1 Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted March 5, 2016 Author Report Share Posted March 5, 2016 Judy I don't have the answers to some of those questions and they are good ones that I am wondering about as well. Here is what I do know, there are children involved. One is under 17 and the other is 17. The wife (former wife) has a child from a previous marriage as well. He has rental property that was his prior to the marriage. There very well may need to be decisions made regarding the itemized deductions as they have itemized for the last several years. All of this is why I am concerned. Other questions, can they get along? How long have they been separated? Do they have a legal separation agreement? I'm sure there are more. The wife is a very nice gal whom I feel would be fair and cooperative. Problem is, he is too. From what I have seen on FB he maybe the jerk involved not that it matters when it comes to preparing the return. I have seen some of the nicest folks become very bitter in these situations even to the point that fairness and common sense is off the table. So, I guess we'll see. If I approach this from the angle that I would like to help both of them and can only do so by them understanding that I cannot discuss the other's return and if they can't or don't agree with me then let them choose who stays and who goes somewhere else. I hate this as I said they have been very good friends of ours for a number of years. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted March 5, 2016 Report Share Posted March 5, 2016 If you try to work with both, make sure you have a signed statement that each understands that you can have a conflict of interest. Your E&O insurance company may have a template. Or, they may tell you not to do it. With children, you know you will have a conflict. How do you tell one that his taxes will be lower if he claims the children and then turn around and say the same thing to her? And, that's just an obvious one. Keep your original client or the one who asks first or neither one. I know preparers who give recommendations to both so each one can start fresh with a preparer who doesn't have inside knowledge of the other ex-spouse. Decide what you're going to do before you talk to either of them, and then stick to your decision. 2 Quote Link to comment Share on other sites More sharing options...
michaelmars Posted March 5, 2016 Report Share Posted March 5, 2016 I have done this on many occasions and if the split is amicable then they might even want to come in together to discuss different scenarios. If it s antagonistic, you can do both but as Lion said, get permission from the client. 4 Quote Link to comment Share on other sites More sharing options...
JMovichEA Posted March 5, 2016 Report Share Posted March 5, 2016 I'm in a situation where two very close friends of mine are divorcing. I thought one of them was going elsewhere, but he wouldn't hear of it. The attorneys for both are also aware of this and I have met with all of them, (my clients and their attorneys) to discuss some of the issues regarding an S-Corp they have. 1 Quote Link to comment Share on other sites More sharing options...
Catherine Posted March 5, 2016 Report Share Posted March 5, 2016 The first thing to find out is separation agreement or not. If not, then they either have to file MFJ or MFS (or MFS and HOH). I have had divorcing clients willing to work together on a joint return once they are told that filing separately is likely to cost them thousands of dollars extra tax. Always the last thing either needs with lawyer bills to pay! If they really are legally separated, you will almost invariably have to pick (or be picked by) one or the other. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted March 5, 2016 Report Share Posted March 5, 2016 Clients may tell you they are legally separated, because their lawyer told them to live separately for legal reasons; but some states (CT) do not or rarely grant legal separations. If your clients do not have a separation agreement on paper that they must abide by, then everything is still in negotiation and things can turn ugly quickly. They may sit with you and agree to each claim one child, for instance, then go tell their lawyers, and end up calling you and accusing you of siding with the other spouse and not having their best interests in mind. That last part could be true. How can you have the best interests of A when some of his/her tax items impact B who is also your client? Make sure you've talked with your E&O insurance carrier and have all applicable conflict of interest documents signed. 1 Quote Link to comment Share on other sites More sharing options...
easytax Posted March 5, 2016 Report Share Posted March 5, 2016 Remember circular 230 /// This was just covered in the March 1 webinar from the IRS OPR (given live again March 8 at www.CPAacademy.com). Bottom line is a written disclosure agreement informing them both of possible conflict. They may be friends but friends do sue friends at times. You MUST chose if they will not SIGN off on conflicts. Protect yourself. 6 Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted March 6, 2016 Report Share Posted March 6, 2016 Protect yourself for the future... Choose one and fire the other. Life and attitudes change. Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted March 6, 2016 Author Report Share Posted March 6, 2016 Thank you for all of the sound advice everyone has given. I have taken the time to research circular 230 as well as the AICPA regarding this subject. There are differences between the AICPA policies and circular 230. However, both suggest not moving forward until there is a signed conflict of interest disclosure in place. I collected several sample disclosure documents and will follow the guidelines set forth in circular 230. If either of them chooses not to agree to or sign the conflict of interest disclosure (waiver) one of them or both will have to seek help somewhere else. Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted March 6, 2016 Report Share Posted March 6, 2016 10 minutes ago, Terry D said: "...one of them or both will have to seek help somewhere else." This is the path you should take regardless of their willingness to sign the agreement you speak of. When the divorce proceedings get underway, even your signed conflict disclosures will not stop the headaches and trouble you will experience. Been there, done that. Got the t-shirt ripped off my back. Attitudes change. Quote Link to comment Share on other sites More sharing options...
BHoffman Posted March 7, 2016 Report Share Posted March 7, 2016 I fire clients who are obviously heading for divorce, and partnerships that are going South. Those conflict of interest things are horrid. You can get dragged into court. 1 Quote Link to comment Share on other sites More sharing options...
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