IRA

[DEO]

New client came with her tax papers. She indicated to me that she contributed $2400.00 to her IRA. I asked whether it is a traditional or Roth. She said Traditional.

later that evening, she called saying it was a Roth. I then told her that no deduction. She was OK.

Now comes the next part, was that since 2012, her previous preprarer has been deducting the Roth IRA on her tax returns.

What is the best course relating to her previous year taxes, amend the returns paying back the taxes along with penalty and interest or ????

Thanks for your answers.

De4o

[BLACK BART]

I just hate these questions of conscience (there's usually so much money  at stake).

Although these prior years' bodies almost certainly will never arise unless you unearth them (IRS doesn't seem to be minding the store about such nowadays), I think we all know what should be done. However, as a practical matter (and assuming you don't simply forget the whole thing and go forward), I'd advise collecting your amendment fees in advance. Sometimes "new" clients, upon being immediately clubbed with a blunt instrument, figure you're not so hot after all and become "former" clients PDQ.

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"These are the times that try men's (strike that) person's souls." -----  THOMAS PAINE  

[Terry D EA]

I think you have an ethical responsibility to inform the client they are required to file an accurate return. Yes, the issue of paying additional funds will be required but let the client be the one to decide to stick their head in the sand with fingers crossed the IRS doesn't question anything. I would not be concerned about loosing a client who I advised properly or pointed out an error. I would think that client would ultimately appreciate my knowledge and concern. It is good to tell them if they ignore and don't amend, and the IRS does question, then there will be additional penalties and interest that could be more than your fees and the amount the have to pay if they amend sooner.