Received subpoena today

[NECPA in NEBRASKA]

I'm still waiting for a call from my insurance company, so I'm throwing this out there, because I am totally stressed about this. The subpoena came from an attorney for an employee of a corporation that I fired two years ago for non payment. The subpoena requests tax returns for the corporation, the owner's personal returns and partnership returns for a partnership that the husband and wife owned. It just says tax returns, so I don't know if it includes payroll tax returns for the corporation. I have no idea what the lawsuit is about, probably because they shut the doors on the corporation well after I fired them. I lost way too much money in the first place, because they had been good friends, just slow pay that turned to no pay. I just don't see why I should have to provide an employee with tax returns that weren't paid for in the first place. I wish that CNA would call me back and let me know if this is even legal. Does anyone know if someone will have to reimburse me for all of the copies and do I have to have the pwners' permission to divulge this information. If anyone has any thoughts, please let me know. Thank you.

Bonnie

[taxxcpa]

I'm still waiting for a call from my insurance company, so I'm throwing this out there, because I am totally stressed about this. The subpoena came from an attorney for an employee of a corporation that I fired two years ago for non payment. The subpoena requests tax returns for the corporation, the owner's personal returns and partnership returns for a partnership that the husband and wife owned. It just says tax returns, so I don't know if it includes payroll tax returns for the corporation. I have no idea what the lawsuit is about, probably because they shut the doors on the corporation well after I fired them. I lost way too much money in the first place, because they had been good friends, just slow pay that turned to no pay. I just don't see why I should have to provide an employee with tax returns that weren't paid for in the first place. I wish that CNA would call me back and let me know if this is even legal. Does anyone know if someone will have to reimburse me for all of the copies and do I have to have the pwners' permission to divulge this information. If anyone has any thoughts, please let me know. Thank you.

Bonnie

For a CPA the rule is that the accountant's workpapers are his own but the materials furnished by the client must be returned whether you were paid or not. However, if you get a subpoena, you may be compelled to furnish any records you prepared.

You would need to consult a lawyer to make sure.

[NECPA in NEBRASKA]

I gave back all of the client's records that I had when I fired them. I also gave the clients numerous copies of the tax returns even though they weren't paid for. This is being subpoenaed by an attorney for one of their employees who is suing the owners.

[jainen]

>>someone will have to reimburse me for all of the copies<<

You have the right to request a reasonable copy fee, perhaps 25 or 40 cents per page. If the records are not readily available to you then you can ask for reasonable research fees as well.

I would start by calling your former clients (I assume they are still your friends). Ask them if they object to you sending the documents. They certainly might, especially if the litigants are simply fishing for new material. But don't you fight it--either comply with the court order or let the attorneys argue about it.

On the other hand, don't submit anything not specifically ordered. For example, if they are requesting tax returns that would not include depreciation schedules or other workpapers not actually filed. The fact that you were not paid is probably irrelevant, unfortunately, but if a return was never picked up you wouldn't have to send it now. Furthermore, you could mark them all "draft" since you do not have any direct knowledge of what was actually filed. If the subpoena gets broadened to include work papers, follow your insurance company's advice.

If the subpoena is unclear to you, send a note to the judge explaining what you understand.

[NECPA in NEBRASKA]

Thank you, Jainen. I feel a bit better that I should be reimbursed for copy fees. I would want to send a letter to my former clients to sign for release of the returns, because this will probably get nasty. This old employee ran one of their businesses for them and I don't know what is going on. I've been out of the loop for a couple of years. This subpoena is not from a judge, it is from the employee's attorney as part of discovery. I'm not sure why they are not asking my former client's for these tax returns, since they received several copies. If my insurance company tells me that I need to comply, then I will ask the attorney which kinds of tax returns she was requesting.

Thanks again.

Bonnie

[jainen]

>>This subpoena is not from a judge<<

Well, whatever the format, it carries the power of the bench. You must comply without a signed release from your client, unless the opposing attorney challenges it. (Or YOU can challenge it, but that is probably too complicated and expensive unless you are worried about some liability exposure for the work you have performed.)

[NECPA in NEBRASKA]

I've only had my work subpoenaed once in a divorce case, and he was still a client so I wasn't sure that I could release information with all of the new privacy rules. No, I definitely don't want to pay for an attorney unless I need to. Do I worry about my work? Not normally, but everybody seems to think that we have deep pockets. I just expected that the owner's would have to produce their own tax returns for discovery. I'm assuming that they have an attorney to fight whatever this case is about.

[ILLMAS]

I'm still waiting for a call from my insurance company, so I'm throwing this out there, because I am totally stressed about this. The subpoena came from an attorney for an employee of a corporation that I fired two years ago for non payment. The subpoena requests tax returns for the corporation, the owner's personal returns and partnership returns for a partnership that the husband and wife owned. It just says tax returns, so I don't know if it includes payroll tax returns for the corporation. I have no idea what the lawsuit is about, probably because they shut the doors on the corporation well after I fired them. I lost way too much money in the first place, because they had been good friends, just slow pay that turned to no pay. I just don't see why I should have to provide an employee with tax returns that weren't paid for in the first place. I wish that CNA would call me back and let me know if this is even legal. Does anyone know if someone will have to reimburse me for all of the copies and do I have to have the pwners' permission to divulge this information. If anyone has any thoughts, please let me know. Thank you.

Bonnie

This the best time for you to get paid for your work, I would notify the attorney that you will not release any information until your former client pays off his/her outstanding balance No EXCEPTIONS and that you would gladly comply once you have been paid in FULL. I wouldn't sweat it if the subpoena is coming from the attorney. Unfortunetly, there is always non-paying clients, I used to work for a CPA firm and clients just didn't want to pay for the services, so the services stopped until they liquidated their balance, then there were others who would go to another accountant, some accountants acted like lawyers demanding information because they are now working with them, but we would informed them that no information was going to be released (client original documents only, no documents prepared by firm, computer files ect...) until the balance was paid off. Sometimes they would ask, well how much do they owe but we wouldn't tell them unless it was client calling for the information, most of the time they never called back.

[michaelmars]

IF ITS JUST the returns they want they can get them just as easily from the irs. You can suggest this to the attorney too.

[jainen]

>>IF ITS JUST the returns they want they can get them just as easily from the irs<<

I'm not sure that's true. The IRS is probably not subject to the subpoena power of a local court. Note that this is NOT the client requesting copies, but somebody who is suing the client and has reason to consider necpa a material witness or in possession of evidence. We have no clue about the case--for all we know it might involve the client filing a tax return other than what the preparer signed.

There are no new privacy rules for this, necpa. Tax returns are intended to be distributed to a third party (the IRS), so not even an attorney can claim such documents are privileged work product. If you don't make them available you may be jailed for contempt of court. So call your client and find out what the story is and whether he will formally challenge the subpoena. Remind him you can't assist his side until he pays the outstanding bill. Then call the other guy and tell him when it will be convenient for you to have him pick up the forms, with $25 in cash.

[Randall]

>>This subpoena is not from a judge<<

Well, whatever the format, it carries the power of the bench. You must comply without a signed release from your client, unless the opposing attorney challenges it. (Or YOU can challenge it, but that is probably too complicated and expensive unless you are worried about some liability exposure for the work you have performed.)

I'm not familiar with subpoenas, but can an attorney just issue one on his own? Doesn't it have to have some court authority?

[NECPA in NEBRASKA]

CNA just called me and they are retaining an attorney to represent me and make sure that I don't say or do anything that I'm not supposed to. I was surprised, but they said that this is a service that they provide to their insureds. The attorney will call me and the other attorney. I'm doubt that the other attorney knows that I only prepared a few of the returns that they are looking for. I have no idea what happened after I let them go. I do feel better now, that an attorney will deal with them and let me know what to do. Thanks everyone for all of the advice.

Bonnie

[MAMalody]

Don't forget to come back and tell us what happens.

[NECPA in NEBRASKA]

I will as soon as I hear anything.

[Chrisbry]

If it was me and I fired the client for NON PAYMENT, I would also have stated in the letter that since they had not paid for the tax preparation, you no longer were considered the PAID PREPARER.

Then I would have sent the IRS a letter stating that you are no longer considered the PAID PREPARER because of nonpayment of fees. Easily solution when courts ask for copies of return you "prepared" -- send them a copy of the letter you sent to client and IRS.

Those instructions came directly from the IRS at a Practioner Liason meeting I attended in May.

[jainen]

>>Those instructions came directly from the IRS<<

It may have come from an IRS employee but it directly contradicts official IRS policy. Section 10.27 of Circular 230 (at http://www.irs.gov/pub/irs-utl/pcir230.pdf) is quite specific that if you have already given the client his tax return, the fact that he didn't pay is irrelevant. In any case, I wouldn't suggest you ignore a subpoena or reply in such a contemptuous way without advice from an attorney.

[NECPA in NEBRASKA]

My insurance company apparently has the same idea,about my not being a paid preparer. About a year after I fired them, the idiots wanted more copies of their returns. I called CNA and they also suggested that I tell them that I wasn't a paid preparer. I didn't do it, because I had read conflicting ideas on that. I only spoke to my attorney for a few minutes last week and I haven't received a new subpoena yet. She would have to change a bunch of them if they were all wrong.

[jainen]

>>She would have to change a bunch of them if they were all wrong<<

Subpoenas often have technical flaws; no doubt many are intentional. What exactly is your goal in all this? Surely you aren't committed to protecting your deadbeat former clients. Why would you not comply with a lawful order and help these people stop the jerk from hurting anyone else?

[Gail in Virginia]

>>She would have to change a bunch of them if they were all wrong<<

Subpoenas often have technical flaws; no doubt many are intentional. What exactly is your goal in all this? Surely you aren't committed to protecting your deadbeat former clients. Why would you not comply with a lawful order and help these people stop the jerk from hurting anyone else?

Sometimes these awful clients are the ones that will do the most harm. If the returns were never filed, they may not be accurate (that might be why they never picked them up.) These deadbeats might also go around town spreading the word that you will release information about your clients to anyone, whether you are compelled to or not.

While I agree that you should obey a lawful subpoena, I don't know enough about the facts and circumstances to have an opinion on this, and would therefore have to go along with whatever the lawyer representing the practitioner recommends; surely that attorney is protecting both the practitioner and his/her insurance company.

[NECPA in NEBRASKA]

I am doing what my attorney has told me to do. When the attorney corrects the subpoena, we will then comply with it. I have no intention of protecting my former clients. I don't think that they can be protected if this is a lawsuit regarding nonpayment of wages. I don't know what the lawsuit is about. I just want to stay out of it as much as possible.