Margaret CPA in OH Posted May 5, 2009 Report Share Posted May 5, 2009 A client just called. They received a refund check made out to them and ME! Surprise, the bank wouldn't cash it! They live on the other side of town but I didn't think it correct to sign it, too, so they could cash it. I called Tax Practitioner Hotline and was told that it shouldn't have happened. You think? They are calling Taxpayer Advocate to get return address, etc. Maybe they will get a manual replacement. Sigh... Quote Link to comment Share on other sites More sharing options...
TAXBILLY Posted May 5, 2009 Report Share Posted May 5, 2009 If there is a local IRS office they can take it there. that usually speeds up the process. taxbilly Quote Link to comment Share on other sites More sharing options...
AnnieR Posted May 5, 2009 Report Share Posted May 5, 2009 Here's another one...client called this morning, he had contacted the IRS about making payments of his amount due...he's a newpaper delivery person (vehicle delivery), receives SS plus $5000 of SE, he owes $373, doesn't have the money to pay right now. The agent he talked to asked him if he had reported all the tips he received, guy tells him no, he didn't report the $350 he received in Dec. (He's honest, if nothing else). The agent told him to amend his return, report the $350 on F 4137, put it on Line 7 of the return as wages and refigure his tax. HE'S SELF EMPLOYED!!!! Any ideas on how to handle this??? This is so stupid! AnnieR Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted May 5, 2009 Report Share Posted May 5, 2009 Well, clearly, the correct thing to do is to file a 1040X, and a corrected Sch C, including the tips as income. Quote Link to comment Share on other sites More sharing options...
jainen Posted May 5, 2009 Report Share Posted May 5, 2009 >>clearly, the correct thing to do is to file a 1040X<< I'm not sure that's clear. According to Circular 230, the practitioner "must advise the client promptly of the fact of such noncompliance, error, or omission. The practitioner must advise the client of the consequences as provided under the Code and regulations of such noncompliance, error, or omission." Is there any requirement for us to do anything besides give this advice? And is there any legal requirement for the taxpayer to actually file an amended return? Quote Link to comment Share on other sites More sharing options...
taxit Posted May 5, 2009 Report Share Posted May 5, 2009 A client called yesterday, he received his refund check but it was made out to his wife only. Problem is he filed married filing separate for 2008 and the previous 3 years before that. He has not lived with his wife for over four years. He had already mailed it back to IRS and called them before he called me. They told him they could reissue the check but it would have to be in both names. I guess we will wait to see what he gets back from them. Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted May 5, 2009 Report Share Posted May 5, 2009 Well, of course it is up to the client if he wants to file it, but I am presuming that since he told Annie about it, he wants to 'do the right thing'. And yes, the client does have a "legal requirement to actually file an amended return" once he becomes aware that he filed a return that omitted taxable income. Now, if it is a small enough amount to make less than a $50 difference, as I'm guessing this does, I'd agree that not filing it would not bother me. I know that in an audit, such a small change would not be bothered with, and a no-change report would be issued, if that was the only change. But here, the client came to her about wanting to fix his error. So, given that, the 1040X would be the answer. Quote Link to comment Share on other sites More sharing options...
jainen Posted May 5, 2009 Report Share Posted May 5, 2009 >>He had already mailed it back to IRS<< Please don't take it personally, but my reaction to this anecdote is skepticism. It is such a wildly unlikely scenario that I must put it with the very large collection of Internet stories about something somebody heard from somebody else that doesn't seem to have any actual documentation whatsoever. Quote Link to comment Share on other sites More sharing options...
jainen Posted May 5, 2009 Report Share Posted May 5, 2009 >>the client does have a "legal requirement to actually file an amended return" once he becomes aware that he filed a return that omitted taxable income<< In legal terms, an amended return is an administrative convenience that the IRS may accept, reject, or ignore. I'm not aware of any code or regulation that requires an amended return to be filed. Quote Link to comment Share on other sites More sharing options...
AnnieR Posted May 5, 2009 Report Share Posted May 5, 2009 My client already told the agent he had included his tips for the other months, I can't imagine they are very big, he just adds it into his income for sch C, but he just forgot for Dec. I am planning to do an amended, the client called for me to do that and told me what they told him to do. Right away I knew it was wrong---duh---why would he file a 4137 with a Sch C? and put it on line 7 as wages? Pardon me, but client is not knowledgeable enough to know taxing procedure. And they told HIM to do it, not his preparer. He may not be terribly smart, but he has all of his mileage down to the last .10 of a mile, everything is accounted for and yes, he does want to do the right thing. AnnieR Quote Link to comment Share on other sites More sharing options...
jainen Posted May 6, 2009 Report Share Posted May 6, 2009 >>he has all of his mileage down to the last .10 of a mile<< Sure, he has his DEDUCTIONS down pat. He doesn't roll 500 feet without writing it down. But INCOME, not so good. Even though he apparently made as much money in tips as his basic fees for the most recent month, he conveniently forgot it. Not exactly what I call "honest, if nothing else." Still, it's a done deal and the IRS examiners don't seem very interested in it so far. Now you recommend he "do the right thing" because of a nonsensical discussion he had with a collections officer who doesn't know beans about what income is what. I know you mean well, but based on what you have explained I wouldn't say the situation calls for amending anything yet. First I would want to explore how his detailed record-keeping could have got so far out of whack, because maybe it didn't. Maybe the mistake was made when he talked to the IRS instead of when he talked to you. So I would want to understand more about this odd IRS contact in which the amount of balance due became unreported income. You see, I do the best I can in preparing the return, but I take a different approach in responding to the IRS. When the IRS has a problem with something on a return, there is a due process they follow concerning the matter. If they don't follow that process, it is perfectly reasonable to assume they don't have a problem. So why make up a problem? There will be plenty of time to amend the return later if necessary. The tax code does not require your client to correct an honest mistake. Quote Link to comment Share on other sites More sharing options...
David1980 Posted May 6, 2009 Report Share Posted May 6, 2009 When you call the IRS for free tax advice, you sometimes get what you pay for. Preparer it correctly, ignore the bogus info. Quote Link to comment Share on other sites More sharing options...
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