jasdlm Posted July 21, 2009 Report Share Posted July 21, 2009 The facts of my 'second' first audit are as follows: Client has been involved in a very long divorce which was final in late 2007. For many reasons (arguments over splitting deductions, etc.) he filed returns for 2003-2007 in spring of 2008. He received a letter that is more along the lines of what I would expect: "Dear >>>: Your federal return for the period shown above has been selected for examination." The are examining the 2003 return, but they are asking for copies of 2002, 2004, 2005, 2006, 2007, & 2008 returns. They are also asking for all supporting documents for 2003. I did not prepare the 2002 or 2003 returns. I did prepare 2004-2008. He owes substantial tax (has several LLCs that he manages or is an owner in. Hasn't paid any tax in the last 5 years.) He paid nothing with the filing of the returns. He is waiting for his huge house, which was about the only marital asset, to sell so that he can pay the taxes in full. I just received the 2002 return from the preparer this morning with a note that they cannot locate the 2003 return or any of the backup information. My client has nothing. I have a copy of what was actually filed, but that's it. I believe that the client took the return that was prepared in 2004 (for 2003) and hung on to it for several years. He requested a new copy, received it via email in early 2008, and filed that copy. His 2003 return has a capital gain from the sale of a business property (approx. $5,000), a large early retirement distribution ($250,000), and a rental loss ($11,000). His schedule A has a charitable prior year credit forward of $12,000 and $49,000 in mortgage interest. The return is missing information. I know this only because I have copies of the data that the IRS has. There is a k1 that is not on the return and a small amount of 1099 income (about $2,500). I'm still working through it. I might need to punt. Quote Link to comment Share on other sites More sharing options...
jainen Posted July 21, 2009 Report Share Posted July 21, 2009 >>I might need to punt. << Not necessarily. You can probably handle it, and make a ton of money. However, you will go nuts if the client is too squirrly to participate. In fact, you would have to already be nuts to try, because you are not an Enrolled Agent so you can only assist him for 2003, not represent him under a power of attorney. I would guess that your main plan would be to get a no-change in trade for setting up a formal payment schedule including a lien on his house. I would also guess you'd better have a back-up Plan B. He has a credible story. It doesn't excuse non-filing, but you can soft sell the angle of turning his life around and finally getting everything straightened out. (By the way, don't turn in those other years unless you have to fall back to Plan C or D.) Quote Link to comment Share on other sites More sharing options...
jasdlm Posted July 21, 2009 Author Report Share Posted July 21, 2009 Can I represent him in my capacity as an Attorney? Quote Link to comment Share on other sites More sharing options...
jainen Posted July 21, 2009 Report Share Posted July 21, 2009 >>my capacity as an Attorney?<< Forgive me, Master, I am not worthy! Quote Link to comment Share on other sites More sharing options...
jasdlm Posted July 21, 2009 Author Report Share Posted July 21, 2009 I wish . . . I'd trade my brain for yours any day!!! Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted July 21, 2009 Report Share Posted July 21, 2009 Personally, I would not have given these audits away. (It sounds like you already have). Number one is more troublesome, but if you can get documents, it should be something you can accomplish. Number two is easier, as you prepared the returns except the oldest ones. You seem to be overly concerned about the final results. While you can screw this up, I don't think you will. Your concern for the clients will lead you to do the best you can. Any anything less than the proposed amounts on the letter is a win for your client. #2 specifically, if all the returs that you prepared are correct, it shows a pattern of compliance, even if late. Since the client seems to agree with the taxes and is willing to pay when the home sells, you don't have a lot to negotiate over on those years except for the payment. Perhaps you can offer the IRS a lien on the property to be paid from the sale (that will probalby not sit well with the ex, but hey, they aren't sleeping together any more anyway). And from what I am reading in your post, most of what you know about 2003 sounds legitimate on the surface. As an attorney, you can represent before the IRS. Good luck. Tom Lodi, CA Quote Link to comment Share on other sites More sharing options...
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