Janitor Bob Posted February 27, 2011 Report Share Posted February 27, 2011 Here we go again........Clients TELLS ME that she will be deducting a crazy amount of items such as, but not limited to: New clothes and jewelry...because she has to look nice to have her Mary Kay parties Office in home...including her entire garage and finished basement....because she stores Mary kay stuff in garage and holds Mary Kay parties in basement various business use of home expenses for above....including cost to landscape her yard New Laptop computer...because she sometimes uses it for spreadsheets and to solicit Mary Kay sales on Facebook Her entire monthly car payment (not just standard or actual expenses) because she drives it to clients' homes and many...many more She goes on to tell me that she knows she can deduct these because the woman who gave the Mary Kay recruitment seminar told them they could.....and she knows one mary Kay consultant that has a CPA do her return and lets her claim all of these things.....and If I can't let her claim these items, maybe she'll go to a CPA. The problem is that this particular client is my sister. Quote Link to comment Share on other sites More sharing options...
grandmabee Posted February 27, 2011 Report Share Posted February 27, 2011 and on top of that she is probaly a free return! I do nine family members and only two pay me something then I feel guilty about taking their money because the others do not pay. I guess the only way I would feel good about this if they all paid, but that will never happen. Quote Link to comment Share on other sites More sharing options...
MAMalody Posted February 27, 2011 Report Share Posted February 27, 2011 The Mary Kay website and information they dispense for taxes does not agree with what she was told. I have had this situation come up and the only answer is the old stand-bye: While I am not perfect every year I put in xxx hours of professional continueing professional education looking at issues just like you brought up and it appears either you were told wrong or have misunderstood what you were told. I want you to get all the tax benefits you are entitled to and to feel comfortable with any return I would prepare for you. If you would feel more comfortable going to the CPA you mentioned, I will not feel offended and would encourage you to go where you feel most comfortable. (sometimes I might add: If you would not mind, I would like to review the return that is prepared by your CPA to see what I can learn from it to ensure that I am giving all the tax benefits possible to my clients) Works for me. Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted February 27, 2011 Report Share Posted February 27, 2011 I am willing to share with your sister our firm's experiences in representing Mary Kay consultants at audit for returns prepared by these other "CPA" types that allow all the frivilous deductions. It wasn't pretty!! If those "gung ho" "I am woman hear me roar" types in Mary Kay are not careful, they will bring the wrath of the IRS in the same manner as AMWAY did in the past. Fire her as a client, even if she is your sister. Quote Link to comment Share on other sites More sharing options...
JohnH Posted February 27, 2011 Report Share Posted February 27, 2011 But if you do decide to prepare her return, do remember to deduct the vet bills and food for her "security cat" because it guards her inventory when she's not home. (I'm not making this up - I actually heard that from a potential client one time.) Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted February 27, 2011 Report Share Posted February 27, 2011 But if you do decide to prepare her return, do remember to deduct the vet bills and food for her "security cat" because it guards her inventory when she's not home. (I'm not making this up - I actually heard that from a potential client one time.) Not to mention the sidewalk leading to the front door, the area of the pathway across the living room to the Mary Kay room, the total cost of payments for her car because she has a Mary Kay Sticker on it... Quote Link to comment Share on other sites More sharing options...
joanmcq Posted February 28, 2011 Report Share Posted February 28, 2011 I've worked on or had coworkers work on these type of audits, and it's frightening how many drink the Kool-Aid and believe with the fervor of new coverts. Some continue to believe, thinking we are just not 'on their side', or 'don't know anything'. We actually had one couple rep themselves at tax court, who threw the book at them. The rep had negotiated down the penalties, and all that was added back on. Especially the ones that have decent other income from wages and have deducted themselves down to nothing. 'Remember that $20,000 refund you got? Well you shouldn't have gotten it, and now you have to pay it back. With interest and penalties'. Quote Link to comment Share on other sites More sharing options...
Achmid Posted February 28, 2011 Report Share Posted February 28, 2011 If she is a freebie what is the difference, you do not have to sign it. You have warned her she being your sister. i have a dear friend like this,a freebie, he got audited for these outrageous deductions. He never showed uu for the audited, sent them 13K they requested. Cried a bit, but figured it was still worth it for all the years he got away with it, but now he is somewhat more conservative in his deductions, but still a gambler. Quote Link to comment Share on other sites More sharing options...
GeneInAlabama Posted February 28, 2011 Report Share Posted February 28, 2011 A false return is a false return, whether we sign it or not. 1 Quote Link to comment Share on other sites More sharing options...
Pacun Posted February 28, 2011 Report Share Posted February 28, 2011 If she is a freebie what is the difference, you do not have to sign it. You have warned her she being your sister. i have a dear friend like this,a freebie, he got audited for these outrageous deductions. He never showed uu for the audited, sent them 13K they requested. Cried a bit, but figured it was still worth it for all the years he got away with it, but now he is somewhat more conservative in his deductions, but still a gambler. I sign all returns whether they pay me or not. 1 Quote Link to comment Share on other sites More sharing options...
jainen Posted February 28, 2011 Report Share Posted February 28, 2011 >>deducting a crazy amount of items << A new ruling, TC Memo 2011-42, shifts the focus from specific deductions to how the activity was operated. It involved an Amway dealer where both spouses had other employment. This summary is from RIA Checkpoint. "Lack of profit objective was shown by facts that taxpayers commingled expenses, had no idea if they were making profit for any given year until they filed that year's return, didn't keep complete records, and otherwise didn't conduct activity in businesslike manner. It was also telling that taxpayers didn't have experience in this type of activity, didn't seek out independent advice, used activity losses to offset their real estate and construction business income, and stated that they would continue with activity regardless of whether it ever turned profit. Countervailing facts that they spent significant time on activity and increased gross receipts during years at issue weren't dispositive considering overall record." Quote Link to comment Share on other sites More sharing options...
Tax Prep by Deb Posted February 28, 2011 Report Share Posted February 28, 2011 I used to, and still sometimes do, sell MaryKay. I was never told the info that Janitor Bob's sister was fed. Perhaps her recruiter was over zealous, but I do not believe that MaryKay would endorse any thing that Janitor Bob relayed. It's been quite awhile since I went to any kind of MaryKay meeting, I only went to one for new consultants, but everything I was given, everything I read on their website made sense regarding tax issues. Again, I do not believe that this is a concept endorsed by MaryKay, but I do believe many senior consultants (who are working their way to a car or other prizes) might be willing to tell you anything to get you to sign on the dotted line. I like their products, I like the way they work with their consultants (I do believe they want you to make a profit), but there is a lot of hype that I just can't go along with and as such I would never make a good consultant. I did it mainly for the discounts! Just my two cents worth! Deb! Quote Link to comment Share on other sites More sharing options...
ILLMAS Posted February 28, 2011 Report Share Posted February 28, 2011 I think sales(men/women) lie just a little to make the sale and we all know that. This happened to my sister down in TX, car salesman told her if she bought the 2009 hybrid edition of the Toyota Camry she would get a certain amount of credit from the IRS, well when it was time to do her taxes, there was no credit for this particular car But this experience helped her out last year when it was time to replace the windows and AC unit at her house, she called me up and we verified the manufacturer and ratings and they did qualify for the energy tax credit before signing off on the contract. Did I mention that they mark up theses items like crazy? Quote Link to comment Share on other sites More sharing options...
joanmcq Posted March 1, 2011 Report Share Posted March 1, 2011 The factors test for business vs hobby has been around for quite a long time, but that particular TC memo does sum 'businesslike manner' quite succinctly. Profit motive is required to prove biz over hobby. And trust me, get an Revenue Agent on your audit lottery case, and it won't be one year. All open years is a given. For 'serious understatement' of income, the SOL is 6 years and a 40% peanalty. In cases of fraud, there is no SOL. And a 75% penalty. And your client IS SOL. Quote Link to comment Share on other sites More sharing options...
Julie Posted March 2, 2011 Report Share Posted March 2, 2011 I've noticed...family members never believe me about keeping records, receipts, etc. Aunt Julie knows nothing. But the tax guy they know nothing about knows everything. Shrug. I hope they get good info from him. Quote Link to comment Share on other sites More sharing options...
GeneInAlabama Posted March 2, 2011 Report Share Posted March 2, 2011 I've had friends ask me tax questions and then get mad at me because they didn't like the answer I gave them. If you don't answer them, they still get mad, so what do you do? Quote Link to comment Share on other sites More sharing options...
JohnH Posted March 2, 2011 Report Share Posted March 2, 2011 Water off a duck's back, IMO. I had an incident a few years ago in which someone at church asked my advice on a tax matter related to the church's day care center. I didn't tell her what she wanted to hear, so she asked someone else, got advice more in line with what she wanted to do, and she proceeded to do what that second person advised. (The second person's advice was wrong, wrong, wrong). Sometime later, she interrupted a conversation I was having with another church member to tell me what she had done (I think to get some cover in case her wrong decision came to light). After the conversation ended and she walked away, the other church member asked me if it bothered me to give correct advice and then see someone do the opposite. I replied that it doesn't bother me one bit. After all, people often pay me good money for advice that they refuse to follow, so why should I care what someone does with it when it's free? 1 Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted March 2, 2011 Report Share Posted March 2, 2011 It only bothers me when they try to blame ME for the fact that they are now in trouble because of not following my advice. Quote Link to comment Share on other sites More sharing options...
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