Discussion Archives:Offer In Compromise: Differences of Opinion
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Discussion Forum Index --> General Chat --> Offer In Compromise: Differences of Opinion
| 23 February 2011 | |
| Here is where I put the posts that weren't on-point to the original discussion.
Comments were moved from Discussion:Offer in Compromise- Examples from the Real World | |
| 19 February 2011 | |
| I've filed several 656's, with the most recent one being for a 100-year old woman who recently passed away. Her husband, who handled all the family financial affairs, passed away in 1992. Taxpayer never thought to file a return thereafter since she had very minimal income (SS benefits, small bit of interest income, no retirement plan income, etc.). We went back to 1992 and filed all returns that were due. Some years did not require a filing. Those that did involved a minimal federal tax liability - with the exception of one year, that involved a land sale, which generated a $50k federal tax liablity. The penalties and interest at this point are $57k. Taxpayer paid the tax before she died and the executrix recently filed the 656. The estate has plenty of assets to pay the tax, so this is an ETA offer. We'll see what happens. | |
| 19 February 2011 | |
| If the IRS wasn't looking for those returns, why oh why would you do them, Ckenefick? In spite of the 6 year policy statement by the IRS? Oh boy. I do hope there is a good reason. Maybe that land sale was within the last 6 years. Let's hope. It HAD to be!!! Or maybe an SFR? | |
Death&Taxes (talk|edits) said: | 19 February 2011 |
| I believe either one of our representation specialists (Mike, Steve or ??) said the other day when it is a question of an OIC, all returns must be filed.....sounds like the land sale return produced an SFR. | |
| 19 February 2011 | |
| Yes, but an OIC wasn't even needed had the returns not been filed, D&T. Unless there was an SFR as you wrote. | |
Death&Taxes (talk|edits) said: | 19 February 2011 |
| It was Steve Kassel Discussion: Missing tax returns look back period to submit OIC. I was jumping to the conclusion that the reason one would file the OIC was to mitigate the SFR. Chris will tell us, I am sure.]] | |
| 19 February 2011 | |
| I think his OIC is because the taxpayer is now dead. ETA was his cited reason for the offer. You might be able to teach an old dog new tricks, but once the dog is dead, the larnin' is over. Oh, and if it were a dead cat (or kitten), I guess we'd still get a bounce out of it.
Yes, I'm as anxious as you to hear back from Chris. | |
| 19 February 2011 | |
| When we say all returns must be filed for an OIC - we mean all the returns the IRS is looking for. That generally means NO MORE THAN six years. I am really puzzled how a dead person could have a hardship beyond being dead. I see some ethical problems at best here. | |
| 19 February 2011 | |
| Trust me...the conclusion to file all those returns - even the one with the big tax bill - was 10000000% the client's decision, not mine. And I confirmed with the client on at least 1,000,000 occassions that she did indeed want to file the returns in light of the alternatives and in light of the magnitude of the penalties and interest. Believe it or not, there are actually some honest folks in the world that do not shirk their responsibilities or otherwise walk away from them.
You also have to remember that when an executor distributes assets out an estate with full knowledge that there are unfiled tax returns, and unpaid taxes, the executor can be held personally liable for such payment. And you also have to remember that this idea of the IRS only going back 6-years is just an idea and nothing more. There is nothing in the statutes that support this 6-year rule and I have seen cases when they've gone back much further than that. If there is such a statute, please cite it to me. And by the way, the issue is not dead just because the taxpayer is. The IRS will process this offer just like any other ETA offer. The offer was not in process when she was alive. It was submitted on behalf of her estate after she died. And another by the way, you don't have to show hardship with an ETA offer. Read the rules. The whole idea behind the OIC program, as it relates to non-filers, is to get taxpayers back into the system. The taxpayer would indeed have been back in the system were it not for her unfortunate death. | |
| 19 February 2011 | |
| This must have been a very spry lady to participate in over 999,999 discussions of her taxes. People who use the 6 year rule are no less honest than taxpayers using any other legal device to lessen taxes.
The six year policy is not just an idea, it is a policy used every day for thousands of taxpayers by scores of tax practitioners. ETA is also a policy, However it is a policy that has probably only been used a handful of times successfully. Even fewer if you eliminate hardship as an argument. Please share with us the specific argument that was used. | |
| 19 February 2011 | |
| I'd have every news program in town involved if they were going to put a 100yo lady in the clink (or take her stuff), this would be after I bought one of those red flyer wagons and pulled her down the street in front of HQ with a protest sign. There are parameters to these things.
However, being the "Ned Flanders" type myself, I must defer to the facts of the case. | |
| 19 February 2011 | |
| The taxpayer desired to file all unfiled returns - those within this 6-year lookback period and those before it - those that showed she owed $100 and those that showed she owed $50k. And I'm not making any generalizations about those who chose the 6-year rule. My point is that this is an informal policy that the IRS may or may not enforce. The client was given good advice and made the decision on her own. I could have said, "Okay then, get someone else to prepare your returns." And she would have. But I'm her advocate and will support her and her heirs based on the path they have chosen. In terms of a specific argument, I had 20 or 30 of these.
CrowJD makes a good point. One guy might say, "I'm 92-years and won't file because the IRS won't throw me in jail." But my client said, "I'm 92-years old and because the IRS may grant me leniency, I choose to file, meet my obligations and remain in the system." | |
| 19 February 2011 | |
| I thought she was 100. It took 8 years to fill out all those tax returns? | |
| 19 February 2011 | |
| If the woman was still alive, I MAY well have filed on OIC too but under NO circumstances would have I have filed returns that far back. Given the facts, I can't help but think that you are the only one who has, or will, benefit from this exercise. | |
| 19 February 2011 | |
| Mike, you can't concieve of any valid ETA basis for an offer? How about an argument that her age made her financially incapacitated and unable to comply with her tax obligations? Especially if there were an SFR for the land sale.
Or what if the IRS at one point sent her a letter stating that she didn't have to file based on her low income, and because of her advanced age she didn't understand that she had to determine her filing obligation each year. She thought the letter meant 'forever'.
At the same time, I can hear the grandchildren asking Chris "Didn't you realize that nanny was senile? Of course she didn't understand what she was doing when she asked you to file 17 years worth of taxes, and you knew the IRS only wanted the past six. Now why didn't you bring in one of her 70 year old children to the discussion? This whole thing could have been avoided had you realized she was not mentally competent to make this kind of financial decision. What written evidence do you have that you tried to talk her out of filing 17 back years? Now, who did you say your E&O carrier was again? Come on, she was ONE HUNDRED YEARS OLD. I don't understand all of the tax rules and I'm only 40." | |
| 20 February 2011 | |
| Kevin, if she was alive I would have considered an ETA Offer. But it does not make sense to me to prepare 17 years of returns that the IRS is not asking for and then explain to the IRS that it is either unequitable or against puiblic policy to hold her responsible for the liability. I feel certain that if she had been told that filing the last six years would get her right with God and the IRS - she would have agreed. Of course we will be told that is not true, but I do not believe it. He still has not explained his compelling arguement. | |
| 20 February 2011 | |
| We're going to scare everyone else away from sharing their stories, Mike. | |
| 20 February 2011 | |
| I am hoping they will learn. I don't post an any other subjects than what I do everyday. Instead, I rely on other experts in every other area. I read 200 posts for everyone I comment on and I try not to interject myself in judgement calls other than to weigh in on one side or the other. But when they go so outside the pale of reason and my experience - I have to say something. | |
| 20 February 2011 | |
| Guys, you're making a lot of assumptions here, but maybe that's my fault because I haven't given you all the detailed facts. This is because in my mind, they're not important at this point. Client made a decision after weighing the options and I'm trying to assist now that that decision has been made. But in any event...
This decision was made by mom (old lady), daughter (POA/executrix) and all other siblings who stand to inherit under the will. I have nothing to gain from this. I don't need the business. I turn clients away every day. Old lady, daughter (POA/executrix) and all siblings were made aware of the options and they agreed they wanted to file. Again, this is after this kind of line of questioning: "You're sure now, this is what you want to do? Is this your final answer? Are you positive? Are you're absolutely certain you've thought this through?, etc. etc. ad nausem" And be careful throwing comments around about E&O carriers. Engagement letters were executed, the case is thoroughly documented and I've known this family for about 10-years. What would be the grounds for the claim anyway - that ckenefick prepared a tax return that he was instructed to prepare? Come on. Throw you E&O comments at the chumps that post on this cite that don't know what day it is. I hear you IRSFixer - You would not have prepared these returns under any circumstances. This makes sense in a lot ways, but not with an honest 92-year old lady that can't sleep at night because she feels she's been cheating the government. And not with the executrix who can't sleep at night either because she distributed estate assets with knowledge that back taxes were owed by the decedent. Moreover, even if you would not prepare these returns, someone else would...and this family was adamant about having these returns prepared. Moreover, at my direction, they even consulted with a tax attorney. In a nutshell, I thought that I would be the family's best shot at working something out with the IRS, hence my willingness to prepare these returns. To Kevin's last paragraph - Granny was not senile. Her mental acuity was intact pretty much up until the end. And 17-years of tax returns were not filed. Only about 7 of the years required returns. Client was informed of the IRS' general stance of only wanting 6-years of tax returns. | |
| 20 February 2011 | |
| That wasn't me threatening about the E&O carrier, that was one of her grandchildren. Don't you see the quotation marks? Besides, I'm not 40, I'm 49, and I do believe that I understand quite a bit of the IRS' rules (but certainly no one knows it all, and I'm still learning almost daily). | |
| 20 February 2011 | |
| There you go again the the "honest" remark. It seems to me that if she was honest and had all that mental acuity at age 100, it might have occured to her at age 83 that people file tax returns. Her daughter, who evidently is also a saintly woman, and who was probably no more than 65 at the time, might have said something to her back then then as well. But I guess when you are near death's door, being honest seems to carry more benefits. | |
| 20 February 2011 | |
| I still don't get why her age keeps jumping from 100 to 92. Maybe she was lying about that too?
And I believe we're still curious about the ETA basis argument. | |
| 20 February 2011 | |
| IRSFixer, you again don't understand the facts. You're not giving me any credit here, just trying to poke holes in what the client decided and attempting to replace client's judgment with your own. Why would it occur to her at age 83 that people file tax returns? At that time, she was recently widowed and husband used to prepare the returns. After he died, she only received minimal income (mainly SS benefits) and yes, as Kevin5 suggests, she did receive a letter saying she didn't have to file. And when the land was sold, she was uninvolved, being only a 1/3rd joint tenant with a living nephew and a deceased nephew's wife.
She had an oversight and when it was brought to her attention, she wanted to correct it. So here I go again with the honesty stuff. Daughter said nothing to mom back then because mom was in good health and managed her own financial affairs. Daughter has no reason to believe mom wasn't filing tax returns. Mom had plenty of relatives/friends in town to drive her around. Siblings assumed mom either was driven to preparer's office or simply mailed her 2 tax documents to preparer. Kevin5 - Mom was 92-years old when the returns were due. We determined they weren't filed when she mom about 97 or 98, returns were then prepared and filed, started receiving IRS correspondence, and then the OIC work began. | |
| 20 February 2011 | |
| I am asking question that the offer reviewer or Area Counsel will be asking. BTW, it seems given the fact that all the tax has been paid, a request for abatement of interest and penalties may have been the most cost-effective route and have perhaps the best chance of success. | |
| 20 February 2011 | |
| Mike, I have never been successful in getting an abatement of interest when it clearly is the taxpayer's fault. Penalties, yes. But I thought that the only way to abate interest was when there has been ministerial misconduct/inappropriate advice/action on the part of the Service. | |
| 20 February 2011 | |
| He said she got a letter saying she did not have to file. I assume that letter was not from Sears. Besides, I did not say the chances were great - they are just better than the OIC. | |
| 20 February 2011 | |
| All has been explained in the OIC addendum. Honestly, I thought we'd have better success with the OIC route. | |
| 20 February 2011 | |
| That's what I thought too, until my initial post was attacked from all fronts. | |
Tax Writer (talk|edits) said: | 21 February 2011 |
| There is nothing in the statutes that support this 6-year rule and I have seen cases when they've gone back much further than that. If there is such a statute, please cite it to me.
Ckenefick, I agree with you and would have done the same. I've seen the IRS go back farther than 6 years more than once. And I've also seen the IRS issue SFRs many years later and continue to collect. And I've seen the state (CA) go back much further than 6 years. I can't think of an instance where I would file a delinquent state return without also filing the federal return. But I know there are some who would disagree with me. | |
| 21 February 2011 | |
| Filing 17 years of returns is absurd...in fact, malpractice unless the IRS is demanding them. If we have to point out the applicable IRS Policy to someone with 17 years of experience....well I for one ain't gonna do it. | |
Tax Writer (talk|edits) said: | 21 February 2011 |
| Okay, kevin is the ethics guru, so I'm going to ask. If you have a client with 10 years of unfiled returns, and the client admits that he had a property sale that the IRS doesn't know about that would generate a 50k tax liability in year 7, do you honestly advise the client NOT to file, and not report the income? I just really want to know because that seems unethical to me. | |
| 21 February 2011 | |
| Tax Writer is exactly right. You cannot advise the client to NOT file a tax return. Sure, you can give him/her all options and let him/her make the decision, but in no case can you advise the client not to file a return. If you do this, say goodbye to your CPA license.
And to Skassel - Again, 17 years worth of returns were not filed. Only 7. Read the thread in full. The client made the decision to file ALL back returns and she was indeed given all the options and the ramifications in advance, as noted above numerous times. And, you don't need to point out the 6-year policy to me. I'm aware of it (as was the client), have been for 17-years and have gone with it in other situations. Nonetheless, I cannot substitute my judgment for the client's. Given the fact that the client wanted to file a return "for the big tax year," I thought it prudent to file returns for the other subsequent years with full knowledge that we'd be going the OIC route (and I think all of these returns were actually within the 6-year lookback anyway). These other returns had minimal balances due (less than $200 in most cases). And what do we do - File one return with a big tax bill, and then, when evaluating the offer the IRS says "What about returns for the most recent 5-years, we don't seem to have anything on file for that?" What do I tell them - "Oh, don't worry about it. Those returns are immaterial. Not much tax is owed on those." Or do we simply file them to support (and bolster) our position that the taxpayer wants to come back into the system and is making a good-faith effort to right an honest oversight? By the way everyone - I have several cases involving court-appointed attorneys for incompetent persons. When these people die the attorney is left to act as the personal representative of the estate. Not a single one of these attorneys is comfortable using the informal IRS policy of going back only 6-years to file returns. If the attorney distributes the estate knowing that returns were not filed for years beyond the 6-year informal window, the attorney is looking at personal liability for the unpaid taxes as well as suits from the beneficiaries due to transferee liabilitiy issues. | |
| 21 February 2011 | |
| Ckenefick - Again, what years did you file? What year was the sale? | |
Tax Writer (talk|edits) said: | 21 February 2011 |
| Or do we simply file them to support (and bolster) our position that the taxpayer wants to come back into the system and is making a good-faith effort to right an honest oversight?
I agree-- what would you do, honestly? I am asking the question with genuine curiosity. I'm not trying to be argumentative. Steve, Kevin, and IRSFixer all have WAY more representation experience than me. But I wonder about the genuine ethical dilemma of such as case. In California, I have seen (multiple times) when the state is looking for old returns from 10+ years back. If I have a client that is a delinquent filer, and I have to file California, can I ethicallyand morally advise the client NOT to file the federal return, while still filing the state return? Also, in the case I mentioned above, if I advised a client NOT to file returns that were older than the 6 year statute, and the taxpayer was later found guilty of fraud for neglecting to report 50K in income (or more) can I be held criminally or legally responsible for my advice (in this case, advising the client to not file any returns earlier than the 6 year statute date?). I am asking because I really want to know. I can't think of any situation where I would knowingly advise a client not to file when there is substantial unreported income. It would give me the creeps. | |
| 21 February 2011 | |
| First, I did not say I would never file more than six years, I said I would never file 17 years back. It is the IRS policy to generally only require the last six years. It is our policy to only go back six years unless there are significant reasons to file more. In long-term non-filer situations, we get transcripts for the last 15 years and then make an evaluation on a case-by-case basis, based on the facts and circumstances of the case, as to how many returns to file. The IRS six year policy is not because they are nice people, it is because the quality of records is poor for older years and it does not benefit anyone to create liabilities that can never be paid. As an example, the IRS does non-assertions of trust fund taxes on a regular basis when it is clear the collection potential is not there. | |
| 21 February 2011 | |
| You can never, in any case, advise a client to not file a tax return. Period. But what you can do is provide all options to the client and let the client decide. And, of course, this decision should be documented in your workpapers. If the client asks a question such as, "If we only go back 6-years instead of 10-years, what are the chances of the IRS coming back later asking for returns for back years 7, 8, 9 and #10?" - you can certainly answer this question based on your experience. And you can of course explain the IRS' informal 6-year policy. But in no case can you link your answer to this question with advice to not file. In other words, you cannot say, "Your chances of being caught are slim to none, so I recommend that you do not file Prior Year Returns #7, #8, #9 and #10." All you can do is provide an isolated answer to this question, nothing more. Similarly, if a client comes to you today and says, "I never filed my 1990 tax return and I sold a piece of property for a $1m gain in 1990, what are my chances of being caught?" The first thing you should do is explain to the client that you are not permitted to advise him to not file the return. Then, you need to provide him with the options and let him make the decision.
As CPA's, we are not permitted to exploit the audit lottery process, which means we cannot give advice based on the fact that one's chances of being audited are slim. Nonetheless, we can tell the client what his chances of audit are, based on figures published by the IRS, and let him come to his own conclusions and decisions. Importantly, not filing a tax returns is a criminal matter. Therefore, if you get these kinds of questions from clients and are not working through an attorney (which can provide privilege), don't answer anything and get the client to retain an attorney and then proceed with the case. | |
| 22 February 2011 | |
| Fixer, here's the scoop with the returns filed: (1) 1995 (2) 1996 (3) 1999 (4) 2000 (5) 2002 [big tax bill] (6) 2006 (7) 2007. | |
| 22 February 2011 | |
| Ckenefick, you are wrong. You are the tax professional. It is YOUR job to make the client understand what returns will be filed. Period. | |
Flybynight (talk|edits) said: | 22 February 2011 |
| I agree with Chris; it appears that he did make the client understand the consequences in full and that it was the client's decision. Ultimately, the client makes the decision and we execute that decision (so long as the decision is within ethical guidelines), even if we personally think it is not necessary or wise. I have clients who insist on not requiring a written agreement for certain transactions, even though I personally like to button everything up. Best practices certainly advise against “gentlemen’s agreements”, but the fact is, if that’s what the client wants to do (after hearing advice to the contrary and giving informed consent), then that’s their decision. I’m not going to not represent them just because I think their decision is not prudent. The divorce lawyer "hall of fame" also has some interesting stories, as it includes many celebrities who marry someone 30 years their junior, without a pre-nup, and get divorced 2 years later and lose another 30% of their net worth. Even though it would seem incredibly wise to do the pre-nup, there are limits on what those lawyers can do; pre-nups, just like taxes, are ultimately the client's decision.
While I agree that the unofficial 6-year policy is used almost uniformally these days, times change and the enforcement pendulum is certainly swinging (and has already swung) towards more rigorous enforcement. It's possible, albeit unlikely, that the IRS would go back longer than 6 years and I also know several T&E lawyers that would be uncomfortable distributing the estate in this case (although lawyers are a conservative, risk averse bunch). | |
| 22 February 2011 | |
| Ckenefick, you are wrong. You are the tax professional.
It seems that Mr. Skassel and Mr. Chenefick have two different visions of their roles in their client's lives. Many of my clients wish to defer decisions to my judgment, and in some instances I will make decisions for them (and explain the reasoning, in writing if it is a technical issue, after all i could be dead tomorrow). Many times when the tax law is ambiguous, or contradictory (courts v IRS, or courts v courts), or when the best tax result depends on probable/possible future events; I assist the client in making their decision. On the other hand, many clients are comfortable with and/or require making their own decisions in all cases. There are decisions that clients must make, even about "tax' issues, that will require placing a greater weight on non-tax factors than mere tax laws and procedures; and so, a tax professional's input is of limited use. Personally, if a doctor told me that I must follow his advice about medical treatment, period; I would find another doctor. And if the health issue is serious enough, I would always seek a second opinion and spend a bit of time in research myself. And after this past week i am not trusting any computer "professionals" on anything. | |
| 22 February 2011 | |
| Well put Flybynight. And Skassel - YOU are wrong. I did make the client understand everything. The client clearly, fully, without doubt, unambigiously understood that her chances of being caught for not filing were 0%. Nevertheless, being fully informed of all relevant facts and all relevant consequences for each option presented - including the consequence that her estate could potentially be depleted by $107,000 - she was hell-bent and resolved on filing. Now you tell me, given that her decision had been made, should I have advised her to not file the return? I want to hear your written answer to this question, so please go ahead and respond. I want you tell everyone that reads these posts that the proper course of action for the CPA is to advise the client to not file the return. But before you answer, you might want to consider the following:
AICPA's Statement on Standards Tax Services 1-7 (#6) - Which states, "A member should inform the taxpayer promptly upon becoming aware of an error in a previously filed return, an error in a return that is the subject of an administrative proceeding, or a taxpayer's failure to file a required return. A member should also advise the taxpayer of the potential consequences of the error and recommend the corrective measures to be taken." Everything I underlined above was done. Corrective measures were explained to the client. And note that a "corrective measure" with respect to an unfiled return would not include giving advice to do nothing. Sure, this is an "option" that the taxpayer needs to consider, but (1) it is not a corrective measure and (2) seeing that it is not a corrective measure, it is not a position that a CPA can recommend. Also, I practice in NC. The applicable NC law is 21 NCAC 08N.0207, which reads: "A CPA shall not knowingly violate any state or federal tax laws or regulations in handling the CPA's personal business affairs, or the business affairs of an employer or client, or the business affairs of any company owned by the CPA." Therefore, if I'm "handling" a tax matter for a non-filer, I can't advise the non-filer to willfully not file a tax return when one is required. Last time I checked, willfully failing to file a required individual federal income tax return would represent a violation of federal law. | |
| 22 February 2011 | |
| MWPXYZ makes some valid points. As CPA's, we give advice all the time - usually relating to an income item, a deduction or a tax credit. But when it comes to a required tax return, we are prohibited from advising the client to not file it. Again, we can present it as an option, but we cannot - in any case - actually recommend it. | |
| 22 February 2011 | |
| Mercy. I think the tax researcher has got some idea of how the program is working. There was only one intelligent comment above and I will not say who made it because I do not want to be accused of bias. | |
Fr. Mackelhenry (talk|edits) said: | 22 February 2011 |
| Crow, if you actually had made an intelligent comment, that would be a day to remember. | |
| 22 February 2011 | |
| Right....a 92 year old who hasn't filed since the Reagan presidency was properly and fully explained the IRS Policy and shown a copy of Policy Statement 5-133 and yet she physically forced you to prepare tax returns for which there was absolutely no reason to file then forced you to sign as the paid preparer....you funny. | |
| 22 February 2011 | |
| Here is the link to Policy Statement 5-133
Here is a case worth a look T.C. Memo. 2009-19 Here are two GOOD discussions from Steve [2] [3] If I consult a TP/client regarding 'non filer', I provide my opinion and solution, I don't leave my resolve to the TP, he ain't waggin my tale. Re: Doctors, I go to a doctor for their opinion, then decide if I accept their treatment. Surgery is not my 1st option. I think what Steve is trying to say is don't do unnecessary surgery. You might have to do surgery, but I won't do surgery just b/c the patient wants it.. TexCPA 19:26, 22 February 2011 (UTC) | |
| 22 February 2011 | |
| I have a question here....
BrockEA | |
| 22 February 2011 | |
| Again, I'm familiar with the IRS' policy and have been for 17 years. You don't need to quote it to me over and over. And your surgery analogy falls flat on two fronts. First, it was not the first option. It was one of several options. And second, after weighing all options, it became very clear that the taxpayer was indeed going to have the surgery. No doubt about it. This was made very clear to me when I asked for confirmation of the decision the first time, the second time and again the third time. And, given that she was going to have the surgery, do I leave it in the hands of a medical resident who hasn't performed but a handful of surgeries, perhaps on completely different body parts? I think not. And this is another point missed by Skassel. This lady didn't force me to do anything. I never claimed that she did. What I did claim is that (1) she and her family made a decision after due consideration (2) she was going to have the returns prepared by someone come hell or high water and (3) given that, I felt I could best represent her prospectively.
News Flash - There are actually honest people in the world whose conscience and integrity is more important to them than money. Should I call these people idiots and refrain from working with them simply because I have a different viewpoint? I think not. And Skassel, I don't think you answered my question from my previous post. Please tell us all that you would advise this client to not file the return. | |
Cricktaxea (talk|edits) said: | 23 February 2011 |
| Man, as an outside observer to this discussion it's amazing to me how things get blown out of proportation and the central point gets missed. In this case the central point from Chris is this:
"You also have to remember that when an executor distributes assets out an estate with full knowledge that there are unfiled tax returns, and unpaid taxes, the executor can be held personally liable for such payment." That's it, end of story and Chris is exactly right. IRS policies and regs are not authority in court and this is a classic example of each situation being different and the policy concerning old years does not necessarily mean it should be relied upon in this case. Bob | |
Tax Writer (talk|edits) said: | 23 February 2011 |
| Please tell us all that you would advise this client to not file the return.
I don't think that any of the IRS heavyweights are going to admit something like that in public; especially in this case when it's an estate tax return. I will say, on the record, that if I know that a client has material amounts of unreported income in year 10 or year 7, I'm never going to advise them to avoid filing just because there is a 95% chance they won't "get caught." I'm just not that type of girl. But I will say that if I ever get a rep case I'd much rather refer them to Steve or IRSFixer and be done with it. I doubt I'll ever do any face-to-face rep work again. I think it's better left to people who have the stomach for it. | |
| 23 February 2011 | |
| Why is everyone so upset that Ckeneflick filed these returns beyond the 6 year period?
I guess due diligence is subjective, for the non filers the goal is compliance, start slow and end strong. Solve the problem, don't treat the symptoms.Thank God for health issurance, slice away. Watch out for those guys with fish on the walls ! | |
| 23 February 2011 | |
| I do not have enough information to tell you exactly what I would have advised. As I said, it is a case by case decision. But based on what I know, I would likely have advised to file the last six years, where a filing requirment existed. I would not have advised to file 1995 - 2000. Not sure about 2002. I would have to have been there.
There is a lot more to this story that we do not know nor will we be told. | |
Flybynight (talk|edits) said: | 23 February 2011 |
| I don't think the implication that Chris is holding back on us is likely to be accurate. We know through his previous posts that he's a credible guy and the facts that he's laid out make sense; at least to me and several other members of this board.
I'm not sure what kind of client's some of you deal with, but I don't require client's to physically force me to do anything. I'm perfectly willing to represent my client to the best of my abilities after they provide informed consent (that is, after all, my professional duty). I've always thought that lawyers, CPAs and EAs have essentially the same role in the tax field, as no one seriously questions that all of us are "practicing law", the right to which is extended to CPAs and EAs by federal statute. As we're practicing law, we serve as counselors to our client's and sometimes client's do things that we disgree with, but that doesn't mean you withdraw your counsel or refuse to comply if they ask you to do a completely ethical action (the very notion seems to turn ethics upside down). It means that you provide trusted advice that allows them to make an informed decision; some decisions are ultimately not left to the "lawyer", whether he's a JD, CPA or EA. While I understand that not everyone agrees with Chris' action, I don't understand why the firestorm was necessary, let's give our fellow tax professionals the benefit of the doubt. | |
Anarchrist (talk|edits) said: | 23 February 2011 |
| Why is everyone so upset that Ckeneflick filed these returns beyond the 6 year period?
Everyone isn't upset, only Skassel. Ckeneflick has adequately explained the situation and seems to have done the right thing. Skassel is just being unreasonable in sticking to an opinion based upon false assumptions formed prior to having all the facts. | |
| 23 February 2011 | |
| And let's not forget what this whole thing is all about - an ETA OIC based on public policy considerations. I realize these are offers are rarely, if ever accepted. But the whole point of the public policy criteria, as mandated by Congress (not the IRS), is to create an avenue whereby a taxpayer feels comfortable getting back into the system when none of the other OIC criteria are met. In other words, if due to special circumstances, we have a non-filer, let's create a way where we can get the non-filer back into the system where there might be a chance for leniency. Without this public policy exception, many folks would choose not to enter back into the system if they know full well they will be hit with tax, penalties and interest and no leniency will be provided.
It's my opinion that the IRS feels that elderly taxpayers might be at risk of slipping out of the system for no other reason than their age. Hence the nationwide TCE (Tax Counseling for the Elderly) programs. Why don't such programs exist for 40-year old able-bodied men and women? | |
| 23 February 2011 | |
| Don't think so. All returns were filed before she died, which is evidence of her intent - while alive - to get back into the system. The fact that she passed away thereafter is irrelevant. | |
| 23 February 2011 | |
| First, let me correct Ckenefick. We ARE NOT CPAs. You might be, but many of us are EAs. Don't lump us in with you PLEASE. I don't want to be a CPA, I don't want to be confused with CPAs I don't want to be lumped together with the CPAs. AND NEITHER DOES ANYONE ELSE who is not a CPA. Get your facts straight. You can read each of our profiles to determine which of us are EAs and which are CPAs and which of us are unlicensed tax preparers. JUST DON'T CALL ME A CPA.
period. damn it. Insulting. Well, maybe just ignorant. | |
Tax Writer (talk|edits) said: | 23 February 2011 |
| AND NEITHER DOES ANYONE ELSE who is not a CPA.
Wow, Kevin. What's up? I didn't hear any attacks on EAs or any other enrolled practitioner on this thread. We're just expressing differences of opinion, that's all. We all respect your point of view and your license. I never feel like anyone is talking down to me, and I'm an EA. And I, for one, wouldn't mind being a CPA as well as an EA. And and I also wouldn't mind being a tax attorney. If I had the time to pursue all the additional licenses, I would do it in a heartbeat. | |
| 23 February 2011 | |
| I don't want to be called a CPA because I am not one, and holding yourself out to be a licensee (which in my opinion even includes not correcting someone who mistakenly thinks you ARE one - as evidenced by him calling you one) is a crime (at least in my state).
I worked hard for my EA and I work hard to keep up my tax expertise. I know very little about SSARs and GAAP (except what I learned in my undergrad and graduate accounting and finance courses - which have extremely little to do with the real world in which I live). I read 99.9% of the discussions here on TA and I read 99.9% of the profiles, so I see who has which designations. I know who knows their stuff and who doesn't. And I don't want to be grouped in with a group to which I don't belong. THAT is very insulting to me and I won't stand for it. Others might not be insulted by being painted with a broad brush, but I am unique (just like everyone else here). | |
| 23 February 2011 | |
| P.S. I also see who doesn't bother to use the yellow box or follow any other instruction before posting questions here. And who doesn't appear to know how to look things up in Pub 17 or follow simple form instructions. | |
| 23 February 2011 | |
| No offense intended on my part. All I know is I made an innocent post about a case I'm working on. Shortly thereafter, I was attacked on all fronts and had to defend myself. As part of my defense, I pointed out that - as a CPA, which I am - I am bound to follow the rules promulaged by the AICPA and my state licensing board. Both of which state that a CPA cannot recommend that a client not file a required return. | |
| 23 February 2011 | |
| (You are also bound to Circular 230, from whence the AICPA begat their SSTS).
| |
| 23 February 2011 | |
| I do note how few CPAs have actually commented here, vs EAs and non-CPAs...... Did anyone else notice that? Read the profiles and count. | |
| 23 February 2011 | |
| Right, throw in Circular 230 too. But my recollection is that the SSTS' go further than Cir 230 with respect to an unfiled return. | |
| 23 February 2011 | |
| Exactly my point. Do read the profiles of all who were questioning you and you'll see that the non-CPAs don't hold that same requirement. Your comment 'as CPAs...' didn't apply to anyone but you! | |
| 23 February 2011 | |
| And you might be right about the crux of the problem. In that case, there should not have been any attacks on my course of action (as a CPA) from those who are not CPA's if the non-CPA's are not versed in the rules that apply to CPA's. | |
| 23 February 2011 | |
| Kevinh5 is an EA
Death&Taxes is an EA CrowJD is an attorney SKassel is an unlicensed preparer IRS Fixer is presumably an unlicensed preparer (perhaps more) TaxWriter is an EA DaveFogel is both a CPA and an EA Taxaway is an EA NOJ is a CPA Flybynight is a CPA MWPXYZ is an unlicensed preparer SXPTax is a CPA BrockEA is an EA Anarchrist is a CPA TexCPA is a CPA FSteinCPA and Fr McGillicudy didn't add anything of import so they don't count. | |
| 23 February 2011 | |
| That's nice. And again, if the non-CPA posters are not versed in the rules that apply to CPA's, they should not have commented on the course of action that was taken by a CPA. I made an innocent post to help out the initial poster and was immediately attacked by non-CPA's who seemed to think that they knew the rules that applied to CPA's. And when I pointed these rules out to them, things started to quiet down. I never made any comments about the rules that apply to non-CPA's. | |
| 23 February 2011 | |
| No, Ckenefick, I don't think that is exactly what happened.
This may indeed be the first time that I've seen where a CPA must act differently than a non-CPA (and you still haven't given us the exact cite, just from memory, so we're giving you a heck of a lot of credibility since we haven't seen it in writing yet). If I didn't know this (and I teach tax preparer ethics for Circular 230 folk), how could any of the other Circular 230 practitioners have known this? You certainly didn't point it out. | |
Flybynight (talk|edits) said: | 23 February 2011 |
| I think once Kevin goes down the list, he'll find that the majority are actually current or former CPAs. Anarchrist, TexCPA, Fsteincpa, Fr. Mackelhenry and Trillium are also CPAs for the list. In addition, both MWPXYZ and IRSfixer were CPAs that are likely inactive at this point. | |
| 23 February 2011 | |
| I'm not exactly sure what you're referring to, but here are the AICPA and NC State rules - that I merely copied from one of my posts above. And that is what happened. When people found out that my client filed a return beyond the 6-year window, I was attacked with the implication being that (1) I was performing surgery (2) the return wasn't necessary (3) I should have walked away and refused to prepare the return (4) I should make the decisions, not the client (5) I should have advised the client to not file the return, etc., etc.
AICPA's Statement on Standards Tax Services 1-7 (#6) - Which states, "A member should inform the taxpayer promptly upon becoming aware of an error in a previously filed return, an error in a return that is the subject of an administrative proceeding, or a taxpayer's failure to file a required return. A member should also advise the taxpayer of the potential consequences of the error and recommend the corrective measures to be taken." Everything I underlined above was done. Corrective measures were explained to the client. And note that a "corrective measure" with respect to an unfiled return would not include giving advice to do nothing. Sure, this is an "option" that the taxpayer needs to consider, but (1) it is not a corrective measure and (2) seeing that it is not a corrective measure, it is not a position that a CPA can recommend. Also, I practice in NC. The applicable NC law is 21 NCAC 08N.0207, which reads: "A CPA shall not knowingly violate any state or federal tax laws or regulations in handling the CPA's personal business affairs, or the business affairs of an employer or client, or the business affairs of any company owned by the CPA." Therefore, if I'm "handling" a tax matter for a non-filer, I can't advise the non-filer to willfully not file a tax return when one is required. Last time I checked, willfully failing to file a required individual federal income tax return would represent a violation of federal law. | |
Flybynight (talk|edits) said: | 23 February 2011 |
| Based on Chris' comments above, that's a very valid point Kevin. This is also the first time that I've seen where a type of Circular 230 practitioner must act differently than other Circular 230 practitioners; as I noted above, I figured we were all operating under essentially the same guidelines practicing "tax law". However, I wouldn't say it's surprising, every state bar/CPA society has a different way of doing things, differences are bound to occur, depending on how close the State follows the ABA/AICPA model rules. | |
| 23 February 2011 | |
| No, I did not think you were all CPA's. I thought the bulk were indeed EA's. I do read the profiles. What gave you that idea? When I make a comment like "us CPA's" or "we CPA's" I'm not referring to the posters on Tax Almanac, I'm referring to the group of which I am a part - to distinguish my membership from others in other groups...just so that it is clear. And once again, since I did make it clear, non-CPA posters should have reserved their comments on the course of action taken by a CPA if they are not versed in the CPA rules. | |
| 23 February 2011 | |
| I'm still looking for the cite that says a CPA must advise his client to file all unfiled returns. That's what I think I see Ckenefick is saying above, yet I can't find it in the SSTS or state law. | |
| 23 February 2011 | |
| Ckenefick, could you point out where you made the distinction of non-CPAs and CPAs earlier? I didn't see it until I made my point today. | |
| 23 February 2011 | |
| I agree with IRSFIXER
I do not have enough information to tell you exactly what I would have advised. As I said, it is a case by case decision. But based on what I know, I would likely have advised to file the last six years, where a filing requirment existed. I would not have advised to file 1995 - 2000. Not sure about 2002. I would have to have been there. There is a lot more to this story that we do not know nor will we be told. Another issue on this post: TP claims to be "honest" . Then why the ETA OIC? Effective Tax Administration - There is no doubt that the tax is correct and there is potential to collect the full amount of the tax owed, but an exceptional circumstance exists that would allow the IRS to consider an OIC. To be eligible for compromise on this basis, a taxpayer must demonstrate that the collection of the tax would create an economic hardship or would be unfair and inequitable If they were "honest" and could afford to PAY, then why not just PAY the bill and move on? TexCPA 19:12, 23 February 2011 (UTC) | |
| 23 February 2011 | |
| Not sure what you're talking about. When I make a comment like "as a CPA" or "We CPA's" I'm making the distinction right then and there since I'm only referring to CPA's. When I quoted the SSTS' and the NC state law, I made it clear that these are rules that apply to CPA's. | |
Flybynight (talk|edits) said: | 23 February 2011 |
| I agree that you cannot advise a client to not file a return (or play the audit lottery), but I think what we're trying to get at is that there is a line between 1) telling a client to play the audit lottery and 2) telling a client what the odds of being audited are. I've always thought that we can recommend corrective action, such as "let's file 6 years back" under the AICPA rules and then simply do so with client consent. My reading of "corrective measure" is for multiple years, so that if you have 12 years of non-filing, a corrective measure to the 12 years of non-filing (to bring the client back into the system) would be to file for 6 years back, which I believe is allowed in the Regs. Otherwise, you might be obligated to file ad infinitum, which is frankly unworkable. However, I'll admit this is a somewhat expansive reading of the AICPA rule, a strict construction of the language would indicate that you are correct, that you cannot advise someone not to file because each year must be remediated on its own. | |
| 23 February 2011 | |
| I obviously misunderstood you. I thought you were referring to everyone participating in this very discussion. I am sorry. But what about a cite saying you must advise your client to file every tax return? | |
| 23 February 2011 | |
| Right on. You can advise the client of the audit lottery, but you just can't tell him to play it. | |
| 23 February 2011 | |
| Without that cite, Ckenefick, I don't see where we have a difference between CPAs and other Circular 230 FATPs. Just a different interpretation of what they mean, as Flybynight's interpretation (six years is enough) is surely different from yours, and you have the same credentials. | |
| 23 February 2011 | |
| I did not respond because I for one do not like to be associated with EA's. ;-)
Actually, because I am buried and have little knowledge on OIC's and therefore would not be able to put in anything constructive. I do see and respect both sides of this issue. I thoroughly respect Steve and IRSfixer as both being very good at what they do. My memory is shot from all the tequila, but I don't recall Ckenefick giving bad advice and he seems to know some stuff. I also see his side if the client wanted/demanded/requested all returns to be filed. As Taxwriter said, OIC's are not what I do, but it is something I would like to learn and the 1st two people I would request assistance from are part of this trhead. Now, another point in Cken's favor is that he is a CPA and therefore should be listened to and obeyed simply because. And, I don't know why Kevin believes it's insulting, maybe because you read about CPA's getting in trouble, but that is because there are more of us and only reason you don't hear about EA's getting in trouble is because people don't know about them. They hide in the shadows. | |
| 23 February 2011 | |
| And, I am horrendous with the Yellow Box, but Kevin, you still help, so I guess that means you like me.
I feel a Rodney King statement coming soon. | |
| 23 February 2011 | |
| Chill. Pill. Everybody.
Holy Toledo, there's a lot of frayed nerves out there. Deep breath. http://www.youtube.com/watch?v=fHCcM_uV-r8 Now relax and go prepare a tax return or two. | |
| 23 February 2011 | |
| Oh I read the Internal Revenue Bulletin, Fred. Sadly, yes, EAs get into trouble and are sanctioned too. But there is no state licensing board for EAs, so they only get slapped on the hand (or behind, as the offense may call for) once, and not twice, like CPAs sometimes do (OPR notifies the state licensing boards of it's actions). | |
| 23 February 2011 | |
| Flybynight can make his own interpretations. I tend to disagree that telling a client to file 6-years of returns cleans up all unfiled years before that. The SSTS refers to "a required return."
And I hear you - and in 95% of the cases I deal with, the 6-year rule is applied. But in no case will I be the one actually making this decision. | |
| 23 February 2011 | |
| And I am now extremely insulted that I don't count. I count my singles every time I leave the strip club, errr dance hall. | |
| 23 February 2011 | |
| Fred, you have to add something of substance or import in order for your post to 'count'. But you can count as much as you want elsewhere. | |
| 23 February 2011 | |
| And if I can get over thinking that I was insulted (when I wasn't, it was all in my own head), you probably can too. We can drink some tequila together and drown our TA sorrows. | |
| 23 February 2011 | |
| I'm back. Had to take Mr. Biggles for a walk. It was a good discussion. If you're interested, I'll let you know how the OIC works out. | |
Flybynight (talk|edits) said: | 23 February 2011 |
| Agreed; please let us know how it goes. | |
| 23 February 2011 | |
| Kevin, every word I say and type has some impotence. And tequila always trumps sorrows. | |
| 23 February 2011 | |
| Go ahead and be impotent if you want, Fred. Tequila will help in that department. | |
| 23 February 2011 | |
| Yes, do tell us about your conversation with Mr. Biggles. | |
| 23 February 2011 | |
| I was a CPA from 1980 until 2003. In 2003 I voluntarily surrended my license because of problems related to my alcohol addiction that was exacerbated by the death of my 19 year-old son in late 2002. I can jump thru a few hoops to get my license back but have not found it necessary to do so to this point. My alcohol problem is in the past. | |
| 23 February 2011 | |
| I am sorry to hear of your loss, Mike. Congratulations on your sobriety. Truly, most of us don't know what it is like to walk a mile in the other person's moccasins. | |
| 23 February 2011 | |
| How did this morph from a general OIC question to comments on Ckenefick's experience regarding one OIC. I thought to post several time to defend C. Truth is - just because it is past the generally accepted 6 years, doesn't mean a return shouldn't be filed. The statute does not begin tolling until the filing of a return, and there are events that could extend the 6 years. If someone wants to file beyond the period of 6 years who are we to say they cannot?
Further I believe that a 92 year old can clearly understand the ramifications and the rules and in all likelihood did not want to leave her children with the decision or a problem. I am absolutely certain my 95, 92 & 90 year old uncles would be more than capable of understanding 5-133. Just like anyone else it depends on the person's cognitive ability. You cannot just assume that they are old so they won't get it. | |
| 23 February 2011 | |
| Ckenefick I have a question for you. If after advising the client that, despite having a filing requirement for 2002 and prior, the IRS was not looking for those returns, etc., if she said she did not want to file those returns, would you have declined the engagement. | |
Flybynight (talk|edits) said: | 23 February 2011 |
| I too, am sorry to hear about your loss Mike. My assumption was based on your profile, which indicates that you were a manager at PW, which I believe is a CPA-required position. I do appreciate the high quality advice that you offer on this forum. | |
| 23 February 2011 | |
| IRSfixer....Godbless my friend. Very sorry to hear about your loss. | |
| 24 February 2011 | |
| I was not going to come back on here tonight because I was tired. Then I did. Then I saw this and then I wondered what a liberal would do if he came across something like this on an early spring night in February in 2011. http://www.youtube.com/watch?v=-b7qaSxuZUg | |
