User talk:CrowJD
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| + | Hi Crow, sorry for taking so long to respond. That's an interesting dilemma you pointed out -- I've actually never thought about it before. | ||
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| + | Let me start by saying the rules regarding attorney-client privilege and the duty of confidentiality are very complex, and I can't profess to be very knowledgeable in this area. You've got state law statutes and ethical rules interacting with federal administrative rules, and it all gets mind-numbingly difficult to understand. | ||
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| + | Anyway, you mentioned that your client told you something about his individual tax return that seems to be in noncompliance w/ the tax laws. If this is the case, I agree that you're likely required under Circ. 230 to advise your client of the noncompliance and its consequences. The Circ. doesn't specify whether this is to be done orally or in writing, but it's definitely a good idea to document for your own files exactly when and how you gave the client the notice required by 10.21. | ||
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| + | I'm really not sure about the atty-client privilege issue. It depends in part on whether your client had an expectation that the communication to you would be held in confidence in the rendition of legal services. Not sure that's what happened... hopefully it never comes to point where this communication was requested or demanded. If it comes to that, I'd hire a lawyer to provide advice and contact your state discliplinary board for advice also. | ||
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| + | As far as disclosure of confidential information to protect yourself from IRS sanctions, that is a tricky issue. Because you're a lawyer, even though you may be performing "non-legal services" (i.e., preparing tax returns), chances are you're still bound by the ethical duties applied to all members of the bar. Thus, even if the client didn't engage your services as a lawyer (but instead engaged you as a tax preparer), I think as a general rule you'd still have the strictest duty of confidentiality to not divulge things the client told you. So in order to avoid breaching your ethical duties, you'd need an exception to the confidentiality duty. | ||
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| + | You might want to see if your state recognizes a "Self-defense" exception to the confidentiality duty. Generally, this permits an attorney to disclose confidential information necessary to defend himself against a charge of wrongdoing in connection w/ representation of a client. See Model Rules of Professional Conduct 1.6. So let's say the Service comes and accuses you of wrongdoing (not complying w/ 10.21). If the situation ever comes down to that, you might be permitted to disclose enough information to defend yourself. But you'd have to be really careful not to divulge too early or too much in a way that hurts your client more than necessary. | ||
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| + | Can the client afterward sue you for disclosing? I suppose they could. That's why it's really tough for attorneys who are also tax preparers. We wear "two hats" which clients sometimes confuse, thinking we're acting as their lawyer. From a confidentiality standpoint, the client might be better off w/ a "pure lawyer" who does only legal work. From now on, it'd probably be in your best interest to discuss with your tax preparation clients at the outset or in an engagement letter that you're not acting in the capacity of an attorney, and that communications w/ you are not within the usual atty-client privilege rules. And you might want to expressly state that any noncompliance w/ tax laws you become aware of may be disclosed to tax authorities to the extent required by law. Try contacting your state discliplinary board also if you have more questions. Maybe they can help. Good luck! | ||
Revision as of 10:43, 21 November 2007
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Juris Doctor
Absolutely! Try adding the text {{JD}} to your user page. Please check the spelling and wording as I'm not sure what the common usage is. Thank you for the idea!
- Tim Doyle, TaxAlmanac Moderator - Talk to me 18:48, 17 December 2006 (CST)
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- Tim Doyle, TaxAlmanac Moderator - Talk to me 09:54, 20 December 2006 (CST)
Just found your message: to be honest I only have 12 partnerships in my database from last year, and none that complex where there are questions of basis etc. Only two of the twelve are comprised of individuals who are not either husband and wife, or life-partner [two LPs are same sex partners where the managing partner is a LLC taxed as a C Corp but which only owns 1% of the venture]. I am satisfied with the mechanics of the software, but sometimes I can see that trying to keep capital accounts and basis in order can lead to baroque processes. What I like about Proseries is the form based data entry and ease of navigation, but then I have never tried anything else except for short trials. What I dislike mostly concerns either K-1 entry for PTPs and other partnerships, especially the lack of choices for other income, or weaknesses in state returns, especially those that do not follow Federal AGI. Then too, I get the feeling certain states get the bum's rush in completing the software, as witness the major error two years ago on Delaware resident returns. I only wish too that certain Lacerte features could be imported (mortgage interest that is not deductible for AMT: in Lacerte, you can indicate this without opening 6251 but in Proseries, you must do the calculation on the AMT form).
All in all I like it, but recognize that I went directly from doing returns by hand to using a computer in 1993 so I can still appreciate and remember how to actually prepare a return.
let me know anything you want to know.
david
Prosereries/Tax Wise
Tax Wise is one I have never tried: gone thru looks at Lacerte, Tax Works, ATX, an Arthur Andersen program once, and way back Pencil Pushers, which Lacerte bought out. I do not own Quickbooks, dislike it, but did use it for my own books for several years, growling all the way. Now I simply use Quicken since I am cash basis, but do keep receivables on an ancient MS Works database. This year fiancee and I are changing that over to Sage Simply Accounting but just for receivables.
You mentioned me saying I overrode.....I think you mean when there is a LLC with guaranteed payments that are from capital, in which case Proseries gives you the option not to include them on the SE line of the K-1 by checking a block....but that is not overriding. I do have to override when I have a PTP which has a loss on Line 1 and a profit on Line 2.....damn software makes you use two K-1 worksheets for this for some reason and worse, picks up the profit but not the loss since it does not realize it is the same PTP, so I ignore the error message I get but I do not override....lately I have even simply netted the two numbers. Overrides and error messages prevent electronic filing but I never file partnerships that way anyway.
My partnerships sometimes are very rudimentary. If I can get away without doing the balance sheet, three cheers!!!! I check that question and goodbye Schedule L. My S Corps are two types: the classic incorporated checkbook, and I have this one guy who sets up LLCs for real estate investments with others, and then elects S....don't ask me why, he is a South Philly insurance man and knows it all, or so he says.
When I lived in the upper Hudson Valley, I had a lawyer friend who used to get the pay per return Proseries.....whether they will do that for partnerships I do not know but I seem to recall he did a number of 1041s on it.
Anyway, wish I had more knowledge of TaxWise to help you. Great to chat with you.
d
Oliver Twist's Sire
That was so funny! I really got a kick out of that discussion. Not often that one can laugh out loud at a post on a tax research site. :)
I hear you on the partnerships, tough going. For now, if the revenue or assets exceed the 250k mark I am passing them on to a mentor of mine. S-corps seem to be the most prevalent type of business entity in my market and I am doing good to be able to get them out the door profitably and in a timely manner, in this, my second year. That partnership you are discussing in the 'Accounting method change' thread is going to be a piece of work it sounds. Doing the L and M's from an excel sheet! :)
I have a cafe and an upscale nightclub that operates a kitchen in my client list. I think that it is good policy to set the bar high for restaurant clients. The two I have really strive to achieve best practices and will invest in some accounting. As I am learning in this business, the clients are going to only be as good as the people involved, no matter what business they are involved in. If you get a referral on one from a client you respect I would go for it. Especially if they are an S-corp!! :)
Good to talk with you. Hope you have a great holiday.
Will
William Price, EA | Portland, OR - Talk to me
LLC
As soon as I read your comment on the Excel accounting records I figured they had not been required to submit the L and M's in at least 2004, maybe 2005. (SIDEBAR - A colleague of mine will prepare L's for all of his clients, especially the smaller ones, because it is probably going to be the only BS they ever have. I can see that point and seems like a nice service, I just do not have the efficiency to put it in place yet.) In your case it is that first year check box as accrual that is the rub. I bet the Service didn't even look at those un-required schedules. But when the LLC exceeds 250k and you have the cash box marked with no AP/AR on the L?? Let me know what happens!
Will
If you want cash basis mark it accordingly. Assume prior year was a mistake. I have seen a change in method without IRS approval many times without ever a comment by IRS. The IRS does not flag that box. If audited years from now the IRS agent will never see the old year checked box. The IRS does not get too excited by timing differences.
Will's and DZCPA's
Wills and DZ's comments came in at exactly the same time there I think, and got glued together. Thanks both of you.
AMT planning or not!
CrowJD - your absolutely right, once one enters the AMT room in any given year, there is no real planning to do unless, it looks like they might not be in the AMT in the following year - then that bunching of deductions into the non AMT year works. Once one is in the AMT for Federal year after year, bunching up the r/e taxes in one year when the income is higher than the projected next year can provide tax savings at the state level. Your expertise in the 1041, 709, 706 is an area that I am far weaker in so the nice thing about this site is that we can learn from each other and help each other out. Your posts here have been helpful for me as well as it gets me thinking about concepts I might not consider on my own. The one on the mortgage letters is a good example of one just within the last couple of days. The AMT can certainly be a bugger but I would rather be on the fringe of AMT any day because that implies in my mind that I am maximizing my tax dollars by paying a lower rate of tax. But then again, I have yet to be into the AMT for $10-25k either.
Atlantic JD
Hey; thanks for your mail. I had to drive to and from Miami today and just now got to my office....man what a nightmare the roads are in today!!
Vero is just north of West Palm; about an hour north. OH YEAH...money is dripping off the people down here. Sometimes it amazes me at what vast amounts of money they have AND waste. Hell, their dogs eat better than me...hehe
I have lived in Florida my entire life, but I was up in the Orlando area until 2 years ago when I moved to the coast in Vero. It is still a small town here, not like Lauderdale, Miami or Palm Beach, but this town is FULL of the arts. The "benefits" in this town during season are very tuned to the rich and famous.
I drive by this house on the ocean most days coming back into my office. It is a 10K sq ft masterpiece for sale....now get this.....45 Million dollars!!!!!!!! Not quite my cup of tea, the house is too venetian style for me, but 45 Million?????
My office is located on the west side of the ocean...DUHHHH. I love the location (very bohemia style) but that is the difference between 700.00 a month rent and 7K a month rent for a small office...
If you get back down to South Florida, let me know. Would love to meet you and share some of the sides of town we all live in...hehe
Merry Christmas and don't forget the eggnog!!!
AMT
Thanks for the kind words about my posts on TaxAlmanac. I learn lots here, too. I am not a policy wonk nor do I mix politics in with my business. I find it challenging enough to try to learn about & understand tax practice. I will say this about the AMT, though. The AMT is s not as simple as the term "flat tax" might suggest. Even if Congress gets rid of the regular tax system, it'll take many, many years before all the effects of that system are gone. I'll be glad if I'm still practicing when that happens. -- Larry Hess, CPA | Albuquerque, NM - Talk to me
Merry Christmas my friend!!
A very Merry Christmas to you Crow....I appreciate getting to know you and this will be a great year coming I hope. Thank you for your posts and for your unique way to make me laugh :) :)
Sandy
Tax Opinion Letters
Thanks for the advise, I have the Circular 230 boilerplate nonsense, I had hoped to get someome to provide more heft, do to speak, I think I'll call one of my lawyer friends and see what they haveRichardleighton 13:45, 19 January 2007 (CST)
LLC Partner Salary
Hi CrowJD I am Ginger Grinnan - CPA in Oceanside CA I entered a question on the LLC_Member's_salary discussion - can you help me figure out what is meant by Sub S loosing "flexibility to allocate" My LLC partners are all paying themselves W-2 income, I know partners can not be employees so I was going to tell them to be a Sub S - but don't want to give them bad advice
LLC Dissolution
Hi, From your posts about LLCs I'm assuming you have some knowledge of these entities. I have been preparing 2 LLC returns (in California) for a few years. Now one of the LLCs went out of business 12/31/06. I didn't know they went out of business until just last week. There are 2 members in the LLC. I'm not sure how to fill out the final return. I assume the assets (only a few) are disposed of on Form 4797? Do I distribute the capital investment (cash) in proportion to what each member initially invested? On the balance sheet, there are still 3 outstanding liabilities - a 3rd party loan, sales tax payable and payroll tax payable. How do I report these on the K-1, if at all? I am not reporting the balance sheet on the tax return. I posted an inquiry on this site a couple of days ago - title: LLC Dissolution. The post has had over 20 views but no replies. Can you help me? Thanks, Robi Robi 18:34, 14 April 2007 (CDT)
tequila
Hey thanks! Jessica
I thank you for writing to me
I thank you for writing to me. It’s very nice.
I don’t agree with your statement that Russian don’t understand American Law. I think it really depends on a person, number of years that this person lives in the US, and also an occupation he/she holds and education. I’ve been a CFO in Russia; therefore I understand the basics that are the same everywhere. Probably only in Israel they do it a little different: Dr on the right and Cr on the left. I was surprised many times, when I learned that an American understand his/her own law significantly less than I do.
On my first year in US one American lady complained, “I paid to insurance company premiums for 15 years, and never took a dime from them. The next day I stopped paying, an accident happened, and they, bastards, don’t want to compensate me.” And just for your information, at my time, nobody bought insurance in Russia, but I simply knew basics. Therefore I do not expect any people to know too much of any kind of law. Also, I do not trust any lawyers as well. If life makes me to go to a lawyer for a consultation, I never trust his words, I always ask him/her to give me a copy from the code, and read it myself, making sure that whatever he/she said is correct. I was also surprised many times, how one law contradict with another, and it gave me understanding of why we need all these attorneys. Yes, I do like to write, and do it a lot. I’m not Dostoevskiy… and Tolstoy … is kind of borings for me. He is too descriptive, and I have to read and read until he gets to the point… But I like to write just for the sake of it. I never publish my writing, because I don’t like negative respond. If I do it for living, then fine, but I do it for pleasure, so I just want to have pleasure only.
I don’t know about a medal. I don’t think that I earned one. I didn’t do anything for people to give me a medal. But what I really think about myself is, that I was born to be an incredible singer. I know that if I’m born here, I would definitely become one. In Russia, when I sing to public, people were simply stunned, and I loved it. I could control a huge crowd of people, and they singed and danced with me. That was great. I didn’t become a singer, because the soviet regime didn’t let me. When I left the country, I was already 35. And it takes decades just to adjust, and make yourself comfortable. I thank you again for your attention. I always look forward to chat.
CrowJD,
I appreciate your comments regarding Preparer Liability. Thank you for emailing to elaborate on your explanation. As always, I look forward to more posts from you.
Sunny
Thank you for your email
My previous email to you got incorporated into someone else's. I think it is because I did not have anything in the Name/Topic field.
Advocacy
"A certain person on a certain recent post asked if it was time to fire his client" What kills me here is that it was not the client who was at fault, but an IRS computer. Having had an auditor send me an IDR that asked the difference between client's Sch C gross and a 1099MISC 'on record' where in fact that 1099 did not exist, another pull a paper from a drawer and tell me it was a directive from the District Director instructing them to audit all of my clients.....this when I told him to work harder.....and several other instances.....I find it should be time to fire the auditor, not the client.
By the way, that one who pulled the 'letter' out later realized he had me confused with another rep. He only told me that when I asked to speak to his manager...he said I could but asked we finish the audit, then started bending over backwards to be nice. After he finished he said I did an excellent job, and that he had me confused with David Someone....stupid fool could have stopped without revealing a name, but no, he continued his idiocy. Next thing I know, he became a field auditor, and not in Butte Montana.
Death&Taxes 07:36, 15 September 2007 (CDT)
Reply to your message to Dr. Jay
Thank you for your message. Yes, they are Doctors and too busy to take care of their finances. I am helping them out as they and their other doctor friends represent a fair chunk of my commission income.
Regards,
Dr. Jay
Thanks from Dr. Jay
Thank you for your message. I almost bought several new homes in Canton and near Marrietta but backed out. I will wait for six months then buy.
I have checked out your website and left you a message there as well. I will pass your web address to a few in Atlata whom I know well.
Regards,
Jay
"Quick Note"
Crow - I am not aware of any CPE courses that go into any great detail about profits interests, etc. - most of my learning has been of the "on the job" variety. If you have access to any of the "journals" (e.g., Journal of Taxation, Journal of Business Entities, etc.) through RIA or otherwise, you can find some pretty good articles on the topic. Wish I could be of more help.
Frank (FTF65)
You are Kind
JD
Thank you for those gracious words. However, I consider your posts and command of the language head and shoulders above mine and most of the others. Keep posting as I enjoy and learn from you.
--Solomon 11:27, 18 September 2007 (CDT)
Thanks. Appreciate that. Ian
Can we schedule a phone conference?
I'd like to get your help on the case I referenced earlier this week in one of my threads RE: Sch E to LLC transfer. The case I'm working on is a lady who inherited a piece of land with her sister, from their father in 1999. In 2006 they sold the land for $6 million, and the tax preparer set the basis for the land at $21K. I have a VERY hard time believing there was a $6 mil appreciation in 7 years, and I think they did not have a stepped up basis. I am trying to get the final or estate return of the father. I don't know the estate rules for that year very well, as estate tax is definitely not my expertise. Regardless, shouldn't there be a stepped up basis, at least to the point of the exemption amounts, of the property?
Please call me to discuss 678-945-0975 Thank you! Cathy Strobeck, CPA
your help
Thanks, JD, for several good and helpful responses. I am in complete agreement regarding the 1065 (which I did not prepare) and have discussed with my client and well documented my concerns in how the 1065 was prepared. I think I mentioned that I had spoken to the preparer and we equally maintain that there will remain questions, concerns until if and when the IRS comes forward and really addresses these hanging LLC issues. I would not use an LLC except for RE, but you guys (attorneys - no offense) seem to love them. Anyway, thanks again and if you happen to know any good attorneys in the Western NC area, please pass along their names. I've been here for over 10 years and have not found/met one that I am comfortable referring clients to. Lynne
Father funded son's business
Son was a sole proprietorship. What is the 'partnership created by state law'? this is a Texas question. Son took $100,000 loan from bank and used the money for the build out and for the purchase of assets. I do not have a break out or detail of how these monies were spent. Son took sales proceeds and I assume paid some of the bills and some for personal expenses. The only idea of sales is the sales tax reports which I do have. Is it possible to prepare a Schedule C for my client showing the sales (from the sales tax reports) and deducting the expenses my client actually paid for and assuming any funds advanced to the son were for business expenses. And then, would I be correct in allocating the original $100,000 between Leasehold Costs and Depreciable Assets and writing them off instead of depreciation and amortization. In other words, would I be remiss in constructing a Schedule C with some estimated amounts? this would be a rather large loss which it is but is it a Schedule C loss or an investment loss where you take only $3,000 a year? Your thoughts, please.
Need you
Good, you're here. Hit the Divorcing clients thread...it's really a legal question. Tanks, JR1
Film writer
The film was "Michael"....his prizewinning book was "Paris Trout." this is hush hush, please.
Sole Prop v sm LLC v LLC as S-Corp for start up
Thanks for asking my opinion. I just hope I added something useful to the thread. It looks like you and the other bright minds on the board have it covered.
It's a good discssion and I like the insight it provided. Thanks for posting it.
TheTinCook 19:22, 7 November 2007 (CST)
Cooks in the Kitchen
I agree. ;-)
Actually, I am glad to get your feedback. If you have any suggestions on how this might be solved, please send them my way!
- Tim Doyle, TaxAlmanac Moderator - Talk to me 18:15, 8 November 2007 (CST)
Mahalo Nui Loa
Thanks Crow for your help and suggestions. I've just returned to my office and saw your post to my User Talk. The bank accounts my dad has, will flow to me outside the will or trust in the event nothing changes over the next several months. I tried to explain to my dad what the trust could do and what it could not do, left some information for him to read and re-read and told him if he had questions let me know and I'd explain better or, if I don't know the answer, I'll find out what the answer is. He was under the impression that the trust would save a bunch of money and keep the state from laying claim to it but had no idea how any of it would work. I basically want him to make an informed decision and not feel he has to have a trust just because he can get one prepared for a discounted price - that old depression mentality kicks into full gear at the words "you can get this for free!" I appreciate your time and help.
Thanks/EA
Thanks, Crow...at this point I've kind of canned the EA idea. Just sitting down to study, memorizing facts...is so useless. It's not about concepts or application which you can't look up, but about facts, which you can. Which is more important? So for now, I really do have better things to do...and with the way things are pointing, I'm beginning to wonder if I might be one of those who just goes and gets a real job one day. Oh, no perish that thought! Jeff JR1
Cir 230 CPE
Thanks for the info. Crow. I was offered an updated CPE course on Cir 230, and I passed on it. I have way over my required CPE for the last two years, and I'm still swamped with work (since March). It sounds like this whole issue is not resolved yet. Natalie 16:19, 19 November 2007 (CST)Natalie
Thank you so much for the information. I was going to start studying for to become an EA in January, so maybe I will bump that up to December. I have been pretty busy with my clients thus far (and raising a little one who is 8 mos now) so going back to school is not in the cards at this point. I want to do everything "right" for my company and my clients, and was a bit worried that I might overstep what I am "allowed" to do, as a I am a non-certified accountant.
Thanks again, you have helped tremendously.
Sasha
Circ 230 Question
Hi Crow, sorry for taking so long to respond. That's an interesting dilemma you pointed out -- I've actually never thought about it before.
Let me start by saying the rules regarding attorney-client privilege and the duty of confidentiality are very complex, and I can't profess to be very knowledgeable in this area. You've got state law statutes and ethical rules interacting with federal administrative rules, and it all gets mind-numbingly difficult to understand.
Anyway, you mentioned that your client told you something about his individual tax return that seems to be in noncompliance w/ the tax laws. If this is the case, I agree that you're likely required under Circ. 230 to advise your client of the noncompliance and its consequences. The Circ. doesn't specify whether this is to be done orally or in writing, but it's definitely a good idea to document for your own files exactly when and how you gave the client the notice required by 10.21.
I'm really not sure about the atty-client privilege issue. It depends in part on whether your client had an expectation that the communication to you would be held in confidence in the rendition of legal services. Not sure that's what happened... hopefully it never comes to point where this communication was requested or demanded. If it comes to that, I'd hire a lawyer to provide advice and contact your state discliplinary board for advice also.
As far as disclosure of confidential information to protect yourself from IRS sanctions, that is a tricky issue. Because you're a lawyer, even though you may be performing "non-legal services" (i.e., preparing tax returns), chances are you're still bound by the ethical duties applied to all members of the bar. Thus, even if the client didn't engage your services as a lawyer (but instead engaged you as a tax preparer), I think as a general rule you'd still have the strictest duty of confidentiality to not divulge things the client told you. So in order to avoid breaching your ethical duties, you'd need an exception to the confidentiality duty.
You might want to see if your state recognizes a "Self-defense" exception to the confidentiality duty. Generally, this permits an attorney to disclose confidential information necessary to defend himself against a charge of wrongdoing in connection w/ representation of a client. See Model Rules of Professional Conduct 1.6. So let's say the Service comes and accuses you of wrongdoing (not complying w/ 10.21). If the situation ever comes down to that, you might be permitted to disclose enough information to defend yourself. But you'd have to be really careful not to divulge too early or too much in a way that hurts your client more than necessary.
Can the client afterward sue you for disclosing? I suppose they could. That's why it's really tough for attorneys who are also tax preparers. We wear "two hats" which clients sometimes confuse, thinking we're acting as their lawyer. From a confidentiality standpoint, the client might be better off w/ a "pure lawyer" who does only legal work. From now on, it'd probably be in your best interest to discuss with your tax preparation clients at the outset or in an engagement letter that you're not acting in the capacity of an attorney, and that communications w/ you are not within the usual atty-client privilege rules. And you might want to expressly state that any noncompliance w/ tax laws you become aware of may be disclosed to tax authorities to the extent required by law. Try contacting your state discliplinary board also if you have more questions. Maybe they can help. Good luck!
