Bartender With 2 Kids Who Earns Cash

[Chowdahead]

Woman came into the office today and says she works as a bartender at a local establishment. She had business card with her name on it and title as bartender and the bar t-shirt. She claims that she works cash only, much of it tips. She doesn't have a bank account. Nor does she have a state bartender license (I asked).

She says she earns approximately $22K in the year.

She has children so obviously she would qualify for the EIC. With the IRS being aggressive on EIC claims this year, I want to make sure I get everything right.

She wants to know if I can accept a notarized letter from the bar owner indicating that she is a full-time batender there. I asked her for bank records but she has no bank account. She says she pays all her bills immediately and in cash through bill pay merchants.

How should a situation like this be handled? She has no expenses to claim. And she has no bank records or license, and I don't doubt she tends bar..

[michaelmars]

run away from this, you do have a license to protect

[Jack from Ohio]

Run Forrest RUN!! There is more to the story than she is telling.

[jainen]

>>a notarized letter from the bar owner indicating that she is a full-time batender<<

Ummm--this is too weird even for me.

[ILLMAS]

Somebody coached her on what to tell you, only believe half of what she is telling.

[JohnH]

She gave you her business card.

You should return the favor by giving her HRB's business card.

[joanmcq]

Does the business card say Vista Print on the back? Run away!

[kcjenkins]

"She says she earns approximately $22K in the year."

How convenient that she earned just about the perfect amount for max EIC.

[ILLMAS]

I have nothing against bartenders or exotic dancers, but how could they go to college, law school, own a condo on so little money?

[JohnH]

I'll bet she can refine that $22K estimate right down to the penny if the preparer will just let her see the screen while preparing the return.

[rfassett]

Let it be her choice to go elsewhere, tell her you will prepare the return - but only via paper and mail, that you need to attach the notarized letter, and that you will need to include numerous disclosures about her lack of recordkeeping. Further tell her that you will need the name and EIN of the "employer" so you can include that on the return so the IRS can investigate as to why her boss does not have her on payroll. Keep building this scenario until SHE runs.

[Chowdahead]

I told her I'd call her back yesterday and didn't because I have been leaning against it. Honestly, I have enough headaches to worry about this year. I really don't want to deal with a situation with this many gray areas and unknowns!

My only thought was to see if it were possible to help her get her taxes doe so I figured I'd look into it a bit. If the bar owner issues her a 1099-MISC, this would be more clear cut correct?

[JohnH]

By suggesting the 1099-Misc, you're trying to forge a compromise that has more downside potential for you than upside. She has already all but told you she's inclined to game the system. Your suggestion could be interpreted as a recommendation on how to make it work. The bartender probably isn't dumb enough to actually cooperate, but what if he did? Do you really want to be seen in hindsight as a participant if it blows up?

[jainen]

>How convenient that she earned just about the perfect amount for max EIC.<<

Well, no, and that's one of the weird things. Her EIC would be about $4200, a thousand dollars below max, and offset by $3800 SE tax. So I don't think this is a tax fraud, at least not on her part. I would be willing to help if she has a bona fide tip log.

But for some reason the employer doesn't run his business in the ordinary way. I don't have time for weird stuff right now, so the most I would do is offer to file an extension.

[Jack from Ohio]

I like the recommendations of rfassett.

[JohnH]

Yeah, that low-intensity break-even return would become very interesting if her actual income were closer to $20 - $30K.

[jainen]

>>if she has a bona fide tip log<<

Another weird thing is how his scenario triggers such a suspicious response. As I read the original post, she DOES have sufficient records to file a return and meet a professional's requirement for due diligence. Asking for the EIN would be reasonable for Form 8919 (employer's share of FICA), but not if the purpose is harassment. Or any part of the purpose. In my opinion the notarized letter should be ignored as irrelevant to tax preparation. What a lawyer would call prejudicial.

All eligible returns are subject to mandatory e-file. When I recall how this forum railed against e-file a few years ago, I smile at a suggestion to threaten clients with paper-filing! So the response is starting to look weirder than the scenario.

[rfassett]

>>recommendations of rfassett<<

Another weird thing is how his scenario triggers such a suspicious response. As I read the original post, she DOES have sufficient records to file a return and meet a professional's requirement for due diligence. Asking for the EIN would be reasonable for Form 8919 (employer's share of FICA), but not if the purpose is harassment. Or any part of the purpose. In my opinion the notarized letter should be ignored as irrelevant to tax preparation. What a lawyer would call prejudicial.

All eligible returns are subject to mandatory e-file. When I recall how this forum railed against e-file a few years ago, I smile at a suggestion to threaten clients with paper-filing! So the response is starting to look weirder than the scenario.

Not sure where the complete lack of records and a comment that says "she says she earns approximately $22,000" meets "a professional's requirement for due diligence" but if you say so - but not in my office. And it was her idea to suppply the notarized letter, irrelevant as it might be. But my approach to handling this was to allow the girl to save face and move on without the preparer having to say "get lost". It was never my intent that the return be prepared in this manner.

[Lion EA]

I probably wouldve told her to come back when she receives a W-2 from her employer in hopes that she would move on to another preparer!

[Janitor Bob]

I would follow along the lines of rfassett....Let her know right up front that you can only do this if you ask a LOT of personal questions and get answers in writing and/or signed statements. If she is still OK with it, then start digging...keep asking and requesting proof until either you are satisfied or she leaves and finds someone that asks fewer questions.

If it smells funny, it's usually bad......CYA

[JohnH]

---> If it smells funny, it's usually bad......CYA <---

We know what a correct answer is, or we know the only possible range of correct answers, for 90% of the questions we ask. So we have the advantage of consciously or subconsciously detecting visual clues when a person answers truthfully. That's one of the most important pieces of information you can gain about a person. As you observe how they behave when they're being truthful, your intuition will be more likely to warn you when they're being devious, even if you aren't consciously aware of the reason at times.

It doesn't take long in this business to begin picking up on subtle clues. Sometimes it's a client who won't make eye contact at important points in the conversation. Or we ask them a simple question and they begin asking us questions in response, rather than give a direct truthful answer. Sometimes it's the way they sit in their chair or maybe how their eyebrows move. How they hold their shoulders or what they do with their hands. Hundreds of possibilities.

I'm convinced that I've made a few mistakes when I followed my intuition, so I know it isn't perfect. But I know that virtually every time I failed to follow it, I later regretted that decision. The facts alone are enough to send this client packing, whether you do it diplomatically or undiplomatically. But it's clear you also feel uneasy for reasons you haven't stated or you may not even be aware of. Your intuition is usually more than just a "hunch". You should follow it.

[Gail in Virginia]

I think that I would also be a little suspicious that this might be a "shopper" for the IRS checking to see if the preparer is actually asking appropriate questions and documenting the answers for the EIC due diligence.

[GeneInAlabama]

I think that I would also be a little suspicious that this might be a "shopper" for the IRS checking to see if the preparer is actually asking appropriate questions and documenting the answers for the EIC due diligence.

Good point.