To sign or not to sign return? Very poor records.

[cred65]

Client has three LLC’s that operate in the real estate market. LLC number one operated as a flipper and has filed as an 1120-S through 2010: the other two LLCs are single-family rentals and report on schedule E as disregarded entities through the year 2010.

The companies had maintained their accounting records on QuickBooks in the past up to March 2011 when they individually filed chapter 7 bankruptcy. At this point they quit using QuickBooks and keeping any accounting records, and the rental deposits from all companies were intermingled into the bank account of the S Corp.

The client has attempted to separate the income and expenses by each LLC in order to file 2011 tax returns, but the record keeping is atrocious and I see no way through this other than going back and rebuilding the accounting records in QuickBooks or some other accounting system. However, the client has resisted taking these required procedures in order to prepare their tax returns. However, I have been able to assemble enough data to prepare the individual return that includes the disregarded entities on schedule E but have little confidence in their accuracy.

Question: if I prepare this return can I submit it as unsigned by myself as a paid preparer?

Or is there a special statement or form that I should add to the return informing the lack of sufficient records in the preparation of the return?

Or should I just dump it?

TIA

[Jack from Ohio]

1. NO Not allowed under Circular 230.

2. YES Dump them.

[joelgilb]

You prepare the return, you sign the return!

[Guest Taxed]

>>The client has attempted to separate the income and expenses by each LLC in order to file 2011 tax returns, but the record keeping is atrocious and I see no way through this other than going back and rebuilding the accounting records in QuickBooks or some other accounting system. <<

Do you offer bookkeeping services? Did they keep any paper records?

Perhaps an opportunity for some extra revenue during slow summer months?

[Cathy]

As two of the businesses are rental income, I'm sure your client is well aware of who has paid their rent and who hasn't. I personally operate 3 businesses (mini warehouse rentals, washateria and tax business) and use one Quickbooks account and one bank statement for all three businesses. It's very easy to distinguish the income from one business to the other....expenses as well.

It appears that possibly your client isn't being entirely open and honest with you. Before I would spend my time worrying whether or not I should sign a return, I'd show him the figures you have worked up so far, present an invoice to him and hope for payment, and lastly, send him down the road. If he insists he will fully cooperate with you then, I'd file an extension and work on it when time allows after I get a sizable retainer.

Setting up an online account for his existing business/ personal checking accounts could be very helpful in detrrmining not only the source of his income, but the expenses as well. I would not tolerate this client playing "dumb" with me. He either fesses up and acts responsibly or he walks.

[Jack from Ohio]

My advice again...

Run Forrest Run!! This client will only drag you down into the ugly mire they have created and now want help to pull them out.

Otherwise, get a HUGE retainer, consult with your E&O insurance before starting, and tell them that they MUST follow your instructions or hit the road.

I have little sympathy for people running businesses that pull stunts like... "... At this point they quit using QuickBooks and keeping any accounting records, and the rental deposits from all companies were intermingled into the bank account of the S Corp..."

Just my not so humble opinion.

[kcjenkins]

Unless they pay you enough to rebuild the records to your level of comfort, why should you make their problem into your headache, at best, or real problem, at worst. You don't need to prepare a return you can't feel ok about signing. That is an invitation to become his excuse, and the IRS would never accept that as a legal option either.

[Gail in Virginia]

The only way you can prepare a return and not sign it, is if you are not paid to prepare it. Why on earth would you want to prepare a mess like this for free?

[ILLMAS]

I would insist in recreating the books, bank statements, check and deposit details can be requested from the bank . If your client resists you must insist.

[SFA]

Hi everybody, i haven't been on the forum since April, but as usual, here is a topic that I am dealing with right now. A new client, closed an s-corp in may, 2006. Never filed the final return, never filed a 2006 1040. Says he closed it because the corp went broke (it was a bar/restaurant). Now wants to file his 2006 1040 without including a K-1 from his defunct corporation.

He dropped off all his 1040 paperwork, but NO business records.

Can a 1040 be filed with a disclosure statement? At this point, he is on my call list to pick up his papers and move on to another preparer.

[Jack from Ohio]

Hi everybody, i haven't been on the forum since April, but as usual, here is a topic that I am dealing with right now. A new client, closed an s-corp in may, 2006. Never filed the final return, never filed a 2006 1040. Says he closed it because the corp went broke (it was a bar/restaurant). Now wants to file his 2006 1040 without including a K-1 from his defunct corporation.

He dropped off all his 1040 paperwork, but NO business records.

Can a 1040 be filed with a disclosure statement? At this point, he is on my call list to pick up his papers and move on to another preparer.

You will get more answers if you start a new thread.

[SFA]

Thanks Jack. Actually, I found the answer to my dilemma.

[jainen]

>>I have been able to assemble enough data to prepare the individual return that includes the disregarded entities on schedule E but have little confidence in their accuracy.<<

Either you have enough data or you don't. If you have a little bit of confidence even though you can tell he's obviously a lying troll, go ahead and sign the return based on his unaudited representations. If you have no confidence because the information appears incomplete or inconsistent, tell him what you need and offer to help (at your hourly rate for bookkeeping or whatever is needed). Since he already "has resisted taking these required procedures" there may be nothing you can do for him. I think that's his decision, not yours (assuming you are in business to do business).