A Future Case of Tax Fraud

[FDNY]

The quiet of a Sunday afternoon was shattered when I receive a call from a longtime client, she knows I work everyday this time of the year.  She sold a 4 family apartment building last May and received a 1099S for 1.05M.  Basis left is about 68K, she never paid the estimated tax I calculated.  After expenses, money went foolishly into buying a new personal residence and payoff of another family residence, all of it.  The conversation begins with "I know you're conservative, but could you make this out so I pay no tax".  I felt like I was talking to Max Bialystock (Zero Mostel), "you're an accountant, it's got count in it's name, move around a few decimal points".  Of course I declined, so she said she will find someone else because she can get invoices for improvements, good luck on producing the cancelled checks.  Was I ever relieved that I don't need to deal with this.  Almost sorry I included the depreciation schedule in her package because I would love that call from her new accountant.  Maybe it will be Leo Bloom (Gene Wilder) because he is going to need that blue blanket.  Come to think of it, the final scene of the movie took place in a prison.

[SFA]

WOW

[JohnH]

Chances are she will find someone who will prepare the return for her.  She may go through one or two candidates before she figures out what she needs to tell them in order to get her desired result  And chances are she will get away with it.  But if she does get audited, it would not be pretty to be in the middle of this, even unknowingly.  It is always smart to dig deeply when a new client shows up on the doorstep with a complicated situation and without a clear explanation for why they left the last preparer.   

[RitaB]

32 minutes ago, JohnH said:

Chances are she will find someone who will prepare the return for her.  She may go through one or two candidates before she figures out what she needs to tell them in order to get her desired result  And chances are she will get away with it.

Sadly, this is absolutely the truth.  Same thing with the people we laughed at preparing their own returns.  99% will get away with the errors. 

Hey, I ate a vegetable yesterday, and drank eight glasses of water.  Not filtered thru coffee grounds either.  It will change your life.  Carry on.

[JohnH]

So, what exactly is the point of drinking water not filtered through coffee grounds?  Water needs to be filtered.  Don't you know all the disgusting things fish do in water?

[Pacun]

1 hour ago, JohnH said:

Chances are she will find someone who will prepare the return for her.  She may go through one or two candidates before she figures out what she needs to tell them in order to get her desired result  And chances are she will get away with it.  But if she does get audited, it would not be pretty to be in the middle of this, even unknowingly.  It is always smart to dig deeply when a new client shows up on the doorstep with a complicated situation and without a clear explanation for why they left the last preparer.   

You are right, she will find someone and maybe they will never be audited.

When I get new clients, and I see that the previous preparer deducted a lot of items. I ask "Did you get the refund from both places?" if they say yes, I tell them they are very lucky.  I hope you are audited because if I were an auditor, I would audit your return and for sure you would get full refund. When they start telling, me "well I didn't tell my previous preparer to put all those expenses"... I tell them "yes but you go to those places because people tell you they give good refunds. About these crook places people say they will get you a big refund... they don't tell you these guys are very honest and you should come and have your taxes prepared. In any event, I don't know what you told the previous preparer last year and if I am not mistaken, you want me to prepare this year's return so let me work on that and I will tell you your situation for this year. For sure, it will not be like last year because I prepare taxes as accurate as possible and maybe you want to reconsider and go somewhere else" A lot of people ask for their paper and I wish them luck. I add before they live "If you ever want to the do your taxes correctly, we will be happy to prepare them for you". Some people come stay or come back a couple of years later.
 

[ILLMAS]

Sadly we will never know the outcome

[Catherine]

1 hour ago, ILLMAS said:

Sadly we will never know the outcome

Unless it's egregious enough to make headlines.  Then we can break out the popcorn!  

[RitaB]

16 minutes ago, Catherine said:

Unless it's egregious enough to make headlines.  Then we can break out the popcorn!  

We can only hope!  I have a client who says his buddy's preparer writes off $800 a month for advertising expense for his buddy because his van has a business sign on it.  If I knew he knew what he was talking about I'd be blowing a whistle, you betcha, and breaking out the popcorn, the "Jello shots," AND the "cough syrup".

[jklcpa]

3 hours ago, RitaB said:

Hey, I ate a vegetable yesterday, and drank eight glasses of water.  Not filtered thru coffee grounds either.  It will change your life.  Carry on.

Buy royal jelly, it cures everything!

[FDNY]

58 minutes ago, Catherine said:

Unless it's egregious enough to make headlines.  Then we can break out the popcorn!  

Someday I just may find out as her brother and ex are also my clients.  I'll report back in 3 years.  I did warn her after our conversation to not commit tax fraud as she has a municipal job that could be in jeopardy if convicted.  We'll see if she has a conscience.   I'll  have plenty of popcorn, homemade wine, Jello shots, and cough syrup at the ready as I don't think she heard me.

Thank you everyone for confirming my decision to stay away.  My description of this case isn't even the whole story.  Building was gifted by her father to her before I took over 20 plus years ago.  She unwisely over the years pillaged the building through mortgages and re finances not spending the money on the building (she does have an extensive shoe collection).  I pride myself on keeping clients out of financial tangles, this is one of my greatest failures. 

[Yardley CPA]

The sad part about this is what Pacun mentioned, they will find someone to prepare the return and they may never get audited.  That's the state the IRS is in these days and its unfortunate for all of us who do abide by a high level of ethics (ok, maybe I abide on a lower scale than the rest of you.   ).  More often than not, we hear of these types of returns being filed with no repercussions.