client phone call

[JimTaxes]

tells me

 

• trying to buy a house
• needs tax return for mortgage company
• says w-2 shows 21,000 for job as pizza delivery
• says he made 14,000 on top of that in tips
• told him about tip reporting.. he told me it was done
• wanted me to pick up 14,000 unreported tip income, i suppose to qualify for loan
• did not feel comfortable about this. suggested he talk to employer about tip reporting and i passed

is how i handed it reasonable

 

[Jack from Ohio]

22 minutes ago, JimTaxes said:

tells me

 

• trying to buy a house
• needs tax return for mortgage company
• says w-2 shows 21,000 for job as pizza delivery
• says he made 14,000 on top of that in tips
• told him about tip reporting.. he told me it was done
• wanted me to pick up 14,000 unreported tip income, i suppose to qualify for loan
• did not feel comfortable about this. suggested he talk to employer about tip reporting and i passed

is how i handed it reasonable

 

This is what he gets for avoiding taxes on the tips he made, but did not report.  His employer is going to tell him to take a hike.  It would cost the employer money, to change the W-2.  His avoiding tax puts him AND his employer at risk with the IRS.

You did good!!

[JimTaxes]

THANKS.!.. i meant to say he did not report them to the employer..  i was leery of doing this return.. I want to help and be kind but picking up 

$ 14,000 in other income that I knew would be part of a loan approval decision made me concerned. 

[BHoffman]

FYI - form 4137 is used by the employee for unreported tip income.  

[BulldogTom]

Just playing devil's advocate here....why not prepare the return.   Lots of employees don't have tip reporting at their jobs.   There is a form for it.   See post above.   The taxpayer wants to pay taxes on money he earned, why not prepare the return correctly for him.

P.S.  - I think you are correct about his motives, but it will be interesting to see if the following year he tells you he does not have any tip income.

Tom
Modesto, CA

[Lion EA]

Does he want the paper return NOW for his loan. And, will he tell you he made a mistake when it's time to e-file? Or, if he's not a client from last year anyway, will you even see him again after handing him a paper return for his mortgage? I'm busy enough that I'd have sent him on his way, too. Follow your gut.

[JimTaxes]

my big concern was if the loan went bad and they came after me for not verifying the $ 14,000

[JohnH]

I wouldn't think twice about doing this return for him.  My first thought is "I'm not touching it."  So no need to keep thinking...

[JimTaxes]

John.. are you saying you would or would not?

[JohnH]

Sorry for being obtuse.  If someone made a request like this, I'd tell him "I'm not touching it."

[mircpa]

It is pretty clear this guy wants to pay to avail loan & inclusion of tips as income would make him eligible for loan. Had the loan issue not there I don't think he would have paid taxes. Just ask him from how many past years had he making tip money which was ever reported.

[Yardley CPA]

9 hours ago, JimTaxes said:

my big concern was if the loan went bad and they came after me for not verifying the $ 14,000

We're not responsible to verify it, are we?  If the client freely provides the information, great.  If the client does not provide the information and we inquire..."did you make any tips?" and they say no, that's the extent of our "verifying?"  No? 

I understand this situation is a bit different in that the client provided the information after the fact.  I'm just looking to ensure we have no obligation to verify anything beyond making general inquiries to satisfy us?

[Catherine]

If your gut says "no" then the answer is NO and that's it.  Second-guessing yourself if you did the right thing will only distress you.  Let me simply say that I have never, EVER, regretted turning down a client whose situation did not "feel right" (for whatever reason).  But I surely have regretted ignoring that feeling, more than once!  Some of those losers took a couple of years to really get rid of.  Generally, my big question to myself with this type of client is why I agonized over firing them for as long as I did.  Usually with a stern self-admonition to listen to my gut the next time!

[Roberts]

It isn't our job to verify the income.

It's completely reasonable for tip income to not show up on W2s as not all tip income is required to show up there.

You aren't liable if the client lied to you. 

It's not wrong to refuse to do their return. As Catherine said, if it feels bad in your gut, don't do it. You aren't under an obligation to work for them. When I hear someone wants to file MFS so that they can avoid making payments on a loan does the same thing for me.

 

 

[Lion EA]

And, we ARE obligated to ask more questions if we feel anything we receive from a client (paper or verbal) is not complete, correct, or otherwise leaves us needing more information/leaves us with more questions. The "known or should have known" proviso.

I, too, do NOT take on new clients if my gut tells me they are not telling me the whole story. And, I work to rid myself of such current clients when my gut acts up. Women might be better at trusting our instincts. But, we all see clients bare their financial souls to us, so we also get a feel for when clients are holding back.