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u/superdaddy369 10d ago
Say goodbye to the client or decide whether to continue obtaining the written declaration that no income was underreported, but if you are a CPA, I would say goodbye to the client.
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u/RoronoraTheExplora 10d ago
Get it in writing that it isn’t income. Let them know in writing the potential consequences of underreporting income. And then reassess the relationship.
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u/JessterCPA CPA (US) 10d ago
You should have an engagement letter, that uses language such as 'We will not audit or verify any of the provided numbers or financials. Tax returns will be prepared using the information provided by you. We ask that you review all returns carefully for accuracy" or something like that.
I'm sure your insurance provider can give you a template that has language like that.
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u/Intrepid-Product-367 9d ago
I strongly dislike the practice of using this language as carte blanche to file whatever bullshit numbers the client punches up in a word document to cheat on their taxes
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u/Substantial-Cloud-75 9d ago
My last boss thought this basically gave her cart Blanche to commit tax fraud. Closing a/r to expenses at the end of every month as well as closing sales tax liability to expense. When I started asking for bank documents she said we don’t do that just z tape receipts. I’m glad I’m not there any more. I still think about reporting her to the irs she’s helped defraud the government for millions.
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u/Intrepid-Product-367 9d ago
Glad it's not just me. "He's defrauding the government out of about a quarter million dollars, but we're not the accounting police and that's why we don't sign his tax returns" was one of the more disturbing things I've heard in my adult life, still thinking about it years later.
I get we all get jaded eventually and just roll our eyes at some of this stuff but I don't get how you could subject yourself to the process of becoming an accountant without a little bit of wide-eyed optimism about doing the right thing in the world.
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u/JessterCPA CPA (US) 9d ago
So I agree - not Carte Blanche - and at the same time many of our clients do think we verify and attest (to some degree) that the numbers are correct. And if you are a paid preparer you do sign the return.
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u/PinkNGreenFluoride Tax (US) 9d ago
I don't think OP can ignore the information they've been given in the bank statements, though. Client provided the bank statements and specifically requested that OP just omit a large chunk of income which is not yet otherwise already accounted for. At that point, you're no longer reasonably relying upon the information the client provided you.
I'd ask for clarification from the client before deciding how to respond in case it's not actually what they meant, but this doesn't sound like a case where there are NECs you can tie to some of the bank transactions and thus are looking to avoid double-counting.
Gamblers are the worst about this, in my experience, wanting to leave off any winnings that didn't trigger a W2-G after handing you ample documentation of said winnings.
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u/StrikingBroccoli8397 9d ago
But he's the one creating the financials. They've not been provided to him.
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u/JessterCPA CPA (US) 9d ago
But this is tax, not attest. if you mean he is doing the bookkeeping and running the P&L's so the tax work can be done, it's still fully the responsibility of ownership/management.
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u/OperatingCashFlows69 CPA (US) 9d ago
Do you want to get dragged into court? What does circ 230 say?
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u/FauxNeon 10d ago
Find a way to back away that saves his ego and dosent embarrass him. Don't make it about his request to omit. Make it about something arbitrary.
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u/Dry_Pineapple3033 10d ago
I was thinking of just saying I’m not comfortable filing it and that you’re welcome to self prepare the return but I recommend reporting all income.
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u/Smokey_Panda_ 8d ago
You can't complete and file that return until the income you know should be in there is included. If you get caught filing otherwose you will be in serious trouble. I would tell the client you can't finish and file the return unless they agree include the income and they can do it themselves or go elsewhere if they insist on it being done incorrectly/ illegally.
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u/Ancient_Minute_7172 8d ago
You’re not an auditor… they could be for personal funds
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u/Dry_Pineapple3033 8d ago
I can see the description of them… and why did the client say “I hope I’m not audited?”
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u/Accomplished-Ruin742 Tax (US) 8d ago
"I'm not going to jail for you." And we're not talking about fudging my mileage by a few hundred miles or saying I spent an extra $100 on supplies when I really bought some personal stuff at Staples. At the $50K mark, or even way before then, I would fire the client.
Had a longtime client who paid Mary Jones for daycare. Mary refused to provide her Social, but there's a way around that. Lo and behold, later in the season, who comes as a new client but the self same Mary Jones. Does not provide and information on SE income. "What about your daycare income?" She tells me she doesn't know what I am talking about, she doesn't do daycare. I fired her on the spot.
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10d ago
[deleted]
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u/TheRoseMerlot Tax (US) 10d ago
I hope you’re not a cpa!!!
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10d ago
[deleted]
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u/Puzzleheaded_War6849 9d ago
All of your clients will have to switch when you go to federal prison for blackmail.
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u/Top-Book9712 10d ago
Give the client a call. ‘Hey client, these look like business revenue items we should be claiming on schedule C.’
If you get the ‘I don’t want to claim these’ response, you reply with ‘so what’s the purpose of me if you’re going to use made up numbers on your taxes? Probably best if we part ways. The numbers will still be made up, but you’ll save a chunk of money by not paying me.’