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Thinking of going 100% probono

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#1
Jake  
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I am 77. Used to do about 65 returns a year as part of a law practice that derived most of its revenues for other matters and that other revenue still runs about $15,000 annually. I referred most of my tax work out a few years ago. I currently prepare 14 returns for elderly legacy clients. I am seriously considering being a non-paid preparer to avoid all the new security and other "requirements". I don't need the income. I might suggest, but not require that they make a donation to a charity. Maybe I can have them reimburse me for my software cost. Or maybe I can just continue to deduct that cost as a general expense. This probono work might be considered a promotional/advertising incentive for estate planning services etc. Does anyone see an issue with that idea?
 

#2
Pitch78  
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As long as it is all part of the same practice, which it sounds like it is, I dont see a problem with it.
 

#3
taxcpa  
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Directing a contribution could be constructive receipt?
 

#4
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Hmm. Does charging them enough to cover software costs allow you to say you are not a paid preparer? Can you deduct the software cost? Don't you need an "Income" hook to hang the expense on? Has your tax preparation service become a hobby?
 

#5
makbo  
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Jake wrote: I am seriously considering being a non-paid preparer to avoid all the new security and other "requirements". [...] Does anyone see an issue with that idea?

Yes. At the very least, you should inform your non-paying clients that you don't take the protection of their confidential data as a serious matter.
 

#6
JAD  
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What an interesting comment. Did he say that he doesn't take protection of data seriously?

If you are really stepping away to relieve yourself of the regulations, can you deduct costs as part of another income stream? You are either in a business or not. You are either a professional preparer subject to regulation or not. You either are doing this on a volunteer basis or not. That is what I would be checking into.
 

#7
Frankly  
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Jake wrote: I am seriously considering being a non-paid preparer to avoid all the new security and other "requirements".

Presumably you work from your house. The security requirements are far more simple than for a firm with an office, lots of staff people, and on-line cloud issues. Security for a home office might be a simple as vetting your wife, locking the file cabinet, password protect the software, and locking the front door.
 

#8
ATSMAN  
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I believe you still need a written security plan as per new IRS rules, even if you are probono??

Anyone disagree with that position?
 

#9
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ATSMAN, maybe. What if, instead of preparing returns on his own software, Jake "looks over the shoulder" of the legacy clients as they prepare their return on software they acquired?
 

#10
ATSMAN  
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SumwunLost wrote:ATSMAN, maybe. What if, instead of preparing returns on his own software, Jake "looks over the shoulder" of the legacy clients as they prepare their return on software they acquired?


If all Jake does is look at the taxpayer as the taxpayer prepares their own return on their own software, I think it might be considered as a tax voyeurism :twisted:

A different security protocal may apply :P
 

#11
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ATSMAN wrote:I believe you still need a written security plan as per new IRS rules, even if you are probono??

Anyone disagree with that position?


Let me assume makbo's role for a change of playing devil's advocate and/or simply being argumentative. The IRS refers to "professional tax preparers" concerning written data security plan. Does "professional" refer to preparing taxes based on compensation, competency, or both?

Now back to my normalcy of posting, I can make arguments for each, and I would not be willing to prepare taxes for free in an attempt to bypass security requirements.
 

#12
makbo  
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JAD wrote:What an interesting comment. Did he say that he doesn't take protection of data seriously?

Yes, by stating that he will not be implementing the most timely, reliable security recommendations.

"The IRS refers to "professional tax preparers" concerning written data security plan. "

The actual law requiring a written security plan is under the Federal Trade Commission, not the IRS. Somewhere the IRS indirectly refers to the FTC requirement, you can look it up if you want. I'm not clear on how the IRS interprets and enforces regulations from other divisions of government. They still can't take away your PTIN, even if you don't have a written data security plan.
 

#13
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makbo wrote:Yes. At the very least, you should inform your non-paying clients that you don't take the protection of their confidential data as a serious matter.


At first I was like "c'mon makbo, I like that your candid, but that's kinda hostile". And I like Jake.

And it's so wise and secure to suggest providing services for no fee at this point in his career.

(Also, he said that security was just part of the reason.)

But now after thinking about, I find myself agreeing.

What is so hard about security compliance that you would not want to do that for them anyway?"

Here's your written policy....

Secure document viewing, encrypted/portal sharing instead of email, wired/fire-walled connection, strong passwords that are changed at intervals, anti-virus and malware protection, 2+ step verification for application access, no access from outside devices like cell phones/laptops without VPNs, locked file cabinets, password protected desktops with locking screen savers, policy only to download files from trusted sources, limited link following and restricted site visiting....

What am I missing?

Wouldn't you do these anyway?
 

#14
ATSMAN  
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They still can't take away your PTIN, even if you don't have a written data security plan.


I am not so sure about that statement. IF IRS determines that you have violated a rule, they do have the option from barring you to prepare tax returns and file for others. I suppose you could mail in "self-prepared" returns but that has its own risks should something bad happen and client turns on you. You may be in a worse position then. Look at the fellows who were stopped from preparing tax returns because of compliance or fraud. It is in the tax blotter.

What is so hard about security compliance that you would not want to do that for them anyway?"


My point exactly, if you want to prepare tax returns for other (paid or unpaid), you owe them some duty that their private data is safe to the extent possible. When I give my personal data at the doctor's office, I have an expectation that it will not be left in the open for others to see!
 

#15
JAD  
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He didn’t say he wasn’t going to take the security issues seriously. He put “requirements” in a quote. Perhaps he is not fond of the overregulation. I don't like people telling me what to do, and maybe he feels the same. You assume the worst and attribute it to him. Didn’t you all have the best security protocols in place before a requirement to put a plan in writing? He asked a broad question about a cool idea that interests him at this stage of his life, and you all are nit-picking.
 

#16
Frankly  
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This security plan stuff is a lot of overreaction to the remote possibility of things happening that almost never happen. And when they do happen it's because somebody did something dumb. Dumb things will still be done, a requirement for a written security plan notwithstanding.
 

#17
ATSMAN  
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From IRS newsletter:

Here is a series of questions tax preparers can ask themselves to assess how secure their office is. The answers can be very important to help preparers protect both their clients and their businesses.
• Are all the places where taxpayer information is located protected from unauthorized access?
• What about other potential dangers such as theft, flood and tornado?
• Are there written procedures that prevent unauthorized access and unauthorized processes?
• Is taxpayer information left unsecured? This includes data stored electronically.
• Did I check desks, photocopiers, mailboxes, vehicles and trashcans?
• Have I taken steps to secure data in rooms in the office or at home where unauthorized access could occur?
• Who authorizes or controls delivery and removal of taxpayer information, including data stored electronically?
• Are the doors to file rooms and computer rooms locked?
• Is there a secure disposal of taxpayer information, such as shredders, burn boxes, or secure temporary file areas for information until it can be properly disposed?

These are common sense questions IMHO that all of us should ask?? I think I am weak on Tornado question? It will blow my place away including the tax papers!!
 

#18
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JAD wrote:He didn’t say he wasn’t going to take the security issues seriously. He put “requirements” in a quote. Perhaps he is not fond of the overregulation. I don't like people telling me what to do, and maybe he feels the same. You assume the worst and attribute it to him. Didn’t you all have the best security protocols in place before a requirement to put a plan in writing? He asked a broad question about a cool idea that interests him at this stage of his life, and you all are nit-picking.


I'm in your camp; the biggest "crime" in the original post was that the wording could lead one to misinterpret his intention. I can sympathize with Jake's situation -- he is winding down his practice and he's down to 14 returns, elderly legacy clients which I would guess he has been hesitant to transition over due to loyalty, family, friendship, or other similar reasons. For all practices, even one this small, there are certain fixed costs of both money and time involved. Big picture -- is it worth it? It's not just the written security plans, it's the software, the E&O insurance, it's the TCJA and the SECURE Act passing at the last minute... the everything.

That said, I would look to make the decision to either transition the clients to another firm (perhaps the one he had farmed out when he pruned his client list in the past; maybe they'd ask him to come in once a week to do those 14 returns?) or to just write up a security plan. Frankly and ItDepends have a great start to it, because the issues for a one-man band are less than a large office.
 

#19
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Frankly wrote:This security plan stuff is a lot of overreaction to the remote possibility of things happening that almost never happen. And when they do happen it's because somebody did something dumb. Dumb things will still be done, a requirement for a written security plan notwithstanding.


This.

It's government CYA so when something happens they can say, "well, we had a rule, it's their fault".

Also, no matter how secure your procedures, one employee (or yourself) will open a document from a sophisticated Russian or Nigerian scammer and, just like that, they have everything they need to print money by filing fraudulent returns.

But let's blame the preparers.
 

#20
ATSMAN  
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Where is Jake? Is he still lurking around?
 

#21
makbo  
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Jake wrote:I am 77.[...] I currently prepare 14 returns for elderly legacy clients. [...] I don't need the income.

None of those things have a bearing on meeting professional responsibilities.

Preparing 14 returns for people who are not members of your immediate family (and who used to pay you the going rate) to me in no way satisfies "non paid preparer" status.
 

#22
makbo  
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ATSMAN wrote:If all Jake does is look at the taxpayer as the taxpayer prepares their own return on their own software, I think it might be considered as a tax voyeurism :twisted:

A different security protocal may apply :P

I actually do this for a good friend of mine. He sits at the computer, logs in to a well-known DIY (online) tax program and gives me a bottle or two of beer while he prepares the return and I make occasional critical comments based on what I see on the screen.
 

#23
makbo  
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ATSMAN wrote:
They still can't take away your PTIN, even if you don't have a written data security plan.

I am not so sure about that statement. IF IRS determines that you have violated a rule, they do have the option from barring you to prepare tax returns and file for others.

No, they don't.

See Sexton v. Hawkins, US District Ct., Nevada Dist., October 30, 2014.

TheTaxBook wrote:"The IRS can suspend from practice any attorney, CPA, or EA that violates the rules and regulations contained in Circular 230. Suspension from practice means the individual is no longer allowed to represent taxpayers before the IRS. Taxpayer representation does not include the act of preparing tax returns for clients. (Loving, U.S. Court of Appeals for the District of Columbia, February 11, 2014)"
 

#24
ATSMAN  
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gives me a bottle or two of beer while he prepares the return and I make occasional critical comments based on what I see on the screen.


IMHO you are a paid preparer not probono
 

#25
makbo  
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ATSMAN wrote:
gives me a bottle or two of beer while he prepares the return and I make occasional critical comments based on what I see on the screen.


IMHO you are a paid preparer not probono

But you yourself said, " I think it might be considered as a tax voyeurism ". I should correct a fact in my original statement -- since my friend no longer drinks alcohol, I actually bring my own beer to his house.

Even if I agreed that I was a paid preparer in this situation (which I don't), there is no place in the software he uses to enter a PTIN and sign as a paid preparer, and even if there was, I don't have his password and therefore cannot enter or change a single thing on his return.
 

#26
ATSMAN  
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makbo wrote:
ATSMAN wrote:
gives me a bottle or two of beer while he prepares the return and I make occasional critical comments based on what I see on the screen.


IMHO you are a paid preparer not probono

But you yourself said, " I think it might be considered as a tax voyeurism ". I should correct a fact in my original statement -- since my friend no longer drinks alcohol, I actually bring my own beer to his house.

Even if I agreed that I was a paid preparer in this situation (which I don't), there is no place in the software he uses to enter a PTIN and sign as a paid preparer, and even if there was, I don't have his password and therefore cannot enter or change a single thing on his return.


We have little time before busy tax season for some fun!

If I was to give my friend some help, I expect him to buy the beer or at least offer to buy!

You are correct that the end usert type software like Turbo Tax or Tax Act has no place to put a PTIN. As a matter of fact I know a fellow who will do the entire tax return on TT or TaxAct, get paid and then they have the taxpayer mail it to IRS and State. He is very popular at the local watering hole and I lost a few clients to him :cry:
 

#27
TY20XX  
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If you considering going Pro Bono, maybe you can try Pay What You Want instead. You can hopefully cover your cost and possibly make a few extra bucks.
 


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