Indecent Proposal

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#1
AlexCPA  
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A prospect called my office the other day asking me to help him commit mortgage fraud. The conversation went like this:

Prospect: I had a lot of business this year but also a lot of deductions, and I want to get a loan in a year so I have to show income, can you help me with that?

Me: What do you mean exactly? If you mean help with filing complete and accurate tax returns, then I can help. Otherwise...

Prospect: Well, you're going to go off of the expenses I give you, right?

Me: Yeah, this is not going to be a fit because...

Prospect: :::Hangs up:::

What's your indecent proposal prospect story? :)
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#2
ATSMAN  
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These sorts of requests/shopping around are not unusual. I had a referral propose that I would simply prepare the return and calculate the taxes based on whatever he gives and that if I did not want to sign that is fine,because he was going to sign it himself after copying the figures on paper forms or have his son file on Turbo tax?? I guess he just wanted me to be the calculator so that the return does not get flagged for mistakes.

Often I get requests to not show legit business expenses on a tax return to boost net gains so that taxpayer may qualify for loan, EIC etc.

My deal is simple. If it is legit income or expense, it is going on the tax return. If you don't like it find someone else.
 

#3
Frankly  
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If you don't like it find someone else.

The unscrupulous tax trade thrives on those clients we decline to serve. Any way to help them become compliant works against that trade segment.
 

#4
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Not so much an indecent proposal but perhaps a cautionary tale, from when I worked at a small CPA firm. Long-standing client, recently divorced, was not a very good businessman and his returns showed minimal income. However, he had to refinance a loan and the mortgage broker "helped" him qualify for it, so that he could finance his next business venture. Unicorn farming or something. Anyway, ex-wife hired a hot-shot divorce attorney and we had to provide boxes of paperwork to them. No problem at all with our work. Client kept good records and we did a nice job. Trouble is, the other side also got hold of the loan application. Divorce court judge looked at the returns prepared by us, looked at the mortgage application and decided that his income was better-reflected by the number on the loan application. Ouch.
 

#5
ATSMAN  
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Frankly wrote:
If you don't like it find someone else.

The unscrupulous tax trade thrives on those clients we decline to serve. Any way to help them become compliant works against that trade segment.


I hear you but most of us probably would like to avoid a "bad apple" with a 10 foot pole because if we are not successful to make them compliant by telling them right and wrong we could get it trouble. We can't force them to be honest!

I had a client that did not disclose to me a 1099-C he received. Once the CP2000 arrived he was all bent out of shape and fortunately we were able to get a penalty waiver. I told him he must disclose to me all tax related documents. Let me be the judge what is relevant. About two years after that same issue but this time the 1099-C was for his wife. This time as soon as he mentioned the problem, I reminded him of our conversation and promptly disengaged. I don't need client's like that.
 

#6
makbo  
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Frankly wrote:The unscrupulous tax trade thrives on those clients we decline to serve.

They also thrive on Congress' refusal to authorize regulation of tax preparers.
 

#7
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many years ago received an audit confirm from a bank stating they were auditing at random several loans and the tax returns that the applicants submitted and would I confirm that I prepared the return that my client submitted.

looked at the return and could see the font was off. Client added 50K to his schedule C. funny thing is he followed it through and the SE tax was right etc...

I chose to simply not respond to the confirmation and dropped the client.
 

#8
belle  
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Long time clients - the 2018 return was finished & ready to efile. They came to pick it up, and stepped in my office to "discuss" changes because they wanted to buy a second home and needed to show more income (or, less expenses).
I looked at them incredulously and said nope, that is NOT how it works in this office. The return was efiled as originally prepared.
I'm downsizing & firing a few clients - they go the letter.
 

#9
ATSMAN  
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I am sure others have experienced this as well. You can sort of tell the people who will make these unreasonable demands at the last moment etc. by the questions they ask over the course of the year. For example I had a client who was always complaining that his "bar buddy" who made about what he made paid considerably less in taxes. I must be missing some deductions etc. Then there was another client whose girlfriend had a house and office cleaning business that could not provide the records of income to justify a higher EITC, inspite of me showing what IRS requires. This lady would call tax preparers in town to shop around the highest EITC she could get.

Once you get that uneasy feeling about a client or prospect, you need to get your guards up, lest you should get burned. :cry:
 

#10
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Great thread. So typical. And adding the "last minute" twist to it is classic as well.

They give you that, "hey man, your not going to do this to me at the last minute are you?" Like YOU are the cause of their tax balance when filing legitimately. Or it's your fault it's late because they have to go elsewhere now.

I actually have this stuff in my engagement agreement - with specific examples (cooking books for lenders and also estimated vehicle expenses). It's not that I feel I need it for legal troubles - but it's the ace in the hole when it comes to them blaming you for last-minute related ethics issues.

Either way - what a load of crap. There is no reason to give a second thought to their troubles related to "you not playing ball" with them.

Anyway, my worst one was a brand new client who wanted me to omit an offshore property sale. He said, "I'm not the type to break the law but I like to use every possible loop hole to get out of as much tax as possible. It's part of the game of course!". And he requested that I prepare his tax return with what ultimately led to an understatement of about $500,000 of income. Though he didn't make it sounds as such, but that was really what he was suggesting.

I sent him away of course. Looking back, it's possible he was an IRS inspector. He came in shortly after I hung my shingle and I know there is one in my area that does this stuff.
 

#11
makbo  
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ItDepends wrote:new client who wanted me to omit an offshore property sale. He said, "I'm not the type to break the law but I like to use every possible loop hole to get out of as much tax as possible. It's part of the game of course!".

What he really meant was the same thing as this alleged quote from a famous basketball player. It's the grease that makes our "voluntary" income tax system work -- the idea that you can foist your fair share of taxes off on the other "loser" taxpayers if only you are clever enough.
"What Kobe Bryant Reads

"I made a point of reading the referee's handbook. One of the rules I gleaned from it was that each referee has a designated slot where he is supposed to be on the floor. If the ball, for instance, is in place W, referees X, Y, and Z each have an area on the court assigned to them.

When they do that, it creates dead zones, areas on the floor where they can't see certain things. I learned where those zones were, and I took advantage of them. I would get away with holds, travels, and all sorts of minor violations simply because I took the time to understand the officials' limitations."
"
 

#12
Preppie  
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In person prospect meeting with a woman who (as of 2016) had not filed taxes in more than 10 years and was throwing away all the notices from the IRS and Virginia until money started disappearing from her bank account. She was a real estate agent getting issued 1099s for between $150K and $200K each year, and the IRS was creating SFRs and levying.

While burning through half the box of tissues on my desk with crocodile tears and telling me what an honest person she was, I asked if she had any rental property. Her response: "Yes, but they pay cash so I don't have to claim it."

When I explained we could not move forward unless she claimed the rental income she declined to further the engagement. She offered to pay me for the time spent, but I explained initial consultations are free.

She left $300 cash in my waiting room.
 

#13
ATSMAN  
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She left $300 cash in my waiting room.


Have you watched the 80's classic Pretty Woman? There is a similar scene but in reverse :P
 

#14
Andrew  
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A long time client marked organizer question about foreign account with a "no foreign accounts" for years. A few years ago, we met again and she told me her husband had been receiving a foreign pension ... for years. They also had rented out a cabin in a foreign country ... for years. And of course, had had a foreign bank account ... for years. I forgot what my response was. Anyway, she left and came back a few weeks later. She had gone to a different firm for advice and this firm had told her that her preparer should just mark the box on schedule B with "no foreign account". I refused and she went to the firm that was willing to mark the box "no foreign accounts", and not report the pension and cabin rental income.
 

#15
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Andrew wrote:She had gone to a different firm for advice and this firm had told her that her preparer should just mark the box on schedule B with "no foreign account".


Pffff - smell ya later.

Wow on the other firm.

Unreal.
 

#16
ATSMAN  
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We ask taxpayer the question and mark the answer they give us. We tell them what the law is and if they want to lie, it is on them! If I have reasons to believe that they are concealing something that should be reported, I will not prepare the return.

It happened once with a Polish couple who recently immigrated to US. I don't think they appreciated our tax laws!
 

#17
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Just wondering: if a client reports ALL income but wishes NOT to deduct all business expenses - where is the requirement in the Code to deduct all expenses? If Client wants to voluntarily pay more tax isn't it their choice?

The only sticky area would be for the sub-$15K/year income client where increasing net earned income (by NOT claiming some business expenses) could increase the EIC.
 

#18
AlexCPA  
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While I'm sure that the Treasury would not mind receiving additional tax revenue, I'd assume that a lender evaluating the income tax returns for underwriting purposes would want to see both the income and expenses reported properly.
Even more of my antics may be found on YouTube:
https://www.youtube.com/channel/UCXDitB ... sMwfO19h7A
 

#19
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Synchros wrote:Just wondering: if a client reports ALL income but wishes NOT to deduct all business expenses - where is the requirement in the Code to deduct all expenses? If Client wants to voluntarily pay more tax isn't it their choice?


If a client asks us to do this and he tells us that its to show more income for a loan - I feel like we are conspiring (or something, I'm not a lawyer) to commit bank fraud.

We KNOW that the client is scheming by omitting facts on his tax return. The client acting illegally and we are willfully helping him/her by omitting facts on a document that is critical to the bank's evaluation process.
 


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