estimates on a tax return

Have a client.

She wants to move to an expensive apartment.

She provided me with the dollar amounts for her income and expenses for her Schedule C that are materially correct,
but they are not not perfect or final.

I can send over a return that says 'draft' to her and then she present to whomever she wants to.

I have an engagement letter signed saying the returns are for the IRS and taxing authorities and that she indemnifies me from
using them for anything else.

Appreciate thought on this, would you send out a return to a client as draft under these circumstances?

I would; it's not an unreasonable request. If she is self-employed, she doesn't have the pay stubs that apartments usually request and thus must provide tax returns.

Her 2019 Sch C net income is expected to be higher than 2018 I imagine? Otherwise I might encourage her to use the as-filed 2018 returns as the 2019 returns have not been finalized.

I would provide it directly to her, with a big watermark on all pages "DRAFT - NOT COMPLETE", and I would remove my paid preparer info from the return(s) as these are not final returns and I know she is going to distribute them for an out of scope reason.

I would also put in an email that the provided draft was prepared from information provided by her, is not final, and may change based on additional information not yet provided by her. I would also reiterate and reference the engagement letter in the email. Then, save the email to file.

Great advice - much appreciated!

If your client needs a preliminary Sch C for moving into an expensive apartment, who is looking at that Sch C??

I can understand when someone is trying to qualify for a mortgage loan etc. but that is not the case. If you want to spend more money for rent, I would think your cash flow matters more than your estimated P/L on Sch C.

I too have provided preliminary return copies to some clients with the understanding that I am not responsible if they file it by copying the figures. There is a big watermark across the forms.

I would tread lightly based on what you describe. All of my returns given to a client have one of two large watermarks. It's either "Client Copy" for returns finished and ready to be filed/e-filed or it's "Projected 2019" for a tax projection prepared before year's end in 2019.

A few things come to mind. First, you have knowledge from your client that it will be used to obtain some type of credit approval for the apartment. What reason is there for you to provide her with a Draft Copy" using preliminary numbers other than to aid her in this matter? Have you provided her with a draft tax return using estimates in the past? The second is what are you going to do if your client provides final numbers which, just miraculously, report a lower Schedule C profit?

I would never give a client preliminary numbers regardless of whether I thought my engagement letter protected me. It wouldn't matter if it was my mother. Sorry mom. I'd have the client do whatever is necessary to finalize the numbers so that the return I provided was final. If she couldn't, that's her problem and I would never allow a client to put the proverbial monkey on my back. If the client complained, I'd send her packing in a New York minute.

It's possible you could have two versions of the tax return (draft and final) floating around to be used by your client in whatever manner suites her best. I would strongly advise against it.

I agree with Taxalmancer - not worth the risk.

Good point - ty! i'm going to tell her she needs to have the numbers final....and also....i be disinclined if a tax return is sufficient without writing the 3rd party asking irs for a transcript.

Suppose client was looking for the expensive apartment last December, or November? Would she/prospective landlord be requesting a Schedule C when the year isn't complete? No. You'd give them the completed 2018 return. 2019 isn't done until it's done. Until then they can use the most current Sched C which is 2018. It's an unreasonable request.

i hear you...but in 2018 she had serious medical problems from a car accident and virtually no earnings.....she said she's fine using final numbers....and i told her it's likely whomever remit tax return to will want a transcript...so let's hurry and file.

In all my years renting, I never had to supply a preliminary Sch C. 99% of the landlords run a credit check that shows if I was late in my payments etc. For commercial rentals they want the tax return transcript or a "certified" copy from CPA.

this is like a 5k/mo apt...but i told her they're likely going to want a transcript.

this is like a 5k/mo apt...

Must be some apartment.... I don't think I have seen monthly mortgage payments that large

Have a client.

She wants to move to an expensive apartment.

She provided me with the dollar amounts for her income and expenses for her Schedule C that are materially correct,
but they are not not perfect or final.

I can send over a return that says 'draft' to her and then she present to whomever she wants to.

I have an engagement letter signed saying the returns are for the IRS and taxing authorities and that she indemnifies me from
using them for anything else.

Appreciate thought on this, would you send out a return to a client as draft under these circumstances?

Isn't the Engagement a request to obtain credit - from a Landlord? If you are licensed in a state that requires a "firm license" in order to render an opinion of "assurance" (audit, review, compilation) - you must first have the requisite license. Each Year when I renew my CPA licenses - the Boards of Accountancy - have a statement that "must" be answered "did you render any opinions on any financial statements"?
You are a CPA - how are you going to answer that question, at renewal ?

IMO don't do this or anything like this!

1) You are helping her to "scheme". Unethical.
2) It is damaging to the party that provides the lease.
3) If the party is a bank, you are helping the client to commit bank fraud.
4) Knowingly helping someone do this could leave you liable if your client becomes delinquent in payments.
5) It is beyond the scope of what you do as a tax preparer
6) I doubt your E&O would cover it.

I've done an estimated Schedule C and I stamp it as such. Mark on the top with a pdf editor ALL DATA IS ESTIMATED.

You don't have to fill out a Schedule C - do a profit loss statement using the same data and write on there it's an estimate.

It's not fraud if you note it's not real.

I've done an estimated Schedule C and I stamp it as such. Mark on the top with a pdf editor ALL DATA IS ESTIMATED.

You don't have to fill out a Schedule C - do a profit loss statement using the same data and write on there it's an estimate.

It's not fraud if you note it's not real.

The OP stated:

"She provided me with the dollar amounts for her income and expenses"

And you are suggesting putting together a P&L for her without going through her bank statements and doing the bookkeeping, etc?

I dont like it.

Why doesn't she (the client) just do that?

There are companies that do this type of independent auditing for banks and leasing companies and they are very thorough and very expensive.