Schedule C prepared by another tax preparer

Hi,

I unexpectedly received a Schedule C from a client that was prepared by another preparer. It's a fairly detailed Schedule C with inventory and significant activity. Obviously this is reported on our client's Form 1040. What's my responsibility in regards to using this as-is, and re-entering it the client's tax return? Is it any different if we received a Schedule K-1 reporting the activity from a partnership?

Thanks!

I view it no differently than a K1, though I'd think the client is an idiot for having another CPA prepare an integral schedule of Form 1040 that you have to duplicate. Keep in mind, we can rely on what is provided to us by clients as long as the information seems reasonable...not auditors!

I don't think that I agree. A K-1 is part of another regarded entity's return. The firm that signs the partnership/S Corp/estate/trust return is responsible for the accuracy of that return, including the K-1s.

If you are signing the 1040, you are responsible for everything in that 1040, including the Schedule C. Treas Reg §301.7701-15(b)(1)

It also begs the question of why the other firm is only preparing the Schedule C, and not just preparing the 1040 and signing if the Schedule C is fairly significant to the return.

I think context might be slightly relevant as well... For example, is it possible this Schedule C was part of a draft tax return, and this client was either disengaged from or jumped firms before the returns could be filed?

If that is the fact pattern, I'd completely disregard the other firm's work.

Did he use the Sch C to apply for a PPP loan?

I don't think that I agree. A K-1 is part of another regarded entity's return. The firm that signs the partnership/S Corp/estate/trust return is responsible for the accuracy of that return, including the K-1s.

If you are signing the 1040, you are responsible for everything in that 1040, including the Schedule C. Treas Reg §301.7701-15(b)(1)

It also begs the question of why the other firm is only preparing the Schedule C, and not just preparing the 1040 and signing if the Schedule C is fairly significant to the return.

I think context might be slightly relevant as well... For example, is it possible this Schedule C was part of a draft tax return, and this client was either disengaged from or jumped firms before the returns could be filed?

If that is the fact pattern, I'd completely disregard the other firm's work.

Thank you for your responses. My line of thought is the same as yours. The Schedule C is significant, but not the majority of the tax return.

The preparer of the Schedule C used to prepare the activity as a partnership, but now it is a SMLLC, so they must have not been disengaged by the client.

However, I am questioning how using the Schedule C prepared by another preparer would be any different than using an excel schedule provided by another preparer, and basically keying the information in. I think we should look it over for reasonableness, but what else can i really do?

Did he use the Sch C to apply for a PPP loan?

Possibly, I'll have to look into this.

I refuse to use a Schedule C prepared by another practitioner. I have NO IDEA what went into the preparation and I am the one that attests to the correctness of the form, not the other preparer. Using that form would be irresponsible and foolish.

...I am the one that attests to the correctness of the form...

As a tax preparer, we are not attesting to ANYTHING. We are responsible to review for reasonableness. If they feel their Sch C is so complex that they engage another party to prepare it, that just decreases the amount of work I need to do. I can rely on the taxpayer's representation that the Sch C as provided is reasonable.
What would be the difference in the client providing a completed Sch C they've prepared themselves? IMO, nothing.
The taxpayer is attesting to the accuracy of the information, not us.

Nonsense. Total nonsense and lazy as hell.

I refuse to use a Schedule C prepared by another practitioner. I have NO IDEA what went into the preparation and I am the one that attests to the correctness of the form, not the other preparer. Using that form would be irresponsible and foolish.

I see your point, but, generally, the Schedule C is a summary of the transactions, similar to what a client (or paid bookkeeper) would provide. A bookkeeper could even provide me with a Cost of Good Sold schedule to be input on Part III of the schedule C. Is this much different than viewing the Quickbooks reports?

I don't think this necessarily makes me lazy by relying on another preparer. This is just time that I'm not billing to the client.
I appreciate your point of view.

When you sign you are stating the return is true and correct to the best of you knowledge. Plan accordingly.

I think we should look it over for reasonableness, but what else can i really do?

This is a lot different than say amending a prior year return to fix something left off or misstated. I would treat this as I would a new client. Ask all the relevant questions, gather all the documentation and bookkeeping, and start from there. Use the draft Sched C prepared by someone else only to help clarify your position.

I think we should look it over for reasonableness, but what else can i really do?

This is a lot different than say amending a prior year return to fix something left off or misstated. I would treat this as I would a new client. Ask all the relevant questions, gather all the documentation and bookkeeping, and start from there. Use the draft Sched C prepared by someone else only to help clarify your position.

I understand what you are saying, but, at what point, is there enough documentation and bookkeeping enough? Do I need cancelled checks and receipts? Like, I said, earlier, many clients will just give you an excel schedule, and I see this at all (5) firms i've worked at. If I ask for the "bookkeeping" and they give me an excel spreadsheet that reports the same information, is that enough? I'm just playing devil's advocate - I know what I need to do.

The preparer of the Schedule C used to prepare the activity as a partnership, but now it is a SMLLC, so they must have not been disengaged by the client.

So the business has a professional who used to prepare the 1065. They would've prepared the financials to prepare the 1065, generating the K-1 which your client reported on their tax return. The only difference now is that the 1065 is no longer required. Logic tells me that the other firm is still preparing the financials and thought it would be beneficial to provide the owner with a completed Schedule C.

So ask the client for the financials prepared by the other firm. I bet your client even has that already.

Nonsense. Total nonsense and lazy as hell.

Wow. I won't bother quoting actual authority relating to attestation responsibility and tax returns because you're clearly not swayed by facts.
If you want to show me the authority supporting a tax professional's responsibility to attest to items in a return, I'll point out where you're misdirected.

Would anyone's answer be different if the OP had asked what they should do if a client returned a completed organizer and no other information? If so, why?

Would anyone's answer be different if the OP had asked what they should do if a client returned a completed organizer and no other information? If so, why?

At various firms, I've had clients return completed organizers for their Schedule C. We entered the information without asking for additional "bookkeeping". I think some clients would question why we are asking for the information when they provided it all in a schedule. ¯\_(ツ)_/¯

Would anyone's answer be different if the OP had asked what they should do if a client returned a completed organizer and no other information? If so, why?

At various firms, I've had clients return completed organizers for their Schedule C. We entered the information without asking for additional "bookkeeping". I think some clients would question why we are asking for the information when they provided it all in a schedule. ¯\_(ツ)_/¯

Exactly.

I would have no problem accepting the information of the Schedule C if everything passed the sniff test.
I was actually on the other end of an arrangement like this forty-some years ago. The owner of the business lived in a different state and the firm I worked for provided services to the business including payroll tax and sales tax preparation, write-up, and the schedule C.

Fair points. How often have we used Sch. C info that the client scratched out on a yellow pad? Many. So whatever rules for attesting to accuracy apply wouldn't be any different.