This sounds like an hourly engagement. I started working for a large firm that does this kind of work and they require payment up front. I find in a majority of the cases that the client either has knowingly not made full disclosure of the work involved or is oblivious of the time needed to do the work.
So, quoting by the year without knowing what each entails is like getting a mechanic to diagnose and give you a quote for your car in your garage that is “making a noise”.
The mechanic won’t do that and neither should we. The client got himself into the mess, and getting out costs time and expertise which equals money.
Get a retainer for your best guess, and then work it off hourly, when it gets to a minimum level like $500 ask for another retainer.
Make the engagement agreement cover your time should the client decide to pull out and demand a refund when you are 90% complete. This happens more often than I would have thought.
I have found that people who don’t pay their taxes:
often don’t pay their other debts
procrastinate
try to make their problems your problems
fix blame on those who help them
are not bad people, but choose not to manage their own affairs
Good luck.
Marc
From:
Sent: Saturday, October 04, 2008 11:12 AM
To:
Subject: Re: [taxchat] Hasn't filed a tax return since 1999
Chuck,
Would you work it down by an hourly rate or by return? I am inputting all of his handwritten records into QuickBooks. I will have to file state returns in
DonnaDonna L. Loeffler, CPA936 Church Avenue
St. Charles ,MN 55972
(507) 251-8119dllcpa@hbci.com The information in this message, and any files transmitted with it, is confidential, may be legally privileged, and intended only for the use of the individual(s) named above. Be aware that the use of any confidential or personal information may be restricted by state and federal privacy laws. If you are not the intended recipient, do not further disseminate this message. If this message was received in error, please notify the sender and delete it.IRS Circular 230 Disclosure: Unless expressly stated otherwise in this transmission, any tax advice contained herein, forwarded with or attached to this message was not and is not intended to be used, nor may it be relied upon or used, by any taxpayer for the purpose of (1) the avoidance of any tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions, or (2) promoting, marketing or recommending to another party any tax transaction or tax-related matters that may be addressed herein.
Chuck Warman wrote:
Donna,
I have a $225 minimum for a 1040. So $2250 would be my jumping-off point.
In my experience, returns involving retailing take an inordinate amount of
time. If you can tell that he has decent records, I’d ask for at least a
$2500 retainer, work it down to about $500, then get another one.
Chuck Warman, CPA
------------
From: taxchat@yahoogroups
Donna L Loeffler CPA
Sent: Saturday, October 04, 2008 10:15 AM
To: taxchat@yahoogroups
Subject: Re: [taxchat] Hasn't filed a tax return since 1999
John,
I am still working on the engagement letter for this client. It is almost
time to come to an agreement about prices. He is balking. Now, I'm getting
skittish about continuing the work. I have noticed on this group that
people have talked about rates. I'm wondering if anyone out there could
give me a ballpark figure for what they would charge for 10 years of taxes.
He has rental property in
investments.
Donna
Donna L. Loeffler, CPA
(507) 251-8119
dllcpa@hbci.
The information in this message, and any files transmitted with it, is
confidential, may be legally privileged, and intended only for the use of
the individual(s) named above. Be aware that the use of any confidential or
personal information may be restricted by state and federal privacy laws.
If you are not the intended recipient, do not further disseminate this
message. If this message was received in error, please notify the sender
and delete it.
IRS Circular 230 Disclosure: Unless expressly stated otherwise in this
transmission, any tax advice contained herein, forwarded with or attached to
this message was not and is not intended to be used, nor may it be relied
upon or used, by any taxpayer for the purpose of (1) the avoidance of any
tax-related penalties under the Internal Revenue Code or applicable state or
local tax law provisions, or (2) promoting, marketing or recommending to
another party any tax transaction or tax-related matters that may be
addressed herein.
Donna L Loeffler CPA wrote:
I really appreciate your thoughtful responses to all of my questions.
He will appreciate that I don't have to file those earlier years. As far as
an engagement letter goes, I get engagement letters from all of my clients.
I have already gotten a retainer from him, but we haven't agreed on prices
yet. I'm thinking I'm going to charge him by the month--that way, he will
hurry up and get me everything I need. He tends to give me stuff
piece-meal.
I just called the IRS. I have to submit a 4506T to get the tax return. The
unfortunate thing is that she said they probably don't have it as far back
as 1998. He didn't file in 1999, according to her. It is pretty hard to
find a starting point. If he only had personal property depreciating, I
wouldn't worry about it, but that real property should have a lot of
depreciation left.
Donna
Donna L. Loeffler, CPA
(507) 251-8119
dllcpa@hbci.
The information in this message, and any files transmitted with it, is
confidential, may be legally privileged, and intended only for the use of
the individual(s) named above. Be aware that the use of any confidential or
personal information may be restricted by state and federal privacy laws.
If you are not the intended recipient, do not further disseminate this
message. If this message was received in error, please notify the sender
and delete it.
IRS Circular 230 Disclosure: Unless expressly stated otherwise in this
transmission, any tax advice contained herein, forwarded with or attached to
this message was not and is not intended to be used, nor may it be relied
upon or used, by any taxpayer for the purpose of (1) the avoidance of any
tax-related penalties under the Internal Revenue Code or applicable state or
local tax law provisions, or (2) promoting, marketing or recommending to
another party any tax transaction or tax-related matters that may be
addressed herein.
John Stevens, Equi-Tax wrote:
Donna,
IRS Policy 5-133 says that the IRS only wants the past 6 years for a
nonfiler, so I would file 2002-2007. The adjusted basis on the real estate
will include depreciation “allowed or allowable”, so the basis should be
adjusted even for the missing years. One thing you could do, however, is
file Form 3115 for 2002 and claim the depreciation that was missed on the
2002 return. Keep in mind that Policy 5-133 is just a policy that IRS
follows. It’s not law, and they can change it. One of the reasons for the
6 year aspect of it is that, until recently, wage and income information has
been available online (easily retrieved by IRS employees) for only the past
6 years, but they now are able to easily access information back to 1999,
and by next year will be able to easily go back 10 years. I’ve been
wondering whether they might change the policy, but so far they haven’t.
As a practice management procedure, I always get a substantial deposit from
multiple-year nonfilers, and a signed engagement letter. It can be a good
niche business, but you need to protect yourself. Nonfilers often don’t
like paying taxes or their accountants, or anybody, for that matter. My
experience is that most nonfilers experienced some kind of event in their
life that threw them a curve (divorce, drugs, alcohol, gambling,
self-employment, etc). Many sincerely want to straighten out their taxes,
but often wait until the IRS or a state agency backs them into a corner, or
levies on their paycheck or bank account, or files liens. Many will follow
through with you, but some won’t, so that’s why you want to get some money
up front so you don’t wind up spending a lot of time fruitlessly.
John Stevens, EA
Stevens Tax & Accounting, Inc., dba Equi-Tax
651-773-5000
FAX 651-457-4529
equitax@unique-
www.equitax.
CONFIDENTIALITY NOTICE: The information in this message, and any files
transmitted with it, is confidential, may be legally privileged, and
intended only for the use of the individual(s) named above. Be aware that
the use of any confidential or personal information may be restricted by
state and federal privacy laws. If you are not the intended recipient, do
not further disseminate this message. If this message was received in
error, please notify the sender and delete it.
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed
by the IRS, we inform you that any
communication (including any attachments) is not intended or written to be
used, and cannot be used, for the purpose of (i) avoiding penalties under
the Internal Revenue Code or (ii) promoting, marketing, or recommending to
another party any transaction or matter addressed herein.
____________
From: taxchat@yahoogroups
Donna L Loeffler CPA
Sent: 10/01/2008 12:35 PM
To: taxchat@yahoogroups
Subject: Re: [taxchat] Hasn't filed a tax return since 1999
Thank you, John, for the information. So far, the IRS hasn't done
anything. Just the State has filed an SFR and that was for 2004.
So, what I understand is that I shouldn't file anything older than 2002.
However, should I calculate the depreciation for the "missing years" and
continue to depreciate as though he filed those years? He has a retail
business and he has residential rental real estate.
Donna
Donna L. Loeffler, CPA
(507) 251-8119
dllcpa@hbci.
The information in this message, and any files transmitted with it, is
confidential, may be legally privileged, and intended only for the use of
the inividual(s) named above. Be aware that the use of any confidential or
personal information may be restricted by state and federal privacy laws.
If you are not the intended recipient, do not further disseminate this
message. If this message was received in error, please notify the sender
and delete it.
IRS Circular 230 Disclosure: Unless expressly stated otherwise in this
transmission, any tax advice contained herein, forwarded with or attached to
this message was not and is not intended to be used, nor may it be relied
upon or used, by any taxpayer for the purpose of (1) the avoidance of any
tax-related penalties under the Internal Revenue Code or applicable state or
local tax law provisions, or (2) promoting, marketing or recommending to
another party any tax transaction or tax-related matters that may be
addressed herein.
John Stevens, Equi-Tax wrote:
Donna,
IRS Policy Statement 5-133 pertaining to nonfilers says that you only have
to file the last 6 years’ returns, which means that you would file for
2002-2007. If, however, the IRS filed “Substitutes for Returns” (SFR) for
any period prior to 2002, I would prepare “Corrected Returns” (the
taxpayer’s original returns) for those periods to replace the IRS’s SFR’s,
in order to start the statutory running of the Collections Statute
Expiration Date (CSED), and possibly to lower the tax calculated on the
SFR’s by claiming deductions and possibly changing filing status and
claiming extra exemptions for dependents. Note that if the IRS filed SFR’s
the Corrected Returns need to be sent to a special address, depending on
whether he was self-employed. You can get that address from the IRS.
John Stevens, EA
Stevens Tax & Accounting, Inc., dba Equi-Tax
651-773-5000
FAX 651-457-4529
equitax@unique-
www.equitax.
____________
From: taxchat@yahoogroups
Donna L Loeffler CPA
Sent: 09/30/2008 5:55 PM
To: taxchat@yahoogroups
Subject: [taxchat] Hasn't filed a tax return since 1999
I have a client who hasn't filed federal or state income tax returns
since 1999. I am going to order the 1999 tax return from the IRS.
However, I would like any tips from anybody as to what to do and what
not to do before I ask the IRS for copies of anything.
He has a notice from that state that they filed a return for him for
2004. They want the taxes they calculated.
I'm in the middle of a sales tax audit for this guy for 2004-2008. So,
it is really hard to get 2004 done without having the previous years
done first.
I know I sound really disorganized. I feel like I am--I have been
inputting into QuickBooks like crazy, just trying to get a grasp on all
of this financial information that he has been giving me. He gives me
it in pieces as he finds it.
--
Donna
Donna L. Loeffler, CPA
(507) 251-8119
dllcpa@hbci.
The information in this message, and any files transmitted with it, is
confidential, may be legally privileged, and intended only for the use of
the individual(s) named above. Be aware that the use of any confidential or
personal information may be restricted by state and federal privacy laws. If
you are not the intended recipient, do not further disseminate this message.
If this message was received in error, please notify the sender and delete
it.
IRS Circular 230 Disclosure: Unless expressly stated otherwise in this
transmission, any tax advice contained herein, forwarded with or attached to
this message was not and is not intended to be used, nor may it be relied
upon or used, by any taxpayer for the purpose of (1) the avoidance of any
tax-related penalties under the Internal Revenue Code or applicable state or
local tax law provisions, or (2) promoting, marketing or recommending to
another party any tax transaction or tax-related matters that may be
addressed herein.
____________
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