Recreating Accounting Records for Filing Back Taxes

[quincy]

I don't think that quincy was implying that a bookkeeper and an accountant would be covered by the same policy type, rather, he was stating that errors and omissions policies are available for both.

Thank you, Zigner. That is exactly what I intended my post to illustrate.

 

[Taxing Matters]

Just to clarify a bit, if a bookkeeper does not have the authority to sign checks, the bookkeeper cannot be held responsible for non-payment of trust fund taxes. Why?, because if the bookkeeper does not have the authority to sign checks, the bookkeeper has no ability to pay the trust fund taxes.

That is not correct. It is possible to still be personally liable under IRC § 6672 for trust fund taxes owed by corporation or other entity without actually signing the checks or even having the authority to sign checks. For example if the person has the power to direct someone else in the organization to cut the checks that person might still be liable for those taxes. I am well familiar with that as I did trust fund investigations and recommended assessments in a lot of cases during my time at IRS, including setting up persons for the trust fund recovery (IRC § 6672) penalty who did not have signature authority on the checks. Authority to sign checks was but one of many factors that I had to consider when determining who was liable. There is much more to it than just check signing authority.

 

[LdiJ]

That is not correct. It is possible to still be personally liable under IRC § 6672 for trust fund taxes owed by corporation or other entity without actually signing the checks or even having the authority to sign checks. For example if the person has the power to direct someone else in the organization to cut the checks that person might still be liable for those taxes. I am well familiar with that as I did trust fund investigations and recommended assessments in a lot of cases during my time at IRS, including setting up persons for the trust fund recovery (IRC § 6672) penalty who did not have signature authority on the checks. Authority to sign checks was but one of many factors that I had to consider when determining who was liable. There is much more to it than just check signing authority.

We are not talking about a scenario where the OP would have the authority or power to direct someone to cut and sign checks to pay for trust fund taxes. The only thing that the OP is going to be doing is to help the guy get his books in order so that he can go to a tax professional to catch up on his income taxes.

There is very little risk in doing that. I am frustrated that several people basically scared him off doing a job that is likely well within his capabilities.

 

[Taxing Matters]

We are not talking about a scenario where the OP would have the authority or power to direct someone to cut and sign checks to pay for trust fund taxes. The only thing that the OP is going to be doing is to help the guy get his books in order so that he can go to a tax professional to catch up on his income taxes.

There is very little risk in doing that. I am frustrated that several people basically scared him off doing a job that is likely well within his capabilities.

The degree of risk depends on what exactly is involved and what the OP is going to do. I have no idea of the complexity of the "client's" business, the state of the records, etc. Just because a business might be relatively small does not guarantee that it has simple issues. I also do not know the knowledge and skill of the OP. The OP is still just a student, and I have no idea how far along he/she is in the accounting program. As a result, I certainly could not say that this is a risk free undertaking for the OP, or even say that it is a low risk undertaking. The OP ought to at least consult a professor at his school who knows his/her skill level fairly well about whether this is something he is really able to tackle and whether he should instead refer the "client" to someone with more skill and experience.

 

[LdiJ]

The degree of risk depends on what exactly is involved and what the OP is going to do. I have no idea of the complexity of the "client's" business, the state of the records, etc. Just because a business might be relatively small does not guarantee that it has simple issues. I also do not know the knowledge and skill of the OP. The OP is still just a student, and I have no idea how far along he/she is in the accounting program. As a result, I certainly could not say that this is a risk free undertaking for the OP, or even say that it is a low risk undertaking. The OP ought to at least consult a professor at his school who knows his/her skill level fairly well about whether this is something he is really able to tackle and whether he should instead refer the "client" to someone with more skill and experience.

Which is something that several of us agreed that he should do. However, I will say that even if all that he is able to do is to data enter the transactions from the credit cards and bank statements into QuickBooks, then he will still have provided a valuable service and savings to his client...and will accomplish a task that a tax professional is highly unlikely to want to take on.

 

[Taxing Matters]

Which is something that several of us agreed that he should do. However, I will say that even if all that he is able to do is to data enter the transactions from the credit cards and bank statements into QuickBooks, then he will still have provided a valuable service and savings to his client...and will accomplish a task that a tax professional is highly unlikely to want to take on.

Well, assuming he/she does a good job of it. After all, the old computer adage of "garbage in/garbage out" still applies to using accounting and tax software. And unfortunately I have seen some garbage product from a few bookkeepers over the years.

 

[quincy]

He should consult with his professor(s) and he should seriously think about insurance if/when he starts working for others.

I agree with Taxing Matters that we do not know enough to judge the difficulty or extent of the work intended to be completed for the elderly man and cannot, therefore, judge the risk. We also do not know how knowledgeable AccountingStudent is except to know that he came to an advice forum for direction (although seeking advice is always smart).

I wish AccountingStudent good luck with his studies.

 

[HRZ]

I would be concerned that if "friend" has been failing to file federal returns for a number of years with multiple business operations that the sky is about to fall in on him and he is unwilling to pay the cost of good solid attorney plus CPA to do damage control with IRS---one of my attorney friends does such work...and wow his billing rate...and hundreds of hours of time to sort out enough details to even barter a resolution with IRS ...if OP's friend has shopped his problem around to several CPA firms he may think he can resolve it for a lot less....not a smart move for a greenhorn to jump into said pool as an IC when the blame game is likely to start big time.

 

[LdiJ]

I would be concerned that if "friend" has been failing to file federal returns for a number of years with multiple business operations that the sky is about to fall in on him and he is unwilling to pay the cost of good solid attorney plus CPA to do damage control with IRS---one of my attorney friends does such work...and wow his billing rate...and hundreds of hours of time to sort out enough details to even barter a resolution with IRS ...if OP's friend has shopped his problem around to several CPA firms he may think he can resolve it for a lot less....not a smart move for a greenhorn to jump into said pool as an IC when the blame game is likely to start big time.

You are overthinking the work of a bookkeeper. However, the bookkeeping has to be done before much consultation can be had with a tax professional or a tax attorney. As far as I am concerned there are three steps. 1) Get the bookkeeping in order as best as possible. 2) Get the tax returns prepared to see where one stands. 3) Consult a tax attorney if the results of preparing the tax returns look dire.

You do not spend money on a high priced attorney or CPA to do step 1 and generally not to do step 2 unless you just have that complicated of a tax return that a CPA is necessary. And to be honest, if the CPA is in a medium to large firm, its going to be somebody really low on the totem pole who actually prepares the return. The CPA will just look over it and sign it.

 

[quincy]

I would be concerned that if "friend" has been failing to file federal returns for a number of years with multiple business operations that the sky is about to fall in on him and he is unwilling to pay the cost of good solid attorney plus CPA to do damage control with IRS---one of my attorney friends does such work...and wow his billing rate...and hundreds of hours of time to sort out enough details to even barter a resolution with IRS ...if OP's friend has shopped his problem around to several CPA firms he may think he can resolve it for a lot less....not a smart move for a greenhorn to jump into said pool as an IC when the blame game is likely to start big time.

I agree, HRZ, that this does not sound like work for an inexperienced student.