[Anonymous]

Hi everyone, it’s been a while since I have posted here but would love some help.

My dad made improvements to his basement last year to turn it into an apartment. He quickly found a tenant and because Denver’s rents are insane high, he is somehow getting $950 per month. I believe the rental period began March 1st so he has $9,500 in rental income.

I have been doing his taxes for a few years now. In asking me to do his taxes for 2015, he asked me to tell him what his refund would look like if he didn’t claim the rental income. I let him know quickly that I would not be part of him committing tax fraud. I also let him now that because he can depreciate the cost of improvements as well as take deductions for portions of property tax, etc. he would get some relief there.

I now found out that he didn’t pull permits for the improvements. I looked at zoning for his house and his rental improvements are not allowed. So now I am at a catch-22. We can’t depreciate the improvements because they’re not permitted. However, he is also taking in rental income that he needs to report.

I am going to lay all of this out for him but ultimately I know that he’ll want to refrain from claiming the rental income. How do I tell my dad that I refuse to be part of this?

[fuzyfro89]

You cannot control whether he does the taxes “correctly” or not. WHat you can control is whether you are a part of it in the event that he decides to misrepresent something.

I would lay out what you already told him (assuming you did your research and those facts are true). If he decides to misrepresent, then you have to say you cannot sign your name on it. Maybe some other CPA can, but not you…

[fsugirl2005]

Even if the properties are not permitted, you would still have to report the income on his tax return.

Let's remember the Al Capone issue. He was imprisoned for tax evasion simply because he failed to report the income from his ILLEGAL operations. So even if it's illegal, you still have to report the income.

AUD - 10/21/16 (75----07/2010 expired)
FAR - 10/28/16
BEC - 11/2016
REG - 01/2017

Using Gleim CPA Review, Ninja Audio, Ninja Book

[Tncincy]

Well sometimes it might sound like a lie, and believe me lying is never good, so DON'T DO THAT. But there is a there is a thread that says something like the stupid things said by family, co-workers, etc. There is nothing wrong with him asking, but count it as a stupid thing. Even though you are licensed, he is still responsible for that return. By all means if he refuses to be truthful, turn him away, but he's trying to know in advance what the refund is, but you can tell him in advance the consequences of not reporting all income. Most folks think because of the license, we know more loopholes than the average person. So no DON'T LIE, yes STUPID to not report all income. There are no known loopholes, there is no advantage, the penalty is not worth it. No Lying just answer the question.

It begins with a 75
Been here too long as a cheerleader....ready to pass

[alboreland]

You sound like you want to do the right thing and that would be to call the buildings department so they can shut down his operation and pile on the massive fines.

He needs to watch out because there are alot of locals know this is illeagal and will report him once they find out.

[ohiostategirlcpa]

Divulging confidential client information to the buildings dept is an even faster way to losing one's CPA license. Better stick to tax evasion 🙂

F91 A95 R90 B94
CMA since 2015
(Gleim books/PDFs, MCQs, SIMS)

[Missy]

LOL not sure how this derailed to offering to help pay or dropping a dime to the buildings department, or the pros and cons of doing taxes for family but to me, the bottom line is this…..if anybody asked me to lie on their behalf or if I truly believed they were going to, I would quickly and without fanfare remove myself from that particular situation. Its not for me to play judge or jury when it comes to someone else's actions only to decide where my personal limits are and not make exceptions even for family.

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[Anonymous]

Everyone's covered ‘most everything already…so all I'll contribute is this:

I know of a guy locally who has his CPA, JD, if I remember right he's passed the Bar and is a lawyer, etc. He had everything going for him for a great career. But now if you Google his name, like looking for his Facebook or LinkedIn as a prospective employer, one of the first results is his felony tax fraud conviction along with his aunt and uncle for a fraudulent return of his aunt and uncle's that he filed. Everyone talks about what could happen, but it really truly does happen. I don't know the full story; I just was looking up local CPAs around my age, and saw that this was one I probably didn't want to have known as too close an acquaintance, cause that's what he's now known for. Sad thing is, who knows if he even knew what his aunt and uncle were covering up, but whether he knew or not it's hard to convince the authorities that you don't know when it's your aunt and uncle that live nearby. But no one has to know the whole story, they just know he's got a felony out of it now and now he's got a ruined career out of it. It's not worth that.

[mhueycpa]

Fill out the forms and don't sign the return. This way you make him happy by “preparing” the forms, but since he's not paying you and since your not signing forms who's to say you are responsible for filing something that's inaccurate?

THE 300 CLUB WILL DO JUST FINE!

[StKkWkFH5KTw]

definitely just let him know it's not worth it to jeopardize your license for this.

[Author]

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