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ratherbereading

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Maybe I misunderstand, but isn't 415 compensation limited to reasonable compensation for services rendered to the employer? Thus making their 415 limit zero? So regardless of their W-2, if the reasonable compensation is $0, then any allocation is over the 415 limit. If that's correct, you do have issues with going over the limits.

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RatherBeGolfing, I put in my variation of the hypo "Assume the TPA is not a . . . preparer of any tax return" because I believe a preparer must disassociate herself from a tax return she believes to be false.

But assume the TPA's employee is an ASPPA member.  Does the report and warning described in my hypo meet a member's duties under ASPPA's Code of Professional Conduct?

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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48 minutes ago, Belgarath said:

Interesting exercise, but to be honest, I would never dream of questioning or "calling out" the service of the daughters, based upon the statement by the CPA that they don't work there. I feel like that crosses a line (what line, I'm not sure) but I frankly don't think it is my business to question that. Now, if the CLIENT had told me the daughters don't actually work there, that's a different circumstance altogether. Then I'd just resign as TPA. Can't correct egregious fraud under VCP!

P.S. - question for the CPA's out there- is the CPA violating any professional ethics by telling this to the TPA?

I agree, I take my client's representation to me at face value and I don't cross that line either.  If a client tries to involve me in a tax avoidance scheme or  fraud, I would just resign and move on. Also, I don't think any of the CPAs I work with would tell me "oh by the way, Dr. Payne is giving his kids a salary so they can defer but they they never actually work for him".  Even if that was the case, why volunteer that information in the first place?

 

 

 

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Belgarath, what if the observer is an employee of the TPA (and not a shareholder, partner, member, or other owner of the TPA)?  The employee tells everything to the TPA's owner, who says the TPA firm won't do anything further.

Has the TPA's employee discharged her personal duties under ASPPA's code?

 

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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20 minutes ago, Fiduciary Guidance Counsel said:

RatherBeGolfing, I put in my variation of the hypo "Assume the TPA is not a . . . preparer of any tax return" because I believe a preparer must disassociate herself from a tax return she believes to be false.

But assume the TPA's employee is an ASPPA member.  Does the report and warning described in my hypo meet a member's duties under ASPPA's Code of Professional Conduct?

Even if the TPA is not actually preparing the return, you still have the issue of control of work product.  The short answer would be you can't perform professional services if you have reason to believe that your work will be used to violate or evade the law.  So you can't do the work but wash your hands of it just because you prepare the return.  Circular 230 also includes language regarding errors or omissions from any return, not just the returns prepared by the practitioner.

 

 

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The point about misuse of an ASPPA member's work product is why I put in my hypo that the warnings about the client's wrongdoing are in the report.

Circular 230 has a provision that might apply to a "practitioner" even if she is not a preparer.  Here's the text:

A practitioner who, having been retained by a client with respect to a matter administered by the Internal Revenue Service, knows that the client has not complied with the revenue laws of the United States or has made an error in or omission from any return, document, affidavit, or other paper which the client submitted or executed under the revenue laws of the United States, must advise the client promptly of the fact of such noncompliance, error, or omission.  The practitioner must advise the client of the consequences as provided under the [Internal Revenue] Code and regulations of such noncompliance, error, or omission.

 

So is the report's warning that the plan might be misadministered and tax-disqualified enough?  Or must a practitioner say something more?

 

But even if it is something more, doesn't section 10.21 (quoted above) mean that the only person a non-preparer practitioner must communicate to is her client?

 

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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For what it's worth, apparently the only thing enrolled actuaries are required to report to the government is the knowledge that an actuarial certification intended to be filed with the government has not been filed (and not any known tax evasion or fraudulent activities).

Of course, there ought not to be any active involvement by the enrolled actuary in any fraud or tax-evasions.

Always check with your actuary first!

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I agree. I would say you are also not protected against government action against you even if the client signs a "hold harmless" letter for your actions. Meaning if you knew that your actions were assisting a client commit fraud, you are now stepping into the same sinking boat that your client is in. When it sinks, the hold harmless letter won't stop you from sinking too.

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John Feldt, while I agree with the idea that a TPA should not go along with its client's wrongdoing, how would the Internal Revenue Service make the TPA's employee responsible if the evidence shows she rendered correct advice (and further explained all tax consequences that would result if the client insists on the wrongdoing)?

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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37 minutes ago, Fiduciary Guidance Counsel said:

John Feldt, while I agree with the idea that a TPA should not go along with its client's wrongdoing, how would the Internal Revenue Service make the TPA's employee responsible if the evidence shows she rendered correct advice (and further explained all tax consequences that would result if the client insists on the wrongdoing)?

Pardon my jumping in here - fascinating thread and a variety of positions....

I think the answer to the question posited above is "if you KNOW or SHOULD HAVE KNOWN that you were facilitating your client's fraud, you have liability - EVEN IF you explained to them that what they were doing was incorrect.  Merely completing the form with data you KNOW or SHOULD HAVE KNOWN to be incorrect causes you to incur liability."

Now, keep in mind, if there is an honest disagreement, or a reasonable basis for doing what they are doing, an appropriate CYA may protect you - but if it clearly is not appropriate, then your facilitation of that act can be problematic.

PLUS, it'll ruin your reputation for being a "professional" at what you do.

Personally, I'd address it delicately with the client.  A discussion around "pay is "comp" for plan purposes ONLY IF it's for work performed.  "Hours" means hours ACTUALLY WORKED (or in some limited circumstances, that which you should have worked and been paid for), and the like.  Depending on the circumstances, I'd even say to the client, "your accountant said..." and have a discussion about the merits of maintaining the plan as a tax qualified plan.

If all else fails, I'd probably fire the client (and I know, business is business, but you won't get many new clients if you let an existing client do something really really wrong.

Let me posit an extension of the hypothetical:  Suppose you do nothing and the client get's audited and this is discovered, plan disqualified.  Client talks to accoutnant, accountant say "I TOLD THE TPA - experts in the field, and they did NOTHING."

You think people might be looking to you for "malpractice" as "experts" in the field who knew something was amiss and didn't bring it to their attention?

By the way, under any scenario, the accountant is toast....

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  • 5 months later...
On ‎1‎/‎6‎/‎2017 at 3:21 PM, Belgarath said:

Interesting exercise, but to be honest, I would never dream of questioning or "calling out" the service of the daughters, based upon the statement by the CPA that they don't work there. I feel like that crosses a line (what line, I'm not sure) but I frankly don't think it is my business to question that. Now, if the CLIENT had told me the daughters don't actually work there, that's a different circumstance altogether. Then I'd just resign as TPA. Can't correct egregious fraud under VCP!

P.S. - question for the CPA's out there- is the CPA violating any professional ethics by telling this to the TPA?

Later reply but I totally trust the CPA on this. He's very close to the client, he signs the 5500 for him, does all the payroll, so he is definitely telling the truth.

4 out of 3 people struggle with math

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Well, if you are completely convinced that the CPA is giving you accurate information, you could always adopt the policy of "Brave Sir Robin" - "When danger reared its ugly head, he bravely turned his tail and fled..."

I'm just shocked that a CPA, (regardless of whether or not such disclosure violates any professional ethics) would actually tell this to anyone. Oh well, fortunately not my problem. Good luck with this client relationship.

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