Bruce Raskin CPA wrote:

- quote -

Yeah, I don't think we know whether they were or not. This
case, obviously, was between two private parties and the IRS
wasn't involved as a litigant. And/or, as Ed suggests in his
third point, there ~might~ have been some behind-the-scenes
leverage going on. In any event, I share your observation
that it is somewhat astounding that the return was filed in
the first place.

But, that said, the "carelessness" I had in mind was in
(accidentally???) handing over Block's internal memos on
this matter (in the absence of an enforceable subpoena
requesting them). As I've often editorialized, you need to
clean out those files and SHRED (prior to subpoenas
arriving, of course) any "smoking gun" documents. The
problem here is that Block had in fact signed the return
including the bogus deductions, and I suppose they did so
with the expectation of being able to prove that they had at
least ~warned~ the client of the questionable items. Thus,
they HAD to retain at least some of the prejudicial
documents in order to cover their OWN butt. This, in my
view, is NOT an appropriate way to practice!

Had I been the judge, I probably would have thrown a heavier
book at Block. But, obviously, the plaintiff didn't warrant
much sympathy. <g
MTW

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- quote -

I am amazed that they even prepared the return When a
preparer signs a return he/she is stating that based upon
the knowledge of the preparer, the return is correct. By
signing the return, Block is as guilty as the taxpayer for
taking deductions that are improper.

Careless is an understatement here. I am surprised that
Block wasn't nailed by IRS on this one. But then, do we know
that they wern't?

The only other thing I will say is that Block sure is
consistent in their prep work. <g
Bruce Raskin, CPA
Small Business and Individual Tax and Accounting Services

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MTW wrote:

- quote -


First, had the preparer been a CPA, under most state laws
the client likely could have pushed for state sanctions
against the CPA in question. The only good news for said
CPA is that the client in this case isn't a very sympathetic
victim <grin> , and so it's very possible that not much
action might be taken. But the client clearly was mad
enough that I suspect he would have pushed matters (heck, he
likely paid more to litigate and appeal this case than the
damages would have been) and likely some blemish would have
appeared on the CPA's record.

Second, the above would change rather dramatically both for
a CPA and a non-CPA if, rather than the civil case at the
taxing agency level going against the client, the client had
eventually prevailed. While the court clearly would not
allow a shift of the taxes and penalties from the client to
Block, had the client prevailed on the tax matter, I suspect
the court would have been much more likely to have
considered having Block pay for any legal and representation
fees arguably created by the disclosure.

Third, I think the preparer effectively "confessed" to an
actionable item against him by the IRS when he revealed the
"fraud" issue and the fact that he though he "should have
turned the client in" for this matter. In essence, it's
admission he signed a return that he believed was
fraudulent. While we don't know, it's very possible the IRS
used that as "leverage" <grin> in getting more information
from the preparer.

Fourth, I think Block was ultimately saved by the fact that
they could document they had strongly advised the client
against taking these positions, and he pushed the matter in
spite of such advice. That made the "victim" even less of a
sympathetic figure <grin> . I suspect that had the preparer
simply "caved in" when the first objection came up from the
client, the results again might not have been as favorable.

Fifth, even though Block "won" the case, the cost of
defending this case no doubt dwarfed the fee they got from
it--which they ended up having to refund anyway.

--
Ed Zollars, CPA
Phoenix, Arizona

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Check this out - the devious client vs. the careless (albeit
conscientious) preparer: Sorenson vs. H&R Block (1st Cir.
2004) unpublished opinion dated 8/20/04. The following link
might work:

http://www.ca1.uscourts.gov/cgi-bin/...ON=03-2268.01A

I have no great point here other than that this case makes
for interesting reading. <g
MTW

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