What If Your Tax Professional Vanishes?

Yesterday, a new client called me. It seems that his tax professional (we’ll call her Jane Doe) vanished. She’s not answering phone calls (nor returning messages–and her voice mail is now full), nor returning mail, nor returning faxes. My client thought an extension was filed (with a payment), but his records are with Ms. Doe, and my client really doesn’t want to have to pay for a tax return twice. What are his options?

First, I hope that nothing has happened to Jane Doe. That said, it appears that her ability to prepare tax returns has vanished with her vanishing. Clearly if she’s not around she’s not going to be preparing any returns.

My new client asked me several good questions:

1. Is my extension valid? It is (and an extension was filed–see below); the extension is for you, the taxpayer, and is valid no matter who prepares your return.

2. Can I verify that the extension was filed? Yes, you can. You can either call the IRS (800-829-1040), request a “Tax Account Transcript,” or you can authorize a tax professional to obtain it on your behalf. (My new client signed a Tax Information Authorization and I ordered transcripts from the IRS. The extension was filed.)

3. I don’t want to pay to have the return done twice. Can I get the files back from Ms. Doe? If a client requests his files to be returned, a tax professional is required to return them. There’s an obvious issue if a tax professional dies; Ms. Doe won’t be here to return the files. In theory, the Executor of Ms. Doe’s estate should return those files…but that’s not likely to happen prior to the extended tax deadline.

My new client probably has a claim against Ms. Doe (or her estate). She was paid to complete the tax returns; if she doesn’t, there’s a clear issue. If she has died, you could file a claim against her estate. If she just vanished, you have to find her in order to get your money back.

There’s no way, though, of avoiding paying for the tax work a second time. I make my living preparing returns for money–I need to be paid for my work.

4. How do we prepare the return when Ms. Doe has all of my 1099s? Luckily, we can order a Wage & Income Transcript from the IRS. This should show all of the government paperwork you received (1099s, 1098s, W-2s, W-2Gs, K-1s, and 5498s). This will help with some of the issues.

However, my new client is self-employed. He’ll need to redo some work (providing his deductible business expenses and income from his business). If you use QuickBooks (or another accounting system), the new tax professional will need to see various reports. That’s easily done and shouldn’t be a problem.

You may have to recreate other records. If this needs to be done, start now. If you need to request bank or credit card statements, do it now; it can take a few weeks for them to appear. You are subject to the October 15th deadline, so start on this today!

There are some takeaways for everyone:

1. Make sure you get a copy of your tax returns from your tax professional (and keep these!). While you can order a Tax Return Transcript from the IRS, it’s a lot easier to have the actual returns. (A Tax Return Transcript is free from the IRS. You can also order a copy of your actual return, but this takes far longer and you must pay for it.)

2. Make sure you receive your files are returned. We scan everything into an electronic filing system, and return all files (I have far too much paper in my office and don’t want more).

3. If your tax professional is a solo practitioner (or a small office), ask the question, “What would happen if something happened to you?” It is a valid question and is one of the main reasons I brought in a partner a couple of years ago.

4. Make sure your tax professional communicates with you. My new client mentioned that Ms. Doe had been, in his words, “flaky.” If you have qualms about a tax professional, why are you continuing to use her? Tax professionals have access to your personal, confidential information. You absolutely, positively should be very comfortable with your tax professional. If not, consider someone else.

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