Tags: stephen j dunn | accountant | organizer

Your Accountant's Organizer May Convict You

Image: Your Accountant's Organizer May Convict You
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Thursday, 12 July 2018 02:58 PM Current | Bio | Archive

An organizer is a questionnaire which an accountant sends to a client to provide information needed to prepare the client’s tax returns. Organizers typically ask probing questions about the taxpayer, the taxpayer’s family, the taxpayer’s income and expenses, and the taxpayer’s foreign financial assets. An organizer is signed by the taxpayer under a statement that the information provided by the taxpayer is correct and complete, much like the oath on a tax return.

The problem is that there is no accountant-client privilege in federal criminal cases. A federal prosecutor can issue a subpoena requiring an accountant to produce a client’s organizer, and to testify about it before a grand jury or at trial. Questions unanswered on an organizer or answered falsely provide evidence of the client’s willfulness.

The recent indictment of Paul J. Manafort, Jr. and Richard W. Gates III includes counts for willful failure to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts, (“FBARs”). In support of these counts, paragraph 32 of the Indictment alleges:

MANAFORT and GATES had repestedly and falsely represented in writing to MANAFORT’s tax preparer that MANAFORT had no authority over foreign bank accounts, knowing that such false representations would result in false MANAFORT tax filings. For instance, on Oct. 4, 2011, MANAFORT’s tax preparer asked MANAFORT in writing: “At any time during 2010, did you [or your wife or children] have an interest in or signature authority over a financial account in a foreign country, such as a bank account, securities account, or other financial account?” On the same day, MANAFORT falsely responded “NO.” MANAFORT responded the same way as recently as Oct. 3, 2016, when MANAFORT’s tax preparer again emailed the question in connection with the preparation of MANAFORT’s tax returns: “Foreign bank accounts etc.?” MANAFORT responded on or about the same day: NONE.”

United States of America v. Paul J. Manafort, Jr., et al., D.D.C. No. 1:17-cr-00201, ¶ 32 (Oct. 27, 2017).

The “writing” in paragraph 32 of the indictment refers to organizers sent to Manafort by his tax preparer, and completed and returned to the preparer. If convicted of willful failure to file an FBAR, Manafort would be subject to a fine of not more than $250,000, or imprisonment for not more than five, years or both. If convicted of willfully failing to file an FBAR while violating another law of the United States, or as part of a pattern of any illegal activity involving more than $100,000 in a 12-month period, Manafort would be subject to fine of not more than $500,000, or imprisonment for not more than 10 years, or both.

Use of an organizer is an inefficient way of seeking information needed to prepare tax returns. Most questions on an organizer are irrelevant or unanswered. If a question on an organizer was not answered, we do not know whether the client deliberately failed to answer it, or inadvertently overlooked it. If an organizer question is answered falsely, we do not know whether the client intended to answer it falsely, or was mistaken in answering it falsely. None of this will be explained when, long after an organizer is completed, it is presented to a grand jury, or at trial.

There seems to be a notion that an organizer protects a preparer from legal liability for a false tax return. An organizer certainly is not in a client’s best interests.

I do not prepare tax returns. But I do assist clients in complying with U.S. laws concerning foreign financial accounts. I do not use organizers. I interview clients over the telephone, and make notes of the interview. The attorney-client privilege protects my notes from compelled production to a third party. If a client has or had foreign financial accounts, I send them an Excel worksheet on the accounts to complete and return to me. In lieu of completing the worksheet, a client can send me account statements of their foreign financial accounts.

A tax preparer should not ask a client to complete an organizer. A client certainly should not be sent an organizer asking questions about foreign financial accounts. Rather than completing an organizer, a client should provide a tax preparer Form W-2, Form 1099, records, and other documents needed to prepare the client’s tax returns, or worksheets tabulating such documents. The client should also truthfully answer any questions the preparer may have in a telephone interview.

Stephen J. Dunn is a tax attorney in Troy, Michigan. He is the author of the treatise Foreign Accounts Compliance (Thomson Reuters 2017) and Foreign Accounts Compliance Blog. He is also an adjunct professor at Michigan State University College of Law.

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StephenJDunn
An organizer is a questionnaire which an accountant sends to a client to provide information needed to prepare the client’s tax returns. The problem is that there is no accountant-client privilege guarding this information.
stephen j dunn, accountant, organizer
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2018-58-12
Thursday, 12 July 2018 02:58 PM
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