# Best course of action? CLN obtained in 2014, never did final filings :/



## usatonz

I obtained a CLN in 2014, have yet to do final filings and missed that boat. I assume this makes me a covered expat as well -although my net worth is 0 or actually negative, my annual income very low -the reason I never did final filings is it was wildly over my head. When I got a firm involved they wanted $1,000's! I could not afford this and feared doing it myself could make things worse. I'm never setting foot in the US again, so I have had mixed advice on other sites. Everything from just take the CLN and ignore everything else or you're in deep f^$#@!1 [email protected]#! I'm curious if anyone here is in a similar situation? It's all so ridiculous and even though I would like to try to fix this, I don't know if I can or can afford to pay for assistance. I don't owe any tax, never earned much and have been out of the US for 16yrs, never going back. Never been contacted by IRS after my CLN. What should I do? Do I go into credit card debt paying for a firm to assist me or go on with my life?


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## Bevdeforges

If you've got the CLN, I'd just get on with life. If the IRS is really concerned about not having the tax returns, they'll be in touch. But in your income bracket, don't hold your breath.
Cheers,
Bev


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## usatonz

Bevdeforges said:


> If you've got the CLN, I'd just get on with life. If the IRS is really concerned about not having the tax returns, they'll be in touch. But in your income bracket, don't hold your breath.
> Cheers,
> Bev


This is my current thinking. That being said without having filed an 8854 am I still liable for yearly filings until an 8854 is filed? Once you have the CLN do tax obligations from that point on cease, or do tax obligations continue until 8854 is filed? I can't seem to find an answer for this..


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## iota2014

usatonz said:


> I obtained a CLN in 2014, have yet to do final filings and missed that boat. I assume this makes me a covered expat as well -although my net worth is 0 or actually negative, my annual income very low -the reason I never did final filings is it was wildly over my head. When I got a firm involved they wanted $1,000's! I could not afford this and feared doing it myself could make things worse. I'm never setting foot in the US again, so I have had mixed advice on other sites. Everything from just take the CLN and ignore everything else or you're in deep f^$#@!1 [email protected]#! I'm curious if anyone here is in a similar situation? It's all so ridiculous and even though I would like to try to fix this, I don't know if I can or can afford to pay for assistance. I don't owe any tax, never earned much and have been out of the US for 16yrs, never going back. Never been contacted by IRS after my CLN. What should I do? Do I go into credit card debt paying for a firm to assist me or go on with my life?


Personally I plan to just put down on the form my best guess as to what's required. The main thing (it seems to me) is to get it on record that returns are up to date and no tax owing.


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## Bevdeforges

It's a very unclear area of US law. I mean, if your worldwide income falls under the threshold amounts, you don't need to file - though whether that still applies with the 8854, I have no idea.

If you're worried about it, make a "good faith stab" at filling out the 8854 and just send it in. Again, if they have any problems with your efforts, they'll be in touch. (But it's highly unlikely you'll ever hear from them again.)
Cheers,
Bev


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## BBCWatcher

I agree that it'd be a good idea to get an 8854 into the IRS. You don't get released from U.S. tax-related obligations (on non-U.S. income) until you "check out" with the IRS. (That changed a few years ago.) And a FinCEN Form 114 to the Treasury Department if applicable.


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## usatonz

what would be the cheapest way to do all this online? assuming they have online forms i would just fill out the past 5yrs and an 8854 and submit it? on line tax specialists quote me $300 a year or so and that's almost 2x in NZ dollars, no way I can afford that.


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## usatonz

well, i contacted brighttax to see what they can do, maybe I can do bare minimum and try to get the form submitted. However if I do submit all this including the 8854 and never hear back then how do I know they even got it? Do I just keep records that we sent it and if they claim I didn't I show that? I hear a lot of people submitting stuff and never hearing a peep, seems bizarre. Thanks guys


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## iota2014

usatonz said:


> well, i contacted brighttax to see what they can do, maybe I can do bare minimum and try to get the form submitted. However if I do submit all this including the 8854 and never hear back then how do I know they even got it? Do I just keep records that we sent it and if they claim I didn't I show that? I hear a lot of people submitting stuff and never hearing a peep, seems bizarre. Thanks guys


You can use the Streamlined Procedures for the prior-year filings (U.S. Taxpayers Residing Outside the United States). 

Download pdf's of prior year 1040s at Prior Year Products

FBARs are filed online but 1040s by mail, as per the Streamlined instructions.

I'm planning to send the final-year 1040 and the 8854 by courier so I can get proof of delivery but this is just in case I have to wait a long time for a CLN and want to prove to my bank that I've fully completed all renunciation requirements. In your case you probably needn't bother since you already have your CLN.


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## usatonz

iota2014 said:


> You can use the Streamlined Procedures for the prior-year filings (U.S. Taxpayers Residing Outside the United States).
> 
> Download pdf's of prior year 1040s at Prior Year Products
> 
> FBARs are filed online but 1040s by mail, as per the Streamlined instructions.
> 
> I'm planning to send the final-year 1040 and the 8854 by courier so I can get proof of delivery but this is just in case I have to wait a long time for a CLN and want to prove to my bank that I've fully completed all renunciation requirements. In your case you probably needn't bother since you already have your CLN.


Will have a look, i never had more than 10k in any accounts so pretty sure i don't need to file fbar. also, one tax lawyer said 8854 can be filed without the need to file fbar if you have got the cln (phil hogden i think was his name)


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## JustLurking

BBCWatcher said:


> You don't get released from U.S. tax-related obligations (on non-U.S. income) until you "check out" with the IRS. (That changed a few years ago.)


No. If you renounce, your US tax obligations end on the day you take the oath at the consulate. IRC section 877A(g)(4)(A).

It _used_ to be the case that your tax obligations didn't end until you filed the 8854, even though for immigration and all other purposes you were no longer a US citizen or permanent resident. There was also a ten year 'shadow' period after renouncing that left you open to US tax on what would ordinarily (for any other NRA) not be US taxable, and a limit of 30 to 60 days on any visit to the US (less than for any other NRA) before becoming liable for US tax on worldwide income as if resident. These were the old section 877 rules, but they were replaced by 877A and the exit tax in 2008.


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## iota2014

usatonz said:


> Will have a look, i never had more than 10k in any accounts so pretty sure i don't need to file fbar. also, one tax lawyer said 8854 can be filed without the need to file fbar if you have got the cln (phil hogden i think was his name)


If you're under the threshold and have been under for the past six years, you don't need to file any FBARs for the Streamlined Procedures. No need for anyone to file an FBAR post-oath, as I understand it.


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## usatonz

iota2014 said:


> If you're under the threshold and have been under for the past six years, you don't need to file any FBARs for the Streamlined Procedures. No need for anyone to file an FBAR post-oath, as I understand it.


Recently I went to my two local banks, explainingto them I have a CLN and with all this FATCA stuff I wanted to ensure I was NOT listed as a US person. Both my NZ banks had no country of birth listed for me, no reference whatsoever to me being an American in the past. I was in their system as a New Zealander as when I created my accounts with them 16yrs ago they used my NZ address and NZ drivers license and that was that. I wonder how many expats are in a similar 'data' situation. I was also wondering if my banks here do not have me as a former US person or US Person, how would the US have any clue wether I did have 10k or more in an account. Anyway, in the end it's all very ridicuous, to hell with CBT :/


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## JustLurking

usatonz said:


> ...i would just fill out the past 5yrs and an 8854 and submit it?


Okay, but your largest worry might be that late 8854 filing apparently equals covered expatriate, and covered expatriate equals instant US tax on any retirement savings and unrecognized capital gains you might have lurking around the place (your home, for example, if you bought rather than rent).

Ordinarily it's a good idea to file paperwork, even if late, just to pacify the IRS beast. However, this might be a case where it could be better not to. Before you do _anything_ you _really_ need to take some time to consider your risks here.

Because there is no late filing available for 8854, filing one late seemingly marks you out as a covered expatriate and brings you to the attention of the IRS. Not filing one, on the other hand, means that you get the execrable covered expatriate treatment only if _they_ contact _you_. They may, or they may not. Metaphorically you are in a cage with a lion. As long as it doesn't notice you, you should be okay. Sticking your head in its mouth is one way to ensure it notices you.


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## iota2014

usatonz said:


> Recently I went to my two local banks, explainingto them I have a CLN and with all this FATCA stuff I wanted to ensure I was NOT listed as a US person. Both my NZ banks had no country of birth listed for me, no reference whatsoever to me being an American in the past. I was in their system as a New Zealander as when I created my accounts with them 16yrs ago they used my NZ address and NZ drivers license and that was that. I wonder how many expats are in a similar 'data' situation. I was also wondering if my banks here do not have me as a former US person or US Person, how would the US have any clue wether I did have 10k or more in an account. Anyway, in the end it's all very ridicuous, to hell with CBT :/


I'm sure many people aren't bothering.


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## usatonz

JustLurking said:


> Okay, but your largest worry might be that late 8854 filing apparently equals covered expatriate, and covered expatriate equals instant US tax on any retirement savings and unrecognized capital gains you might have lurking around the place (your home, for example, if you bought rather than rent).
> 
> Ordinarily it's a good idea to file paperwork, even if late, just to pacify the IRS beast. However, this might be a case where it could be better not to. Before you do _anything_ you _really_ need to take some time to consider your risks here.
> 
> Because there is no late filing available for 8854, filing one late seemingly marks you out as a covered expatriate and brings you to the attention of the IRS. Not filing one, on the other hand, means that you get the execrable covered expatriate treatment only if _they_ contact _you_. They may, or they may not. Metaphorically you are in a cage with a lion. As long as it doesn't notice you, you should be okay. Sticking your head in its mouth is one way to ensure it notices you.


well, don't have net worth or retirement savings or any schemes or plans. capital gains none as well, so should be ok there.

Late here so off to sleep, thanks all!


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## Bevdeforges

Honestly, I just wouldn't worry about it. If you really want to file the back returns, you can either just download the forms from the IRS website. Be sure to get the forms for each year for which you're filing. Forms & Pubs and click on the tab for Prior Year to get each year's forms.

If you want some cheap help in doing that, TaxAct will sell you the last 4 years of their filing program for $15 a year. (Much better than $300 a year, I think.) But with a simple return, you might prefer to do just one year (say, the current or most recent year) and then use those forms from the program as a model for the other years.

But you're right. You'll get nothing to acknowledge receipt or acceptance of the returns - unless there is a problem with them.

If you're certain that you owe no taxes over the back filing period, you could just skip the whole process. The IRS resources are limited enough that they aren't going to worry about receiving your filings unless they somehow think that you owe them some big bucks.
Cheers,
Bev


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## BBCWatcher

The FinCEN Form 114 filing threshold depends on whether the total across all your foreign financial accounts ever hit US$10,000 or more.

You can request a tax transcript from the IRS if you wish at no charge. Use IRS Form 4506-T.

I do not recommend an "ostrich" strategy here. Refer to IRC 6039G for one reason why I don't recommend that.


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## Nononymous

Always useful to remember that if you don't have US income or assets, there is very little the US could do to collect money from you, in the unlikely event that they took notice and decided you owed them anything.


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## usatonz

Before I posted here I contacted a firm in the US about my situation. They want $2,500 USD for an initial 1hr consultation then costs after that. Can't afford that to say the least. Tax act sounds interesting Bev, thanks. But part of me is paralyzed to do anything at all. I'm very busy and struggling and to deal with this seems impossible right now.

Nononymous, i have no ties to the US other than a few family members.

Are there any in here with a CLN that never did final filings?


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## JustLurking

usatonz said:


> Are there any in here with a CLN that never did final filings?


Although it's emphatically not what he'd recommend, Phil Hodgen doesn't envisage too many problems for anyone who deliberately elects covered expat status. That is, provided they stick to a few basic rules. 

I don't either, but then I'm personally not in that situation. For counterpoint, BBCWatcher will soon provide a couple of screens of text telling us why he thinks Phil Hodgen is wrong on this...


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## Nononymous

JustLurking said:


> Although it's emphatically not what he'd recommend, Phil Hodgen doesn't envisage too many problems for anyone who deliberately elects covered expat status. That is, provided they stick to a few basic rules.
> 
> I don't either, but then I'm personally not in that situation. For counterpoint, BBCWatcher will soon provide a couple of screens of text telling us why he thinks Phil Hodgen is wrong on this...


That was my question, years ago.

Incidentally, I would not take that route now, because my daughter (who has the misfortune to have inherited my US citizenship, albeit without a US birthplace) could potentially face difficulties with gifts or inheritance should she for some reason decide to live her life in the US. That's the only reason though.


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## iota2014

JustLurking said:


> Although it's emphatically not what he'd recommend, Phil Hodgen doesn't envisage too many problems for anyone who deliberately elects covered expat status. That is, provided they stick to a few basic rules.


The OP's situation is a little different though isn't it? He's already got his CLN (presumably triggering notification to the IRS) and has already missed the filing dates for the 8854 so presumably if the IRS notices his existence at all, they'll regard him as a covered expatriate already. Filing the 8854 late, and unable to say yes to Question 6, seems to just create another opportunity for the IRS to notice.


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## BBCWatcher

usatonz said:


> Nononymous, i have no ties to the US other than a few family members.


If you want to maximize your chances of being able to visit them in the U.S. then it'd be prudent to have a _tidy_ exit.


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## JustLurking

iota2014 said:


> The OP's situation is a little different though isn't it? ... Filing the 8854 late, and unable to say yes to Question 6, seems to just create another opportunity for the IRS to notice.


Yes, that's my understanding too. By missing the 8854 deadline it seems that the OP may have self-selected into covered expat already, albeit by accident rather than design.

Still, Phil's article (if accurate) gives some comfort that there are actions one can take, and more especially actions one can avoid taking, to make sure that no unmanageable bad effects ensue.


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## usatonz

Thanks guys, going to check that article out.


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## iota2014

usatonz said:


> Thanks guys, going to check that article out.


You could maybe ask Phil Hodgen what he thinks would be the safest course of action in your position - let sleeping dogs lie, or file everything including 8854, even though late, in order to certify all obligations complied with, and thus hopefully slide out of covered expat status without causing any ripples.

He seems to be open to receiving questions.


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## Bevdeforges

OK, I think we've had enough of a pep rally here for this Phil guy. He is one tax adviser among many. Take his advice with the same grain of salt as anyone else's. 
Cheers,
Bev


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## iota2014

Bevdeforges said:


> OK, I think we've had enough of a pep rally here for this Phil guy. He is one tax adviser among many. Take his advice with the same grain of salt as anyone else's.
> Cheers,
> Bev


Personally I find his blog a good deal more useful than the average tax adviser's website. Obviously one must weigh up all advice found on the web.


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## BBCWatcher

Wesley Snipes had "professional" tax advisors: Eddie Ray Kahn and Douglas Rosile. (They also went to prison, as it happens, though that's not a given.) The point is you can get advice, but _you_ are responsible for what you do or don't do. It's _your_ tax and financial reporting and your life, not your advisor's.

Fortunately most advisors aren't like those Wesley Snipes hired. However, there have been two occasions I can think of where I disagreed with a tax advisor. The advice given was in my favor, but the correct answers were in the IRS's, as it happens. I wasn't going to sign off on those errors because it was my a** on the line, not theirs. I was absolutely correct, as it turned out. One of the issues was of the "Really? You want me to do _what_?" variety and quickly resolved. (That particular individual was an idiot at that moment, truth be told.) The other went into lots of reviews, up into senior management, and eventually the advisor admitted their lower ranks got it wrong. The advisor's firm didn't like this, though, because they had screwed up everybody else's tax returns for years, it was a lot of people, and they had deprived the IRS of some revenues. But it just wasn't even ambiguous -- the really did screw up and should have known better.


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## iota2014

BBCWatcher said:


> Wesley Snipes had "professional" tax advisors: Eddie Ray Kahn and Douglas Rosile. (They also went to prison, as it happens, though that's not a given.) The point is you can get advice, but _you_ are responsible for what you do or don't do. It's _your_ tax and financial reporting and your life, not your advisor's.


Looking on websites and blogs (and forums) in search of answers and helpful comments and useful information, is rather different from paying a tax advisor to sort out one's filing. If you're paying an advisor to do the job and get it right, surely s/he is indeed responsible for the consequences of getting it wrong.

Free advice, of the kind available from tax advisors' websites, blogs, etc, may or may not be worth reading. Often, such websites just seem mainly aimed at scaring potential clients into handing over their money. But some are quite informative. As with all the free stuff available on the internet, it's up to the seeker to weigh up the value and credibility of any particular website.


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## BBCWatcher

iota2014 said:


> If you're paying an advisor to do the job and get it right, surely s/he is indeed responsible for the consequences of getting it wrong.


That'd be nice, but nope. You sign your own tax return (and financial reports), not anybody else -- and that's by careful, deliberate design and intent.

You can _try_ suing the tax advisor you paid for if you're unhappy, but that might be from your prison cell.  The IRS and/or Department of Justice may or may not exercise prosecutorial/enforcement discretion and accept your explanation (excuse?), hopefully truthful (or Deity help you), that you relied in good faith on what a reasonable person could have trusted was good, lawful advice. However, you are responsible and are by no means guaranteed to be able to pass that buck. And you're still going to pay the additional tax owed at the very least -- or have the IRS maintain its first position in line to collect. As Wesley Snipes demonstrated.

On the other hand, if you lie to or hide the truth from your tax advisor, your tax advisor is off the hook. Funny how that works, isn't it? That happened fairly recently in the first prosecution of a "naked" FBAR violation, and the perpetrator (the filer, the "Ordinary Joe") was convicted, not his accountant. ("Naked" meaning it was the only offense charged, not an offense within a case in which other offenses were also charged. Though the perpetrator was, shall we say, "notorious," so prosecutors weren't starting off in a good mood.) The perpetrator answered his accountant's tax questionnaire with a lie, that he didn't have reportable foreign accounts (when he did and knew he did), and that was plenty enough for a criminal conviction -- and for his (cooperative) accountant to be cleared.


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## iota2014

I'm not talking about buck-passing, or attempts at deceit, or tax evasion. I imagine many U.S. taxpayers hire tax advisors not out of a desire to commit crime but out of a sincere and deeply held desire _*not*_ to inadvertently commit crime, or be suspected by the IRS of trying to commit a crime. If you're saying that incompetent tax advisors in the U.S. can't be held responsible by their clients for adverse consequences resulting from the advisor's incompetence, I'd say that's a pretty sorry state of affairs.

Fortunately, there probably are some quite knowledgeable tax advisors around - the tricky bit being finding them. Bit like dentists, except at least you can sue a dentist if they mess up your root canal.


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## BBCWatcher

iota2014 said:


> If you're saying that incompetent tax advisors in the U.S. can't be held responsible by their clients for adverse consequences resulting from the advisor's incompetence, I'd say that's a pretty sorry state of affairs.


I'm not saying that. You might have a civil claim. You might be able to afford an attorney. You might prevail and win a judgment. Your judgment just might even be paid in full, eventually. And the judgment even might be adequate and might make you whole. It just might.

So how much do you want to bet on all those mights _actually happening_? How lucky do you feel, how long can you wait, and how much legal investment can you bear, less your responsibilities to the IRS? And how does any civil judgment, even if it existed, even it were collected, give Wesley Snipes back a significant portion of his life and career that he served in prison?

*It's your tax form*, not your accountant's, not anybody else's. You own it, and you are responsible for it. If you want to rely on a quack and then try to sue him/her later for the consequences, that's up to you, but I wouldn't recommend it.

"But my attorney told me it was OK to go into the heroin distribution business!" doesn't excuse you from years of hard time. And I'm not describing anything peculiar to the United States. Most countries adhere to the same principles, including in tax matters -- many much more onerously and harshly than the United States.



> Bit like dentists, except at least you can sue a dentist if they mess up your root canal.


Yes, you can file a lawsuit. (Anybody can, really.) However, let's consider a real medical example: Joan Rivers. Joan Rivers is quite dead, I'm quite sure. Her _estate_ is reportedly suing over her death, *but she's always going to be dead*, excepting TV reruns. I'm not aware of any court judgment in favor of the plaintiff, even the most generous one, that can make Joan Rivers whole and raise Joan Rivers from the dead.


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## iota2014

Goodness, what lurid warnings! Sounds like you have had some bad experiences with tax advisors! 

We seem to be at cross-purposes, and quite a distance from the OP's question. Apologies to the OP.


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## BBCWatcher

iota2014 said:


> Sounds like you have had some bad experiences with tax advisors!


No, not at all. But I know what it means to sign a tax form, and I hope everyone else does.


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## Bevdeforges

Net-net, using the services of a tax advisor does not free you from responsibility should the IRS take exception to something on your return. Whether or not the tax advisor actually signs the return as "preparer" doesn't change your liability.

A tax preparer may promise to reimburse you for fines or penalties you wind up paying, or loan you money against the refund you believe you have due. That can become the subject of a civil law suit after the fact. But you are still fully liable for any "mistakes" or "omissions" on your own tax returns and without a contract between you and the preparer/advisor, the fact that someone else signed your return as preparer actually doesn't "protect" you from anything. The onus is still on you to choose your advisors carefully.
Cheers,
Bev


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## iota2014

But one _would _ have a contract.

Never mind. I daresay I'm probably missing something obvious.


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## Bevdeforges

iota2014 said:


> But one _would _ have a contract.
> 
> Never mind. I daresay I'm probably missing something obvious.


You probably will have a contract with a tax preparer. But not necessarily with a tax advisor. 
Cheers,
Bev


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## iota2014

Bevdeforges said:


> You probably will have a contract with a tax preparer. But not necessarily with a tax advisor.
> Cheers,
> Bev


That explains the confusion then. Thanks for the explanation.


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## BBCWatcher

Iota2014, you're missing the fact that contracts are often inoperable. Bernie Madoff had contracts with his clients, but Madoff is in prison and his clients lost huge amounts of money. There's another recent case where several mariners hired a particular tax preparer, and the IRS went after both the tax preparer and them for doing something very stupid and illegal (as they really should have known). The filers owe taxes, interest, and penalties, and the preparer....is very unlikely to be able to compensate the filers. 

Joan Rivers had a contract. Wesley Snipes had a contract. Heck, Texaco and Pennzoil had a _handshake_ contract, it was enforceable (a court found), and...Texaco declared bankruptcy. (Too bad for Pennzoil.) You cannot depend on contracts to make you whole. They are not licenses to act recklessly, illegally, or even carelessly. And if you don't understand that...well, I'm very surprised.


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## iota2014

Never mind - when I'm dying in my cold prison cell for recklessly expecting a tax advisor to provide correct tax advice, you can send me a Christmas card.


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## Bevdeforges

iota2014 said:


> Never mind - when I'm dying in my cold prison cell for recklessly expecting a tax advisor to provide correct tax advice, you can send me a Christmas card.


Hey, even the Mafia in the US has tax advisors. And those guys are paid specifically NOT to render "correct" tax advice, but rather what the customer wants to hear. (Sorry, couldn't resist.)
Cheers,
Bev


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