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18 Dec 2018

Research Case—Delinquent Taxes. When property taxes become delinquent, governmental entities often accrue interest and penalties on the delinquent taxes or choose to sell the rights to collect such taxes, interest, and penalties to exter-nal parties. Select a local municipality of your choice. Using information from the government’s Web site, respond to the questions below. (Hint: Search for delinquent tax collection process, delinquent property taxes—FAQs, tax lien, etc.)

Required

a . What happens if a taxpayer fails to pay property taxes on time? When do taxes become delinquent? What happens if a taxpayer fails to pay delinquent taxes? At what point does a tax lien attach to the property? What interest charges and other penalties or fees are assessed to the delinquent taxpayer?

b. If delinquent property taxes or tax liens are sold at public auction, what rights are purchased by the buyer? Is there a possibility, at some point in time, that the tax lien buyers can attain legal title to the property for which they hold the tax lien? (This may be called a treasurer’s deed.) If so, describe this process.

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Patrina Schowalter
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19 Dec 2018

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Read the following audit engagement letter, then asnwer the questions below.

March 1, 2015

Smart and Partners, PLLC is pleased to have the opportunity to provide you with professional services. This engagement letter embodies the entire agreement regarding the services to be rendered by our firm to you.

We will prepare:

Your 2014 federal and resident state individual income tax returns;

If applicable, 2014 non-resident state individual income tax returns for the same states you filed with for 2013, unless you direct us otherwise;

2014 federal and resident state individual income tax returns for any children you specifically request;

If applicable, 2014 property tax returns for the same jurisdictions you filed with for 2013, unless you direct us otherwise;

• If applicable, 2014 business or occupational license tax returns for the same jurisdictions you filed with for 2013 unless you direct us otherwise.

Please note any requested additions or deletions to the returns listed above at the bottom of this letter.

We will prepare your returns based on your filing status as reflected in your income tax returns for last year. If your marital status has changed, you want to change your filing status, or you have questions about your filing status, please contact us immediately to discuss this.

Attached to this letter is a series of important questions you should answer as a part of this engagement agreement. Any unanswered questions will be taken as a negative response and will be included in the signature and representation below.

Please forward your organized tax information at your earliest convenience, including any supporting documentation required to complete the returns. Any additional documents we request of you after we have received and reviewed your tax information must be received by us no later than April 1, 2016 to allow for the timely preparation of your tax returns.

We expect to begin the preparation of your returns upon receipt of all required tax documents. The un-extended filing due date for your tax returns is April 18, 2015.

You agree that in the event of unresolved tax issues or delays in processing, or if we do not receive all of the necessary information on a timely basis, it may become necessary to apply to extend the due date. Applying for an extension of time to file may extend the time available for a government agency to undertake an audit of your return or may extend the statute of limitations. In the event you owe taxes in excess of the amounts withheld from your income or, if you are self-employed, in excess of estimated tax payments made, penalties and interest may accrue on your unpaid taxes after the due date.

Additionally, extensions may affect your liability for other penalties and interest or compliance with government and constituent deadlines. We are available to discuss this matter with you at your request at our regular hourly fees should the need arise.

It is your responsibility to provide all the information required for the preparation of complete and accurate returns. You should retain all the documents, canceled checks or other data that form the basis of income and deductions. These may be necessary to prove the accuracy and completeness of the returns to a taxing authority. You have the final responsibility for your income tax returns and, therefore, you should review them carefully before you sign them.

Our work in connection with the preparation of your income tax returns does not include any procedures designed to discover fraud, theft, defalcations or other irregularities, should any exist. However, should we find any irregularities or unusual items we will bring them to your attention. We will render such accounting and bookkeeping assistance as determined to be necessary for preparation of the income tax returns. If we discover any errors or omissions on a prior year return we will bring that to your attention.

This engagement does not include responding to inquiries by any governmental agency or tax authority. If your tax return is selected for examination or audit, you may request that we assist you in responding to such inquiry. In that event, we would be pleased to discuss providing assistance to you under the terms of a separate engagement for that specific purpose.

The Internal Revenue Code and regulations impose preparation and disclosure standards with non-compliance penalties on both the preparer of a tax return and on the taxpayer. To avoid exposure to these penalties, it may be necessary in some cases to make certain disclosures to you and/or in the tax return concerning positions taken on the return that do not meet these standards. Accordingly, we will discuss tax positions that may increase the risk of exposure to penalties and any recommended disclosures with you before completing the preparation of the return. If we concluded that we are obligated to disclose a position and you refuse to permit the disclosure, we reserve the right to withdraw from the engagement and you agree to compensate us for our services to the date of withdrawal. Our engagement with you will terminate upon our withdrawal.

The IRS permits you to authorize us to discuss, on a limited basis, aspects of your return for one year after the return's due date. Your consent to such a discussion is evidenced by checking a box on the return. Unless you tell us otherwise, we will check that box authorizing the IRS to discuss your return with us. In accordance with federal law, in no case will we disclose your tax return information to any third party for any purpose other than to prepare your return without first receiving your consent.

The potential for conflicts of interest exist in any engagement. In the event that we in our sole discretion believe that a conflict has arisen affecting our ability to service your account in accordance with either the ethical standards of our firm or the ethical rules of our profession, we may be required to suspend or terminate our services.

In accordance with our firm's current policy on document retention, we will retain copies of the records you have provided and our work papers for your engagement for a period of seven years. After that time, our work papers and files will no longer be available. Physical deterioration or catastrophic events may shorten the availability time of our records. The working papers and files of our firm are not a substitute for your records.

In the interest of facilitating our services to you, we may communicate by facsimile transmission or by sending electronic mail over the Internet. Such communications may include information that is confidential to you. Our firm employs measures in the use of facsimile machines and computer technology designed to maintain data security. While we will use our best efforts to keep such communications secure in accordance with our obligations under applicable laws and professional standards, we have no control over the unauthorized interception of these communications once they have been sent and we specifically disclaim and waive any liability or responsibility whatsoever for interception or unintentional disclosure of emails transmitted by us in connection with the performance of this engagement.

Our professional fee for the services outlined below will be based upon the complexity or the work to be performed and our professional time to complete the work. Additionally, this fee is dependent on the availability, quality, and completeness of your records. In the event you fail to timely provide us with records that we request or if the records you provide are incomplete or unusable, we reserve the right to terminate the engagement without completing our work. If we can assist you in preparing needed records, we will contact you to discuss the problem, the additional work needed, our fees for such work, and the anticipated delay in completing our engagement before rendering further services.

All invoices are due and payable upon presentation.

You represent that the information you are supplying is accurate and complete to the best of your knowledge and that all deductible expenses, including but not limited to meals, entertainment, travel, business gifts, charitable contributions, dues and memberships, and vehicle use are supported by records as required by law. You understand Smart & Associates will not verify the information you provide, but may ask for clarification. You also represent that any unanswered questions on the attached list should be accepted as a negative response.

We look forward to serving you. Our services will conclude upon delivery to you of your 2014 tax returns for your review and filing with the appropriate taxing authorities. If the foregoing fairly sets forth your understanding, please sign this letter in the space indicated and return it to our office in the enclosed envelope. However, if there are other tax returns you expect us to prepare, such as gift and/or property, please inform us by noting so just below your signature at the end of the returned copy of this letter.

Very truly yours,
Smith and Associates, PLLC

Accepted:

James Johnson

James Johnson, Client

1-Assume that James Johnson asks the Smart and Parners, LLC to complete his taxes. Is it necessary for this agreement to be in writing? Why or why not? Explain.

2-Assume that James' Dad, Mark, accompanies him to the accounting firm. James, who is 20 and owns a housecleaning business, executes the engagement letter. Mark tells the accountant who is preparing James’s taxes that if James fails to pay for the firm’s services, he will pay for them. If James fails to pay the accounting firm, will the firm be able to force Mark to pay for the services? Why or why not?

3-James explains to the accountant that she expects to receive a tax refund. Before James executes the engagement letter, he informs the accountant that he currently does not have any money to pay the firm, but he will pay the firm once she receives her tax refund. The accountant indicates that this will be acceptable. James subsequently executes the engagement letter. As soon as the accounting firm completes the tax return, it bills James and demands immediate payment. If James challenges the payment due date, is the oral agreement between James and the accountant regarding payment admissible in court? Why or why not?

For these following problems, assume that James has executed the engagement letter.

4-Assume that Jamse decides to do his own taxes with TaxAct. His friend, Bobbie, needs to have her taxes completed. James tells Bobbie that she will assign her rights to have her taxes done by the accounting firm to Bobbie, if Bobbie will pay the accounting firm for its services. Can James do this? Why or why not? What rights does the accounting firm have, if any?

5-The accounting firm completes Jamie’s taxes and asserts that Jamie owes it $500 for its services. In need of money, James agrees to clean Mister Duck’s house for $500. James asks Mister Duck to pay her debt to the accounting firm rather than pay her directly. Assuming that James performs her obligations to Mister Duck, what rights, if any, does the accounting firm have if Mister Duck fails to pay it? What rights, if any, does James have?

6-Assume that the accounting firm files James' taxes on the wrong form, resulting in substantial taxpayer payment penalties. What rights, if any, does James have?

7- On March 15, 2015, James stops by the accounting firm and tells an accountant that she cannot locate certain tax records and that she will not be able to supply them to the accounting firm. Assuming that the firm has already started James’s return, what rights, if any, does the accounting firm have at that point?

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