Mark (age 44) and Mary (age 43) are your tax clients. They have two children, Matthew (age 20) and Mindy (age 17), who live at home. Mindy is a senior in high school and Matthew commutes to a local college where he is studying soil management. Mark owns and operates a successful lawn maintenance and landscaping business. He has six employees and three pick-up trucks used for transportation to job sites. The business has a credit card in its name for use by the employees and Mark, who fills the trucks with gas almost daily. Mark gave the business card to Mary, Matthew and Mindy and told them to use it to buy gas for their automobiles used for shopping, going to school, and short trips. In the current year, his wife and children put $5,210 of gasoline in their automobiles using the business credit card. Mark is adamant that the $5,210 be deducted on his Schedule C. He feels the amount is small compared to the business gas purchases of approximately $28,000. Mark says the amounts charged are spread throughout the credit card statements and would be very difficult for the IRS to detect on audit.

Why wouldnt you sign the return? What is the tax code violation?

If you signed the return, what could happen to you as a tax preparer? What penalties apply for the tax preparer?

What types of taxpayer penalties apply?

How would you explain to your client why you would not sign the return and why they should change their position on what they want to put on the return? Remember they are NOT tax preparers; explain it so they will understand, back it up with IRS tax code or IRS filing rules and requirements.