Your CPA firm (California based) is considering the employment of Will Swindle who is licensed as both an attorney and certified public accountant in the State of California. During your initial interview with Will, you obtain the following information: Will has been suspended from practice before IRS as an attorney due to various violations of Circular 230. During an IRS field audit of an aggressive tax shelter, Will was charged with not "acting fairly and with integrity in the practice before IRS." Specifically, Will contends that IRS was not entitled to basic accounting information in his possession because the documents are privileged communications and they were protected by the attorney/client privilege. He says its "it’s all a big misunderstanding and he is in the process of appealing the suspension. Besides he tells you that his CPA license is not affected by this order.
Will wants to bring several of his clients to your firm. One of his clients is Bambina Smith who is the soon to be former spouse of your current clients John Smith, who is also a former client of Will. The Smiths are divorcing because John discovered that Bambina was running an illegal escort service and failed to report client fees during their marriage. Will tells you that the unreported income is about $100,000 for the last jointly filed return.
Will has been preparing her individual income tax returns on a contingent fee basis due to the divorce situation.
Will feels that he could help increase the firm business through a unique marketing plan that he has used in his own practice as an attorney. He says that he has established "business relationships" though out the greater Pomona Valley area California. He feels that the key in advertising professional services is use vague but enticingly worded mass e-mails and mailing misleading flyers to commercial enterprises though out the Pomona area.
Will has a fee dispute with one of his clients and wants to transfer the client to your firm for safe keeping until the client pays him.
What potential issues do you see? Consider IRS Circular 230, AICPA Standards for Tax Services and any applicable Federal or California laws that might apply.