Video: Client Refund Checks

In this lesson, Nick Palazzolo, CPA, tackles the seemingly straightforward, yet crucial topic of handling client refund checks in compliance with Circular 230, which governs the conduct of tax professionals practicing before the IRS. With characteristic clarity and a touch of humor about the CPA exam's fondness for "legacy textbook stuff," Nick distinguishes between the permitted and prohibited actions a CPA can take when presented with a client’s refund check. By laying out the scenarios in a format reminiscent of multiple-choice questions, Nick ensures that the key points stick—especially the golden rule: never endorse the client's check. Instead, learn the appropriate steps to safeguarding the check until the client can collect it, thus avoiding a breach of IRS practice rules.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Client refund checks. Now, this is sort of based on a multiple choice question. It's a one you could easily see on the exam. They do love kind of harping on this. So, you know, we got a slide for it. Circular 230, which provides regulations for the practice of tax professionals practicing before the IRS. We know that just drill that down. Nice introduction for every slide. Got to love it. Among the rules here are those relating to the handling of a client's refund check might be like, well, why is that a big deal? Kind of is. In the given scenario, the CPA has the following options related to the client's refund check. So we've got three that are not permitted, one that is permitted. Obviously, this is very much in the format of a multiple choice question. So what can you do in regard to a client's refund check? You can hold the check for safekeeping and await the client's return. You know, they're going on vacation, right? They did their taxes. They're they're going off to sail on a yacht and they're going to come back. They're saying, hey, you just did our taxes. So we'll get the refund check sent to you. Now, you as the CPA, as the tax practitioner prepare, you can hold the check for safekeeping and await the client's return. Sounds good. You're not doing anything wrong. Now, what can you not do? Oh, boy. There's a few things. First off, you cannot endorse the check, which, you know, endorsing a check, signing the check and depositing it into an escrow account for the client's benefit. Now, if these seem oddly specific, it's because they are. I mean, these are commonly presented situations on multiple choice questions. You cannot hold

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Ethics and Responsibilities in Tax Practice

Module: 2 Concepts, 33 Videos

Internal Revenue Code and Tax Return Preparation Regulations Overview

4:17

Introduction to Internal Revenue Code and Tax Return Preparation Regulations

5:20

IRS Tax Forms

5:40

Types of Federal Taxes