Long, Lawrence A.

English

University of Denver

Denver Law Review Volume 27 Issue 3 Article 7 June 2021 Who May Prepare a Tax Report in Colorado Lawrence A. Long Follow this and additional works at: https://digitalcommons.du.edu/dlr Recommended Citation Lawrence A. Long, Who May Prepare a Tax Report in Colorado, 27 Dicta 111 (1950). This Article is brought to you for free and open access by the Denver Law Review at Digital Commons @ DU. It has been accepted for inclusion in Denver Law Review by an authorized editor of Digital Commons @ DU. For more information, please contact jennifer.cox@du.edu,dig-commons@du.edu. DICTAWHO MAY PREPARE A TAX REPORTIN COLORADO?LAWRENCE A. LONGChairman, Unauthorized Practice Committee, Colorado Bar AssociationOne of the recent opinions of Attorney General John W.Metzger of particular interest to the legal profession, is that ofJanuary 4, 1950, addressed to Myron C. McGinley, Auditor of theState of Colorado, in answer to inquiries captioned "Local Govern-mental Audits by Improper Practitioners". Mr. McGinley inquiredsubstantially as follows:1. Is an audit of local governmental units by one not a C.P.A.or registered accountant, a violation of our statutes?The answer was in the affirmative.2. If the answer to question one was in the affirmative, is itproper to report the violation to the local District Attorney?The answer was also in the affirmative.The third question, which pertains more particularly to thelegal profession should be quoted in its entirety and is:In the light of Chapter 76, Session Laws of 1937, and the 1938opinion of your office thereon, and in the absence of express statu-tory provisions, may financial reports prepared for and filed withgovernmental agencies be prepared and compiled by or with theassistance of any persons other than one of the following: Namely,(1) the person upon whom the law imposes the duty to report, or(2) a registered or certified public accountant, or (3) an attorneyat law?In answer to this question the Attorney General reverses theopinion of a prior Attorney General rendered on January 21, 1938,wherein that Attorney General stated: " - - - any person may pre-pare income tax returns for others so long as he does not prepareany balance sheets or profit and loss statements - - -". (Opinionof Attorney General, 1937-1938, No. 338)Mr. Metzger has the following to say in his opinion reversingthe previous ruling:This ruling prompts you to ask whether, pursuant to the pro-visions of Chapter 76, supra, or otherwise, financial reports preparedfor and filed with governmental agencies may be prepared andcompiled by or with the assistance of any persons other than one ofthe following: namely, (1) the person upon whom the law imposesthe duty to report, or (2) a registered or certified public accountant,or (3) an attorney at law.I concur in your conclusion that pursuant to Section 7 (D)supra, only registered and certified public accountants may prepareor certify for clients reports of audits, balance sheets and otherfinancial accounting and related schedules, exhibits, statements orreports which are to be filed with any governmental agency. SectionDICTA7 (E) supra, contains a further limitation with respect to renderingprofessional assistance to clients for compensation, in general or asan incident to such work, in any or all matters relating to account-ing procedure, and the recording, presentation and certification offinancial facts.Section 7 (J) supra, however, exempts "from the provisions ofChapter 76, supra, * * * an attorney who, in connection with his pro-fessional duties, prepares or certifies reports to be filed with a courtof law, board or other governmental agency, or to be used for anypublic purpose, when said reports contain no balance sheet or profitand loss statement."Since the exemption contained in Section 7 (J) applies only toattorneys at law, it appears that the Attorney General's opinion ofJanuary 21, 1938, was too broad in ruling that "any person may pre-pare income tax returns for others so long as he does not prepareany balance sheet or profit and loss statements." Such a ruling per-mits serious encroachments upon spheres of activity reserved bylaw to registered and certified public accountants, and to attorneysat law.I also agree with you that there is no restriction upon the prep-aration of such reports to governmental agencies by the person uponwhom the law imposes a duty to report.In addition to the above named categories, I think it is quiteclear that nothing in the Accountancy Act of 1937 restricts or limitsthe power or authority of any State, county or municipal officer orhis appointee engaged in or upon the examination of the accounts ofany public officer, his employees or appointees, (Sec. 17, Chapter132, 1935 C.S.A.) The same would be true of the activities of a fed-eral officer or agent.I conclude also that nothing in the Accountancy Act of 1937would restrict or limit the appropriate Federal or State employeesfrom assisting persons in the preparation of income tax returns.In summarizing his answer, Mr. Metzger is of the opinionthat the following may prepare or give assistance in financial re-ports for filing with governmental agencies:(1) The persons upon whom the law imposes the duty to re-port.(2) A registered or certified public accountant.(3) An attorney at law.(4) A state, county or municipal officer or his appointee.(5) A federal officer or his appointee.As is entirely obvious, this recent view of the present AttorneyGeneral is a complete departure from the formerly acceptedopinion. If valid, it has far-reaching implications and should beof considerable interest to the bar of Colorado. If literally followedit would not only place a tremendous burden of enforcement on thestate, but would also mean a considerable expansion of this typeof work for the legal profession.The questions raised by this opinion concern (1) its validity,(2) the reaction of the lawyers, (3) the reaction of the account-ants, (4) the reaction of the public, and (5) the reaction of thosenumerous "unqualified" individuals who have heretofore done in-come tax work, or prepared other financial reports for filing withgovernmental agencies, or given assistance with respect thereto.In most circles it is felt that if the opinion is correct there willbe little reaction from anyone unless the matter of enforcementbecomes an actuality. To have additional unenforced regulationsbefore us would lend neither strength nor dignity to the legalprofession. This leads inevitably to the question: What does thebar want to do about it?A TIME STUDY FOR FIXING FEESJACOB V. SCHAETZELof the Denver BarAfter receiving the yearly calendar for our new 1950 period,I took my pencil and made a few computations that should provevery interesting in arriving at one of the bases for fixing attorneys'fees.There are 53 Sundays, 52 Saturdays, and 10 holidays, or 115days in which we do no work excepting possibly Saturdays whensome of us do get to the office. Even with Saturday counted as partof a day, we lose enough time on vacations and by sickness to makeup for that difference.There will be 365 days in the 1950 period and if we deduct115 non-working days, we will have 250 working days left. If wefigure that we will put in 7 hours each day as chargeable time, wewill have 1750 hours for which we can make a charge. From myown experience, this would seem rather liberal because I doubt ifwe can really charge for more than 6 hours a day. The rest of theday is generally taken up with various consultations, charity work,and other types of work for which no charge is made. It now be-comes a rather simple matter to determine how much per hour weshould charge as a basic minimum if we are going to earn whatwe think we should. For example, if we want to earn $600 a monthor $7,200 a year, before state and federal taxes are taken out, wemust divide the hours of time that we have (1750) into the $7,200which gives us $4.11 per hour. This totals $28.77 per day. Thenlet us say that our tax is 20%. That now makes $1,440 for federaland state taxes or approximately $1.00 per hour more than theprevious figure of $4.11.Now, add your overhead. This consists of rent, stenographers,telephone, stamps, stationery, supplies, etc.; I doubt if any of usare getting through with less than $292 a month or $3,504 per year.Now, 1750 working hours into $3,504 makes roughly $2 per houradditional charge that must be made. One can readily see that thecharge should be $7.11 per hour or approximately $50.00 per day.DICTA 113

Who May Prepare a Tax Report in Colorado

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Who May Prepare a Tax Report in Colorado

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