You’re having a perfectly fine time at a party, reception, barbecue, ballgame, meal or any other gathering, when out of nowhere you’re bombed by a taxpayer with that most loaded question: “Mind if I ask you something?”

Conventional wisdom says rules vary state to state over whether a professional can be sued for casual advice; even-more-conventional wisdom points out that in our litigious society, defending even a frivolous lawsuit consumes valuable time and money.

Though casual questions about taxes – not to mention your answers – usually fall short of igniting E&O lawsuits (Accounting Today), respond carefully. “Off-the-cuff or ‘cocktail party’ advice is never recommended,” said Bill Thompson, president of insurer CPA Mutual in Gainesville, Fla. “Any advice should be in writing after receipt of an engagement letter.”

‘Provide for my cats’

Surely people don’t actually expect specific, valid, actionable professional advice in 30 seconds? For nothing?

Wrong.

“ ‘Can you tell me how to set up my will so I can provide for my cats and the person I give the money to will not have to pay taxes?’ ” recounted Enrolled Agent Martha Nest, of Westview Tax Services, in Bardstown, Ken.
“ ‘How much money can I give my kids this year so they won’t pay tax on it?’ ”

“People are very creative when it comes to asking complicated tax questions without being a paying client,” added Steven Pargo, an EA at CSL Tax Advisors in St. Charles, Mo. “My most recent encounter was with a person who has an S corp, sold properties and had a few rental properties. This person has been incorrectly filing the 1120S and their 1040 for years, handwritten. I gave it a complimentary glance and explained that their tax situation is more complicated than it appears, and that I advised a professional complete it, even if [that professional] wasn’t me.”

“This person declined,” Pargo added. “I couldn’t believe it.”

‘Free tax machine’

“I get confronted for tax advice all the time because when people know what I’ve attempted to do for a living for 27 years, they think I’m some sort of free tax machine,” said EA James Christenberry, of 1040 Rapid Tax & Properties in San Antonio. “Normally questions about tax planning and audits. A lot about Social Security.”

Seekers of free advice also frequently ignore warnings. Hawley, Pa., practitioner Robert Flach said he isn’t asked for tax advice in social settings, but does get hit up via e-mail or comments from his blog, The Wandering Tax Pro.

“This,” he added, “even though the following statement is prominently placed in the margin of my posts: ‘Before contacting me with questions about how a blog post relates to your specific situation, please be aware that I do not give free tax advice to non-clients by e-mail, comment response or phone. So don’t waste your time and mine.’ I usually ignore the e-mail or comment.”

“The best one was the pharmacist,” Nest said. “I went in to pick up a prescription and the owner of the pharmacy asked if he could discuss a tax situation with me because if he called his accountant, he’d get a bill! He wanted me to explain how salary would work with a pharmacist he was planning to hire who had incorporated himself. This is a small town, so I took the 20 minutes and explained the situation.”

Good responses

“You can’t come to a professional and ask them to work for free,” writes entrepreneur and consultant Adrienne Graham on Forbes.com. She recommends replying to the advice-seeker, “How would you feel if your boss came to you and said, ‘Hey, since we can get this done from information from the Internet, I won’t be paying you today’?” 

She also recommends carrying your practice’s fee schedule with you; declining lunch or coffee invitations that you sense are just fishing expeditions for your advice; and referring questioners to your free resources, such as published articles or blog entries.

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