Navigating tricky moments with clients and what to say

Most ethical dilemmas don’t start with a client asking you to break the law. They start with a small, “Can we just …?” that puts you at a crossroads. You or your staff will have to decide how to answer that question, especially if you’ve known the client for several tax seasons. 

The key is having a plan for these moments so you can respond with professionalism, protect your reputation, and keep your practice compliant with IRS rules.

When information is missing

A long-time client can’t find a Form W-2. Or they want to claim a dependent without documentation. Circular 230 says you can’t ignore what you know or what you should know. 

According to Circular 230, tax professionals can’t ignore what they know or what they should know about a taxpayer’s situation. Filing with missing or incomplete information isn’t just risky; it's a direct violation of your professional responsibilities.

Example: A client says their employer “never gave” them a Form W-2, but you see last year’s return listed the same employer. Due diligence means advising them to contact the employer, check their online payroll portal, or request a Form W-2 transcript from the IRS before filing.

Pro Tip: Explain that waiting to file is better than filing with missing information that could cause IRS delays, penalties, or an audit later. 

Spotting red flags

It can be challenging to send your clients away because they are missing information, but it’s important to follow the rules. Not every questionable situation is obvious. Over time, you’ll learn to spot subtle patterns that don’t add up.

Common red flags include:

• Mismatched addresses
• Dependents claimed by multiple taxpayers
• Income changes that conveniently qualify for credits

Example: A client reports a sudden drop in self-employment income that puts them just under the earned income credit (EIC) limit. While the income drop may be legitimate, it’s worth asking for supporting documentation, such as bank statements, invoices, or canceled checks, before finalizing the return.

Pro Tip: If your gut says something’s off, it probably is. That’s your cue to ask more questions.

Saying ‘No’ without losing the client

Explain that your questions are about protection, not mistrust: “I want these credits to stick if the IRS reviews your return. That means I need a bit more documentation.” Don’t forget to document your questions and answers and maintain records when possible. 

Stand firm

Clients who respect your ethics are the ones who stick with you. The ones who don’t? They’re often the ones who would have caused bigger problems later. Each choice you make in the tax office reflects your professional values. Choose the path you can defend confidently to the IRS, your peers, and yourself.

Rejecting a client’s request can feel uncomfortable, especially if you’ve worked together for years. But saying “no” doesn’t have to damage the relationship if you frame it the right way.

Here is a professional way to respond: “I want to make sure every credit and deduction on your return sticks if the IRS ever reviews it. That means I need just a bit more documentation to back this up.”

By positioning your request as a protective measure rather than a mistrust issue, you reinforce that you’re looking out for the client’s best interests.

When to walk away

Sometimes, no matter how you explain it, a client refuses to provide documentation or insists on reporting something that doesn’t meet IRS standards.

In these cases, you have to decide whether to proceed or end the engagement. Remember: the short-term discomfort of losing a client is nothing compared to the long-term cost of defending a penalty, audit, or preparer investigation.

Pro Tip: Keep a standard “Disengagement Letter” template on hand. This protects both you and the client by documenting that you declined to prepare the return under the requested terms.

Final takeaway

Navigating tricky tax prep moments is part of the job. The key is to respond with:

• Professionalism – Keep the tone respectful and client-focused.
• Clarity – Explain exactly why documentation is needed and how it protects them.
• Consistency – Apply the same standards to every client, every time.

In the end, your reputation as an ethical, thorough preparer will attract the right kind of clients: The ones who value your expertise and trust your process. That’s the kind of client base that lasts.