Inferior Tax Preparation Cases
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Do you know if you received good tax preparation service or poor tax preparation service? Most of the time you do not know. You trust the person preparing the tax return. Unfortunately, receiving poor tax preparation service is more common than you think.
We pride ourselves on preparing quality tax returns. Our firm has a unique view on tax preparation services due to our experience with IRS Tax Audits. We know the problem areas. Your tax return will report all deductions allowed. We take positions on your tax return that meet the “more likely than not” IRS standard.
These are actual tax preparation service cases. We omitted names and locations to protect the confidentiality of our clients.
Inferior Tax Preparation Case 1
The client was audited by the IRS. The IRS Auditor proposed a large adjustment to the tax return, which would generate a $60,000 tax bill. The client’s previous tax preparation firm told the client to write a check. The client hired us to complete the IRS Audit.
- We reviewed the tax return and found a major error that the previous firm had made.
- We researched other tax positions to resolve this case.
- We put together a position that was reasonable. The IRS Auditor agreed with our position. We were able to reduce the tax bill from $60,000 to $25,000.
If this client had not sought a second opinion, the client would have paid $35,000 in taxes that were not actually owed.
Inferior Tax Preparation Case 2
The client is a realtor and received Form 1099 income every year. Being self-employed meant staying on top of the taxes throughout the year. The client received a large tax bill at the end of the year because the client was not educated on estimated tax payments and the client’s tax preparer did not provide adequate guidance on paying tax estimates.
- We thoroughly reviewed the previous year’s tax return tax returns with the client and explained how the tax return was prepared and how the taxes owed was determined.
- We prepared the client’s tax return for the current year, and based on this information, we developed a simple calculation to assist the client in making the correct estimated tax payments for next year.
- We reviewed the client’s business structure for possible tax savings ideas.
- We assisted the client throughout the year on record keeping and business expenses.
The client informed us that more was learned in our initial review than in all the years of working with the previous tax preparer. It was a relief to the client to have a trusted adviser on taxes and business accounting.
Inferior Tax Preparation Case 3
QuickBooks was a mess. The client attempted to get a loan but could not because the financial statements made no sense. The client had a profitable business, but the books did not reflect the success. The client worked with multiple CPAs in the past and none helped the situation.
- We were granted accountant’s access to the business QuickBooks file.
- We gathered business tax returns starting with the first year the business started to operate. We then fully analyzed the year-to-year QuickBooks entries and business tax returns.
- The cost to do a complete overhaul of the books would have been tens of thousands of dollars. To save the client a significant amount in accounting fees, we adjusted the books using educated estimations using all data available to us.
After two years of assisting the client on tax and accounting, the client’s QuickBooks problems were cleaned up. The client was able to get additional financing. We continue to work the client as a tax advisor and yearly tax preparer. The client said they wished they had met us years ago because they would never have gotten into this mess.
Find a Trusted CPA or Accountant
We have met many clients who have received poor service from other CPAs. In some cases, the CPAs declared fraudulent deductions on the clients’ tax returns, resulting in IRS tax audits and high penalties. In other cases, the CPAs made significant mistakes on the clients’ tax returns, which resulted in high tax balances. In still other cases, the CPAs took advantage of people by charging higher fees to clients who were owed large returns.
Finding a trusted CPA can be harder than it seems. If you do not understand how the tax return was prepared, how do you know if the tax return was prepared correctly? How do you know you received a quality tax preparation service? We recommend doing the following before signing your tax return:
- Review all the numbers reported on the tax return.
- Ask the CPA where the numbers came from
- Ask the CPA how the numbers match your tax records
Do not blindly sign your tax return. Ask questions about your return before you sign. You are fully responsible for everything reported on your tax return, not your accountant or CPA. For additional guidance, read 5 Red Flags When Picking a CPA or Accountant.