H recently quit a national public accounting firm and purchased the practice of a local accountant. Her first busy season with this new set of clients has been eye opening. Some of the taxpayers have been taking very questionable positions on certain recurring items. Somewhat paranoid, H is now quite concerned about incurring penalties. What can she do to guard against possible preparer penalties?
First, it needs to be emphasized that the tax practitioner is being paid to be an advocate for the client, not an independent third party hired to provide an unbiased or neutral opinion. It is the job of the tax expert to explain the relevant considerations and possible consequences, including positions that can be contrary to the law but which may be defensible. The final decision is to be made by the client after reviewing the alternatives provided. If the practitioner believes that the client's actions violates his or her personal code of ethics, the practitioner should withdraw the engagement.
First, even if an answer to a particular question does exist, the cost of uncovering it probably cannot be recovered by the client. Second, given the small percentage of tax returns that are audited, there is only a slight chance that either the taxpayer or preparer will ever come face to face with the IRS. Third, preparers, like most people want to please their customers and find it hard to just say no. When these dynamics are present, they make it relatively easy for practitioners to resolve an issue in favor of the client, notwithstanding the lack of reasonable support for the position.
H recently quit a national public accounting firm and purchased the practice of a local accountant....
Fraud at Berry, CPA’s BERRY, CERTIFIED PUBLIC ACCOUNTANTS Brief History of the Firm In 1999, John Berry graduated from college with an accounting degree. After 10 years at an international accounting firm, John decided to start his firm, Berry, CPA’s. The firm, located in Oakwood, caters to local clients; specifically, John and his staff of four professionals specialize in non-public companies. The majority of the services provided by Berry, CPA’s are tax planning and preparation; however, the firm also performs...