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My accountant a CPA still has not finished preparing my taxes, his attitude is "don't worry the later you file the less the chances of being audited"

(I understand from reading the boards that I should not be too worried about an audit if it occurs, but to my knowledge it is time consuming and like most people I would rather have a root canal with no analgesia)

Well I found out that if I owed money I would have to pay a penalty to the IRS, so I stepped up the pressure to get my returns , today I found out that it looks like between corporate taxes , a state AMT and individual taxes I owe the IRS around $10,000 he told me that I would not pay a penalty but I would pay interest (same difference I'm still paying), he calculated it at an extra $300.but his attitude seems to be it would cost more than that to hire an attorney if I got audited - this was the first I knew about having to get an attorney for an audit, I rather thought that's why I had a certified accountant with 25yrs of experience but hey you live and you learn.plus he has always struck me as being honest and straight forward

Now to my main questions - I started a medical practice 2yrs ago and I work in a hospital part time, I am a single parent with two kids filing as head of house hold, I claim myself and 1 dependent on my income from both jobs, according to my accountant I grossed approximately $94,000 last year and I was paying a witholding of 25 - 28 cents on the dollar,I really don't understand how I could end up triggering the AMT and owing what to me is a huge amount of money the only thing I can think of to explain my whopping debt is the obvious - my accountant made a mistake and did not withold enough money during the year,which brings me to the next question, if this was not a mistake
Should I amend my exemptions on my W9 to single with no dependents on the second job or should I file as single on both jobs to ensure that the right amount of money is withheld for the coming filing period

I know I sound muddled and confused but it's 5.00 in the am and I've been up all night worrying about how I am gonna pay this money
Next question would the IRS will let me pay over a period of time or do I have to include the check when I send in my returns
To make it worse or better depending on which side you look at it, I will probably gross around $150,000-180,000 this year
I want to avoid this carnage next filing period, I also want to sit down with my accountant,to come up with a sensible plan for tax saving strategies, I already contribute to a pension plan at both jobs but if I am not wrong the more the deductions from the business the greater the risk of triggering the AMT I would really appreciate advice on what questions I should be asking him to make sure that he has not missed any thing vital. I like him and although on one hand if it turns out that he made a mistake somewhere I would like to work with him in straightening things out (I am a creature of habit and I can live with him making an error), On the other hand I am relying on him to be the expert , and since I am just starting out and it's a small practice I can not afford any major SNAFU's

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Sorry I can't answer a lot of your questions but in your shoes the first thing I would do is find a new accountant. Start by getting his guidance on what to do this year. You can ask about last year's return but at this late date it may be better to let the first one finish your return. Might want to let the new guy review it before filing though.

I think you probably can get an installment payment plan with IRS but they'll charge interest. 25% withholding should cover your federal income tax liability and then some but I'm not sure about state and a corporate tax. Don't see a federal AMT either but have no idea about a state AMT.

Now that I think about it I might pull everything from the CPA, and go find a new accountant. This sounds really screwy.
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Sounds like you need a new accountant.
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No. of Recommendations: 8
My accountant a CPA still has not finished preparing my taxes, his attitude is "don't worry the later you file the less the chances of being audited"

The "Find a new accountant" trio is now a quartet. This statement is twaddle, so he's either incompetent or hosing you.

<snip>

Well I found out that if I owed money I would have to pay a penalty to the IRS, so I stepped up the pressure to get my returns , today I found out that it looks like between corporate taxes , a state AMT and individual taxes I owe the IRS around $10,000 he told me that I would not pay a penalty but I would pay interest (same difference I'm still paying), he calculated it at an extra $300.but his attitude seems to be it would cost more than that to hire an attorney if I got audited - this was the first I knew about having to get an attorney for an audit, I rather thought that's why I had a certified accountant with 25yrs of experience but hey you live and you learn.plus he has always struck me as being honest and straight forward

See above and don't take up a profession that requires an ability to quickly assess people's character. I'm a strong believer in having a rep attend an audit in those rare cases that actually involve a face-to-face meeting, but an attorney isn't necessary unless you're up to something criminal, in which case your preparer shouldn't have gone along with it. This guy gets worse and worse.

Now to my main questions - I started a medical practice 2yrs ago and I work in a hospital part time, I am a single parent with two kids filing as head of house hold, I claim myself and 1 dependent on my income from both jobs, according to my accountant I grossed approximately $94,000 last year and I was paying a witholding of 25 - 28 cents on the dollar,I really don't understand how I could end up triggering the AMT and owing what to me is a huge amount of money the only thing I can think of to explain my whopping debt is the obvious - my accountant made a mistake and did not withold enough money during the year,which brings me to the next question, if this was not a mistake
Should I amend my exemptions on my W9 to single with no dependents on the second job or should I file as single on both jobs to ensure that the right amount of money is withheld for the coming filing period


Using the facts you present your Federal income tax would be $14,779 with the standard deduction. That is 15.7% of the stated $94,000 income. Federal AMT is not an issue.

I'm not sure this is particularly useful to you since I really can't figure out exactly what the different liabilities are you're addressing. Specifically, you mention "starting a practice," but you seem to be subject to withholding for all of your income. This leads me to believe that your practice is the corporation you mentioned. Are payroll taxes fully paid? Is corporate income tax an issue?

I know I sound muddled and confused but it's 5.00 in the am and I've been up all night worrying about how I am gonna pay this money
Next question would the IRS will let me pay over a period of time or do I have to include the check when I send in my returns


Step one is to get your completed returns so you know exactly what you're looking at. Step two is to make sure you're on track so you won't have an unpayable balance due when you file your 2006 return. Step three, before you file 2005, is to figure out how you can pay it off given your current cash flow that stays true to step two. The IRS will work with you if necessary.

To make it worse or better depending on which side you look at it, I will probably gross around $150,000-180,000 this year
I want to avoid this carnage next filing period, I also want to sit down with my accountant,to come up with a sensible plan for tax saving strategies, I already contribute to a pension plan at both jobs but if I am not wrong the more the deductions from the business the greater the risk of triggering the AMT I would really appreciate advice on what questions I should be asking him to make sure that he has not missed any thing vital. I like him and although on one hand if it turns out that he made a mistake somewhere I would like to work with him in straightening things out (I am a creature of habit and I can live with him making an error), On the other hand I am relying on him to be the expert , and since I am just starting out and it's a small practice I can not afford any major SNAFU's


It's your money and your peace of mind, so keep this accountant if you please. Just do so with the knowledge that he's lying to you, intentionally or un.

Phil
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The "Find a new accountant" trio is now a quartet.

OK, so I can't count. Sue me.

Phil
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Get a new accountant.

Gordon
Atlanta
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My gratitude to every one that took the time to offer me advice, I am looking for a new accountant as we 'speak'.I am going to camp on my current CPA's doorstep till I get the returns, I will go over them with him and see if we can figure out if there were any errors anywhere ,run them through turbotax and then take them to a new accountant for a second opinion.I am determined to make myself a much better informed client so I have been going through these boards,they are an excellent source of advice( to quote my teenage patients,I would like to give a big "shout out " to folks like phil). This has been a wake up call to me .I was always more focused on the patient care aspect of my business,(just thinking about paperwork makes me queasy)but this has brought home to me that what you don't know can REALLY mess you up.
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I am looking for a new accountant as we 'speak'.I am going to camp on my current CPA's doorstep till I get the returns, I will go over them with him and see if we can figure out if there were any errors anywhere, run them through turbotax and then take them to a new accountant for a second opinion.

When a patient goes to another doctor for a second opinion, That doctor charges for the service. Likewise, when a new CPA goes over your tax return and expresses a second opinion, payment is due. You need to decide if it's worth your while to pay the first CPA more, or pay the second, or both.

Doug
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More than a new acountant you need to understand your own tax return so no matter who you hire, you are able to check his work instead of going to a board such as this one, without the right information to respond adequately to your needs.

Instead of staying up all night worrying, download a GOOD tax calculaator that handles AMT and phaseouts, and SE taxes. They are usually free. Unlike tax programs instead of asking abstract questions you fill in the lines of a 1040. they also usually pre-calculate the current year's tax so you can adjust your withholding appropriately. Read up, in the instructions for 1040, what every line with a number on your return is for and how it is computed. Check your preparer's figures with your calculator. Pretty soon you'll dump the CPAs and prepare and file your own returns.


ed



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I would not bother to "camp out" just go into his office and demand you materials. They are yours. Don't worry when he tells you he has started or planed on doing it this afternoon -- just get your stuff. If you are in trouble let your new accountant deal with it.

Gordon
Atlanta
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Your accountant may just be lazy, BUT, why take the chance? If I were you I would use TurboTax to compute my tax. I have used it for 8-10 years. It does federal and state. By the time you gather up all the information your accountant needs, you have the information you need to compute your tax using a tax program. It's not as hard as you might think, take it one line at a time.

AMT is a real problem, at least on federal returns, and more and more people are going to be "hit with AMT." I can't address any state issues, as I am not familiar with them.

I can assure you that the later you file a return has nothing to do with increasing/decreasing you chances of an audit. Also, most people do not need a tax lawyer to oversee an audit. I think most accountants are qualified to mediate during an audit. You need an "enrolled agent" to stand before the IRS in certain instances - tax court, etc.

Personally, I believe the government's need for income is what increases your chance of an audit & right now the government needs income. The IRS is trying to hire private debt collection agencies to assist in collection of IRS debts.

The IRS does have an installment agreement plan. $43 User Fee to set up. There are other options available also, depending on whether the taxes you owe are business or personal.

You will pay penalties and interest, which accrue on a daily basis. You may ask for the penalties (failure to file and failure to pay) to be removed for "reasonable cause," IF you can explain why you didn't file and pay on time & someone at the IRS gives you the benefit of the doubt.

If you have problems with the IRS, you can't get an Installment Agreement and/or your request for penalty abatement is denied, and you receive appeal rights, go to the Taxpayer Advocate Service, (We're in every document published by the IRS and listed in the phone book) before you go to Appeals. Once appeals denies, we can't do anything.

I hate people getting false information about the IRS. I am not trying to drum up business. If you called me at work, I would not be able to tell you, "Find another accountant."

Case Advocate with Taxpayer Advocate Service
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I would not bother to "camp out" just go into his office and demand you materials. They are yours. Don't worry when he tells you he has started or planed on doing it this afternoon -- just get your stuff. If you are in trouble let your new accountant deal with it.

Gordon
Atlanta


I agree. He also cannot refuse to give you any material that is yours (such as W-2's, 1099's and such) if you decide not to pay him. He can however withhold the tax return he has prepared, as that was his work, even if it was done wrong. It sounds like you have already filed an extension and any penalties/interest will have to be paid regardless.

WRJ
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Ok, to sum some things up for OP and other interested parties.

Your accountant needs to be fired. Any accountant that tells you it is ok to postpone a return that you know has a balance due should be fired. Interest is building every single day, so it is costing you money to wait and it is costing him nothing. Keep that in mind.

Doing income taxes with software is certainly a good way to go. But keep in mind that the software is NOT a substitute for knowledge or a good tax preparer. Simply stated, if you put junk in, you will get junk out. Remember those Turbotax commercials from last tax season? They said they guarantee the "computations". Ask yourself when the last time your computer got your arithmatic wrong. Math is not the issue, tax law is. I used to work at H&R Block and I used to teach their tax course, which is open to anyone. It costs between $150 and $200, but the knowledge you'll gain is priceless. Don't like Block? Fine, find another tax course. Most prep services offer one, but they vary greatly in quality. If you take it and still want to use a tax pro or software, great, but now you'll know a little about what he is talking about and what the software is asking you. Or, you can always spend hours reading the Pubs (they are not that bad when you know the basics).

I now work at a tax representation firm, and I am an enrolled agent. I talk to various departments of the IRS everyday, and believe it or not, most of the people I talk to are very nice. I also see the worst of the worst of clients who have the IRS hot on their trail. I have a client that has a wage levy, so he took an unpaid leave of absence and got another job four hours away. He thought he could work there a while before the IRS caught up with him. (The newest wage levy arrived on day four.) Then he called us.

Installment agreements are great, but you have to use them the way they are intended. It is not a tool to get rid of a levy for a while, as so many people believe. It is also not possible to get an installment agreement that will cost you "$5 a month for the rest of my life." Wish I had money for everytime I heard that. There are also requirements that must be met along the way, including being current on all tax returns and tax deposits. That might sound minor, but I prepare returns as well, and I do many returns for people who haven't filed for more than ten years. I have seen a single year $10,000 balance due turn into $250,000 in a matter of years. Think it can't happen? Think again.

The Tax Advocate service can be very useful, just as notatwork said. I deal with them all of the time, and they have helped with client issues more times than I can count. But remember that they are still part of the IRS, no matter how "independent" they say they are. Take that for what it is worth.

Here is another good, stead-fast rule. NEVER go to an audit, if you can avoid it. I don't mean that going to an audit itself bad, what I mean is the taxpayer should avoid going. Ever. Period. Paid representation is best. They have the tax knowledge, they won't volunteer more information than the IRS asks, and they know what the boundaries are. Any qualified enrolled agent, CPA, or attorney can go to an audit for you with a minimum of paperwork. Do not go. Ever. If the person who prepares your return (whether that is YOU or an unenrolled preparer) is not one of the above, they should not be at an audit. An unenrolled preparer is worthless at an audit, and they are only acting as a witness. Not a representative. And they have to spill everything you said during the tax prep - there is NO privacy or privledge. Don't bring your friends or family either. If the person you want to go to an audit for you doesn't know what a CIRCULAR 230 is, RUN away and find someone else.

Finally, it is possible to work out a deal with the IRS for less than your total balance due. But it is NOT as easy as they make it sound on tv or at your local bar. I do those too, and the rules are tight and they continue to tighten. Don't believe anyone who says there is a "simple way" to get rid of your tax bill. There is one simple way - pay it. Other than that, there are hurdles to jump.

On a personal note, sometimes it is difficult for me to sympathize with the taxpayers. Many of the people I help got behind and never knew how to catch up. I understand that. What I am talking about are the people who simply flaunt their lawlessness. I have had people tell me many times that they are going to leave the country, or take some other measure to avoid the IRS. Well have fun overseas, your tax bill with the IRS will never run out. It'll be here waiting for you. In the mean time, I, and many other law-abiding citizens, will be filing our returns. Getting current with the IRS is much easier and more painless, and you will feel much better about yourself.
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I'd like to agree with FoolishGerald advice.

1)NEVER give out more information than is absolutely required. If the IRS (or most people in general) don't ask for it, don't give it for free.

2)Don't try to run or pull a fast one on taxing agencies. They will find you (too bad it doesn't work when you are owed a refund, you have to hunt them down) and it won't be pretty.

3)Debts owed to the IRS, again like most things in life, can't "vanish" with some smooth talking. Even bankruptcy won't make them go away.

WRJ
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Even bankruptcy won't make [tax debts] go away.

Some taxes can be discharged in bankruptcy, but if tax is the only debt you're facing, there's probably a better way than bankruptcy.

Phil
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