How to handle these CPA errors?

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How to handle these CPA errors?

Postby markfaix » Thu Apr 04, 2013 1:27 pm

After using TurboTax for many years, I decided to use a CPA for my personal income taxes this year because I needed a CPA for an S Corp I had started, and because I was trying to spend more time with my family. But the results were terrible, and I'm wondering what to do.

The CPA came highly recommend by my estate planning/tax attorney and is the senior member of his accounting firm. Based on my income, I am not high in his pecking order, so he gave my return to an associate with >10 years experience.

These are the errors I found in my review of the draft 1040:

1. Did not include 2011 refund that I credited toward 2012 taxes.
2. Reported recharacterization of Roth to traditional IRA as taxable income (1099-R reported correctly).
3. Failed to claim bonus depreciation on a >6000 lb heavy truck I purchased for my business.
4. Did not include my HSA or 529 contributions despite my giving him this info.
5. Did not account for capital loss from sale of business assets.
6. Incorrectedly completed Schedule SE based on net profits including depreciation, instead of K-1 SE income.
7. Did not include deduction for business computer that I had purchased.

The errors would have resulted in my paying >$8K additional taxes that I did not owe. He quoted a fee of $600 for my return (1040, A, B, C, D, E, K-1, 1099-MISC, 1099-INT, 1099-R, 4562, and a few others).

Has anyone seen such problems? The CPA himself is very knowledgeable and helpful despite his expensive hourly rate ($300/hr for consultation), and I found his advice to be worth it. Ideally I would like at least to retain him for my S Corp return. But what should I do about my personal return above?

Give him a chance to correct the errors?
Tell him to forget about 2012 1040, but keep him for the S corp and go back to TTax for my personal return?
Cut off the relationship entirely and find another CPA for personal and S corp?


Edited to correct tax preparation fee as $600.
Last edited by markfaix on Thu Apr 04, 2013 1:43 pm, edited 1 time in total.
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Re: How to handle these CPA errors?

Postby billern » Thu Apr 04, 2013 1:37 pm

Is it $300 per hour or a $500 fixed fee? Based upon the information you provided, that is definitely more than a 2 hour tax return. I don't think it is an excuse but it sounds like maybe they rushed through your return in order to do it for the $500 fee quote.
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Re: How to handle these CPA errors?

Postby markfaix » Thu Apr 04, 2013 1:41 pm

billern wrote:Is it $300 per hour or a $500 fixed fee? Based upon the information you provided, that is definitely more than a 2 hour tax return. I don't think it is an excuse but it sounds like maybe they rushed through your return in order to do it for the $500 fee quote.


His personal rate is $300/hr for consultation (which I did when starting my business), or for his high net worth clients' tax prep. The $600 (I incorrectly typed $500 in OP) is a flat fee for the 1040. Obviously his associate did all the work, and the head CPA reviewed it only briefly.
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Re: How to handle these CPA errors?

Postby stlrick » Thu Apr 04, 2013 2:31 pm

I doubt very much that it was "outsourced to an associate with >10 years experience." It was probably outsourced to India, or to some version of a U.S. sweatshop for otherwise unemployed accountants. The associate did a lousy job with his real responsibility, which was to double-check the completed work, and the senior CPA did not look at it. You certainly should let him know that quality control in his current work set-up stinks. If he cares about the reputation of his company, you should not need to be confrontational about it. He should want to correct the errors (and not charge you - or explain why you are wrong about the errors) if you simply inform him of them.
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Re: How to handle these CPA errors?

Postby deathb4disco » Thu Apr 04, 2013 2:51 pm

markfaix wrote:
billern wrote:Obviously his associate did all the work, and the head CPA reviewed it only briefly.


That's SOP at every CPA firm (unless he's a sole proprietor.) At this point, I'd point out the errors and let the guy fix it. If you're still not satisfied, you've got a year to find someone else.
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Re: How to handle these CPA errors?

Postby Petunia » Thu Apr 04, 2013 4:36 pm

In what way did you want him to "include" your 529 contributions? Do you mean deduct them? They aren't deductible.

Other than that, all of those errors should have been caught, but weren't. Mistakes can happen, but should be the exception, not the rule.

Personally, I would re-think the arrangement.
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Re: How to handle these CPA errors?

Postby ddb » Thu Apr 04, 2013 4:41 pm

Petunia wrote:In what way did you want him to "include" your 529 contributions? Do you mean deduct them? They aren't deductible.


In NY state, contributions of up to $10K MFJ/$5K MFS to a NY-529 plan are deductible on the state tax return. I assume other states have similar situations.

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Re: How to handle these CPA errors?

Postby pkcrafter » Thu Apr 04, 2013 5:10 pm

The CPA himself is very knowledgeable


Really? The list of errors certainly don't support this. Get another CPA? It's a no-brainer.

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Re: How to handle these CPA errors?

Postby Petunia » Thu Apr 04, 2013 5:41 pm

ddb wrote:
Petunia wrote:In what way did you want him to "include" your 529 contributions? Do you mean deduct them? They aren't deductible.


In NY state, contributions of up to $10K MFJ/$5K MFS to a NY-529 plan are deductible on the state tax return. I assume other states have similar situations.

- DDB


Ah, that makes sense. Thank you, ddb.
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Re: How to handle these CPA errors?

Postby SeattleCPA » Thu Apr 04, 2013 11:58 pm

Here's an honest (perhaps too blunt) suggestion.

Try another CPA. If you have a similar experience, probably you're the problem... i.e., you may not be organized enough in the way you present your data (which will cause anybody you work with to have trouble.)

Note: People sometimes tell me things in emails or conversationally... then omit from their organizer or from their accounting records... and then wonder why I don't remember the bit of info a year or two later. I take no ownership of that sort of "miscommunication." That's on the client.

BTW, if you work with another CPA and you have a wonderful outcome and no troubles, probably the CPA is the problem.

Final comment: There really do seem to be personalities that don't work well together.
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Re: How to handle these CPA errors?

Postby travellight » Fri Apr 05, 2013 1:18 am

You're ahead of me if you didn't get charged for e-mails to let him know about his mistakes. That's what my cpa did to me.

I would find another cpa.
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Re: How to handle these CPA errors?

Postby mephistophles » Fri Apr 05, 2013 1:47 am

I have been dealing with the same CPA for many years, and am happy for the most part. I submit highly organized material with a cover sheet listing each item in writing, backed up with forms. Even so, he shorted me $1,200 on charitable deduction which was clearly shown. I had him redo the taxes correctly, and of course, at his expense.

Suggest you have them redo your taxes, and of course, at their expense.
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Re: How to handle these CPA errors?

Postby JamesSFO » Fri Apr 05, 2013 3:47 am

SeattleCPA wrote:Here's an honest (perhaps too blunt) suggestion.

Try another CPA. If you have a similar experience, probably you're the problem... i.e., you may not be organized enough in the way you present your data (which will cause anybody you work with to have trouble.)

Note: People sometimes tell me things in emails or conversationally... then omit from their organizer or from their accounting records... and then wonder why I don't remember the bit of info a year or two later. I take no ownership of that sort of "miscommunication." That's on the client.

BTW, if you work with another CPA and you have a wonderful outcome and no troubles, probably the CPA is the problem.

Final comment: There really do seem to be personalities that don't work well together.


Interesting point, I will say sometimes I find that the organizer puts things in unintuitive orders for me, so I'll find myself making an attachment / long note on say page 5 of ~40 and then get to page 40 and need to scratch out/etc.

So I could totally see how individual choices in how to fill out the organizer, share documents, etc. could mess things up.
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Re: How to handle these CPA errors?

Postby kitteh » Fri Apr 05, 2013 7:27 am

I would have no confidence whatever in any of his work after this. I would also talk to them about whether you owe them a payment for such a mess of a return.

Like another person, I wonder if this was outsourced to India.
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Re: How to handle these CPA errors?

Postby Cut-Throat » Fri Apr 05, 2013 8:22 am

I would stay away from CPAs and find an independent tax preparer. That's all mine does. He does over 1000 returns every year and nothing else.
Since he only does tax returns he is very skilled at it. And also much cheaper than a CPA.
He also corrects botched returns from CPAs, such as yours. I believe a CPA is the worst place to get a tax return prepared Probably most H&R Block people are better.

Your CPA is probably doing all sorts of other things throughout the year and does very few tax returns.
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Re: How to handle these CPA errors?

Postby jwblue » Fri Apr 05, 2013 10:53 am

Another tax preparer/professional showing incompetence?

No surprise.

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Re: How to handle these CPA errors?

Postby markfaix » Fri Apr 05, 2013 11:31 am

SeattleCPA wrote:Here's an honest (perhaps too blunt) suggestion.

Try another CPA. If you have a similar experience, probably you're the problem... i.e., you may not be organized enough in the way you present your data (which will cause anybody you work with to have trouble.)

Note: People sometimes tell me things in emails or conversationally... then omit from their organizer or from their accounting records... and then wonder why I don't remember the bit of info a year or two later. I take no ownership of that sort of "miscommunication." That's on the client.

BTW, if you work with another CPA and you have a wonderful outcome and no troubles, probably the CPA is the problem.

Final comment: There really do seem to be personalities that don't work well together.



@SeattleCPA:

Thanks for your feedback. I agree it is reasonable to find someone else for 2013. But what would you do for 2012?

FYI, the CPA didn't give me a tax organizer, so I actually downloaded and printed out yours (!) from your website. I provided all the info in the organizer and all supporting documents. The CPA actually joked that I was so organized that if I quit my day job, he would hire me in his office. I agree personalities can clash, but I don't think that's the issue here.
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Re: How to handle these CPA errors?

Postby N1CKV » Fri Apr 05, 2013 11:48 am

Here's a news flash:
Having a CPA is not an immediate qualifier (nor-disqualifier) for the position of Tax Preparer. Taxes are a part of the CPA Exam, but most CPAs don't even deal with income tax (especially personal income tax). Seek someone that specializes in preparing income tax returns.

It seems that with as much Financial knowledge that floats around here that would get pointed out more often. I am an Accountant, for the record.
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Re: How to handle these CPA errors?

Postby Cut-Throat » Fri Apr 05, 2013 1:49 pm

N1CKV wrote:Here's a news flash:
Having a CPA is not an immediate qualifier (nor-disqualifier) for the position of Tax Preparer. Taxes are a part of the CPA Exam, but most CPAs don't even deal with income tax (especially personal income tax). Seek someone that specializes in preparing income tax returns.

It seems that with as much Financial knowledge that floats around here that would get pointed out more often. I am an Accountant, for the record.


+1...This is what I have been saying!
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Re: How to handle these CPA errors?

Postby billern » Fri Apr 05, 2013 8:40 pm

Cut-Throat wrote:I would stay away from CPAs and find an independent tax preparer. That's all mine does. He does over 1000 returns every year and nothing else.
Since he only does tax returns he is very skilled at it. And also much cheaper than a CPA.
He also corrects botched returns from CPAs, such as yours. I believe a CPA is the worst place to get a tax return prepared Probably most H&R Block people are better.

Your CPA is probably doing all sorts of other things throughout the year and does very few tax returns.
I'm a CPA and I can tell you the prior year returns I see from clients coming to us from H&R Block (which is pretty rare, we are in a different segment of the market) often have significant errors.

Accounting and tax are service industries. The quality of the work and the level of communication are highly dependent on the individuals who you work and your relationship to those people.
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Re: How to handle these CPA errors?

Postby ejvyas » Fri Apr 05, 2013 9:28 pm

Whenever I used a CPA I bought a turbotax and made sure the calculations matched. Ultimately after all those years I realized Turbotax and little research is enough for me. Better than the effort it takes to chase the CPA and get them to file before Apr 15.
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