The Costs of Not Hiring a Tax Professional!
Recently, I was hired to give a consultation to an Advanced Degreed Medical Professional who hired a non-licensed tax professional to prepare a recent year’s tax return. He saved money since the tax- preparer charged him a nominal fee to prepare the return or so it seems. But, read on to see if he/she really saved money.
I reviewed the tax return and noticed several oddities that I would have caught had I been hired to prepare the tax returns.
First, there were many expenses on the Schedule C where the numbers were round. Such numbers look like estimates or made-up and not authentic.
Second, the Net Schedule C business profit as a percentage of the gross receipts looked low!
Third, the amount of net income on that year’s tax return didn’t justify that the taxpayer earned enough to live on. Another red flag!
Fourth, part of the Schedule C detail for the Gross Receipts was labeled cash. A huge red flag! And there were other oddities.
That being said, the tax return is being audited by the Internal Revenue Service and the costs and emotional strain of going through an audit will likely be taxing. I strongly suspect to the tune of thousands of dollars especially if more tax years are opened for audit.
Based on my discussion with the taxpayer, the books were not kept well if at all. That’s the biggest mistake small, medium and even some large businesses make. Not keeping a good set of books.
The result of all this becomes damage control and I’ve seen mistakes of this nature time and time again. The bottom line is “don’t skimp when it comes to hiring and paying a good tax professional because it can come back to bite ya!! Ouch!!! And when it does, it hurts!