MAR 11, 2019 Posted in Budget, Accounting

$40,000 Tax Return Error

At SRG Advisors, LLC we believe in more than just being tax preparers; we strive to be our clients’ financial quarterback. CPA’s are the most trusted advisors to their business and personal clients. Clients who hire the right CPA and ask questions before making decisions will always come out ahead.

While SRG Advisors, LLC focuses on businesses, we also do many personal returns for business owners. When people hear that I’m an accountant and do personal taxes, they often ask me countless questions: Do I need to report this income? Why did I not receive a refund? Why do I have to pay taxes? What is a 1099?

I like when I get challenging questions and I try to help as many people as I can. While each question is important, I have come to realize most people are afraid of taxes and do not understand their business or personal tax returns. Additionally, they are afraid to ask for explanations or put in the time to understand them. I tell all my clients if you spent the same amount of time planning your business as you spend planning your vacations you would be exponentially more successful.

Here are a few examples I have come across in practice that show why hiring the right CPA makes a world of difference.

Case A:

A close friend of mine was using an accountant for 20+ years. Each year their accountant would send over their return and the client would sign and file without review. Two years ago they asked me to take a second look, which I was happy to do. The first year I reviewed their returns I found a seemingly small error, a number that was a positive instead of a negative. That made an item that was supposed to be a loss of 5K become taxable income of 5K. In other words this was a 10K error. Correcting this mistake amounted to $4,000 in savings for Client A.

The next tax year, I took a little longer to review the return. I sat with Client A before reviewing their prior accountants return, to understand their current year activity. We spoke about how they hired a new investment advisor and in the transition they sold most of the investment portfolio that they’d held onto for many years. Upon review of the return, I noticed that they reported significant short-term and long-term capital gains. I asked the client about the short-term gains since their portfolio consisted of investments they’d held onto “forever”. We took a look at the original 1099 and it said long-term gains. However it was somehow reported on their prepared return as short-term gains. Some might think this missed item would not have made a difference, but when properly changed to long-term gains their taxes decreased more than $40,000. SOS! Second Opinion Services

How is your accountant looking out for you?

I will post Case B next week.

There are many significant and complex tax deductions and credits for businesses in all industries. However, many businesses and their accountants are unaware of these savings and the tax returns are never given appropriate attention or a second look. Contact SRG Advisors today to have a highly trained and dedicated member of our team review your returns!!! SOS! Second Opinion Services