Updated July 2, 2015
We have a very strong commitment to bookkeeping. Other firms will happily prepare a business income tax return based upon the work of the client, while forcing the client to sign a liability waiver absolving the CPA of any responsibility on the tax return. This practice of a Business Tax Preparation Company Chicago Illinois has sadly become quite commonplace, in the era of store bought software general ledger packages.
But clients are not CPA’s or Enrolled Agent’s. Clients don’t know what is deductible and what isn’t. They don’t know how to document their income or expenses properly. Most have internal balance sheets that don’t even balance in the first place. Sadly, those mistakes do nothing but cause large problems and tax bills for the client.
Our commitment to bookkeeping and getting the details right was proven once again this tax season. We picked up a large entertainment facility as a client at the beginning of 2014. They have an internal bookkeeper maintaining an internal set of books, and complained about their income tax returns being wrong. Their prior CPA Firm took their books, asked a couple of questions, and completed the returns.
I explained that the only way to get it right would be to professionally prepare an external set of books under public accounting standards. That duplication of efforts didn’t make a lot of sense to the owners, but when I went through the prior returns and showed them their potential liabilities, the owners agreed to move forward.
So we took in their work monthly and prepared an Income Statement, Balance Sheet, Bank Reconciliation, and Detail General Ledger. The facility utilizes an outside payroll processor, one of the national companies, that handles their payroll and payroll tax returns. At the end of the year we received the year end packet from the payroll processor that included W-2’s, the 941, and the W-3. But their was a problem. The payroll just didn’t reconcile. Because we were doing the monthly record keeping, we knew that there was a problem.
Most other accountants would have just tied out the payroll numbers to the W-2’s that were presented. After all, that is evidence of a deduction, isn’t it? But something was wrong. The W-2’s were off by over $84,000. What had happened was that the two owners of the company took an $84,000 bonus at the end of the year, and the payroll company had not included this in their W-2’s. The outside processor had processed the bonus checks as payroll, and had somehow entirely excluded it from the annual payroll accounting.
Under normal circumstances, what would have happened? A lessor firm than ours would have processed the corporate return based on the evidence presented. The owners would have missed an $84,000 deduction and paid more income tax than was appropriate. Their W-2’s were wrong, so their personal income tax returns would have been understated from the standpoint of their adjusted gross incomes. Also they would have missed the additional federal and state withholding from the bonus which would have added to their refunds.
A couple of months would go by and the payroll company would finally notice their mistake. They correct it by issuing an amendment on the fourth quarter payroll tax returns and W-2’s. Now we would have to amend. If we didn’t we would face an audit that we would lose because those amendment would have gone into the government. Our payroll numbers wouldn’t match the updated W-2’s and 941. Now the client would have to pay to amend the returns. And since the returns would be late, there are going to be penalties and probably interest.
I can’t emphasize enough the need for proper external bookkeeping done by professionals who know what they are doing. Professionals who are not biased, trying to push every expense through that is non-deductible or marginal at best. We did an analysis of how much money we saved the client. It turned out that it was more than we charged for the returns in the first place. Why? Because we have a commitment to bookkeeping. A commitment to get it right the first time.
It’s always less expensive to take the time and do it right the first time, rather than not taking the time and trying to fix a problem later on.
If you are having problems with your Business Tax Preparation Company Chicago Illinois or have issues with your accounting in general, we would love to help. I love hearing from my readers, and can be contacted at
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Chris Amundson is the President of Accounting Solutions Ltd., a full service public accounting firm of Certified Public Accountants and Enrolled Agents handling the bookkeeping, accounting, tax preparation, and audit representation needs of Businesses, Estates, Trusts, and Upper Income Individuals.
Updated July 2, 2015