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06 Mar 14 Here comes Santa Claus

MEMBER 18 writes:

"I am starting to wonder if there are any tax agents out there that actually check their work or an employees work before preparing financials & income tax returns (I know it is not true as there are lots of good tax agents).

I lost a new Pty Ltd client this week who said he would go back to his previous tax agent because I told him that he cannot claim 10% GST on every transaction including non GST registered contractors. He was upset when I told him that he would have to pay the money back to the ATO. He had never been told that you can’t claim groceries, takeaway lunches or evening meals that can range in the hundreds of dollars at a time as a legitimate expense. In total it could add up to thousands of dollars. ‘Why can’t the company pay for the directors & shareholders to have meals?’ He also told me that in the past 5 years, the other accountant prepared the work, gave it to him for signing & did not ask him any questions, and certainly did not give him any advice. As there has not been a single GST adjustment in the 2 years of financials I have on hand, I can only at this point in time agree that no questions were asked.

I had a new client come in yesterday. Rental property, 9 years old. Rented out for 5 years and no quantity surveyor’s report.  She was not asked for one & was not given any advice regarding what the report was. Building write off alone will be around $ 4,000.00. This is becoming more and more common.

Another client 4 years ago had literally hundreds of thousands of dollars in errors as their previous accountant did not reconcile any bank accounts, loan accounts, BAS. Client showed $120K Debit in Cash at Bank on books when in fact there was a $190K overdraft. When I queried with the former tax agent I was told everything was adjusted back to purchases as the client would not give him statements. This agent just transposed the client’s Trial Balance onto his accounting software, depreciation was calculated as per depreciation schedule and then he worked off the loan and bank statements and debited and credited with any variances to stock. In 4 years I have been acting for this client, I have never had any problems getting bank or loan statements from the client.

Another case. $50K Debit was in fact $50K Credit. These are not just isolated instances. Six months ago a former client who came back to me had a tax return prepared but no financials. I had to redo that year and claimed back an extra $225,000 in depreciation and some 20 – 30 Chattel Mortgage Loans on which no interest had been claimed. When queried with the other agent I was told by the lady who not only did the work but also provided tax advice to the client that ‘I am not a tax agent. I am only someone who prepares the work. My superiors were going to do the financials up properly at a later date and amend the return’. Two years later it was still not amended.

The list goes on and on. These are only a few cases with the first two being within 24 hours of each other.

Maybe it’s me. Maybe I should not be advising clients as to what they are doing wrong. I should not be adjusting their financials. I should not be asking their permission to prepare amended BAS. When a claim is made for their personal house or their son’s house, etc, I should just work off the client’s sheet and never ever query whether or not something is personal or private. That way I can keep every client. I can set up a business called ‘Santa Claus Tax Services’. My motto could be ‘It is Xmas 52 weeks a year’."