Whose Side Is Your Accountant Really On?
by Rebecca Button on April 10th, 2008
How would you feel about hiring an accountant who puts the interests of the IRS before those of you or your business? What’s that you say? You wouldn’t like it? That’s what I thought you’d say…but what if I told you you had to?
Unfortunately, that may be the case.
(I mean, I won’t force you to but a much stronger influence might…what was their name again?…..oh right! The Government.)
The Small Business and Work Opportunity Tax Act of 2007 stipulates that those who prepare returns containing an understatement of tax due - which the preparer "knew or reasonably should have known" - will be subject to penalties amounting to "the greater of $1,000 or 50% of the income" the preparer received for that particular federal return.
The act also expands the definition of tax-return preparer to cover those handling any federal return, including those for estate, gift, excise, and employment tax.
According to a recent Fortune Small Business article there are a bevy of downsides to this new legislation including:
- The act has the potential to injure the close personal relationships many small businesses maintain with their accountants.
- Smaller businesses may need to prepare more documentation than previously required. In turn, accountants may be less apt to take clients at their word.
- In some extreme cases, accountants may ask for far less data, hoping they will be less liable the less they know, which would put more of the legal burden on entrepreneurs.
So it sounds a bit like intimidation doesn’t it? And it would appear that the government would end up with a lot of free (and somewhat covert) auditors. How do you plan to handle this new legislation? Are you going to write your congressman? Did you even know this tomfoolery was afoot?
And for those of you who do end up getting audited this tax season (for real) check out How to Survive an Audit of Your Business- And Live To Tell About It