We fired a client.
Nice enough fellow, but he would not listen. To us, to
the IRS, to getting out of harm’s way.
He brought us an examination that started with the
following:
We filed in Tax Court. I was optimistic that we could resolve the matter when the file returned to Appeals. There was Thanos-level dumb there, but there was no intentional underreporting or anything like that.
It may have been one of the most demanding audits of my
career. The demanding part was the client.
Folks, staring down a $700 grand-plus assessment from
the IRS is not the time to rage against the machine. An audit requires documentation: of receipts,
of expenses. Yes, it is bothersome (if not embarrassing) to contact a supplier
for their paperwork on your purchases in a prior year. Consider it an incentive
to improve your recordkeeping.
At one point we drew a very harsh rebuke from the
Appeals Officer over difficulties in providing documentation and adhering to schedules.
This behavior, especially if repetitive, could be seen as the bob and weave of
a tax protester, and the practitioner involved could also be seen as enabling
said protestor.
As said practitioner I was not amused.
We offered to provide a cash roll to the AO. There was
oddball cash movement between the client and a related family company, and one
did not need a psychology degree to read that the AO was uncomfortable. The roll would show
that all numbers had been included on the return. I wanted the client to do the
heavy lifting here, especially since he knew the transactions and I did not. There
were a lot of transactions, and I had a remaining book of clients requiring
attention. We needed to soothe the AO somehow.
He did not take my request well at all.
I in turn did not take his response well.
Voices may have been raised.
Wouldn’t you know that the roll showed that the client
had missed several expenses?
Eventually we settled with the IRS for about 4 percent of the above total. I knew he would have to pay something, even if only interest and penalties on taxes he had paid late.
And that deal was threatened near the very end.
IRS counsel did not care for the condition of
taxpayer’s signature on a signoff. I get it: at one point there was live ink,
but that did not survive the copy/scan/PDF cycle all too well. Counsel wanted a
fresh signature, meaning the AO wanted it and then I wanted it too.
Taxpayer was on a cruise.
I left a message: “Call me immediately upon return.
There is a wobble with the IRS audit. It is easily resolved, but we have time
pressure.”
He returned. He did not call immediately. Meanwhile the
attorneys are calling the AO. The AO is calling me. She could tell that I was
beyond annoyed with him, which noticeably changed her tone and interaction. We
were both suffering by this point.
The client finally surfaced, complaining about having
to stop everything when the IRS popped up.
Not so. The IRS reduced its preliminary assessment by
96%. We probably could have cut that remaining 4% in half had we done a better
job responding and providing information. Some of that 2% was stupid tax.”
And second, you did not stop everything. You had been
in town a week before calling me.”
We had a frank conversation about upping his accounting
game. I understand that he does not make money doing accounting. I am not
interested in repeating that audit. Perhaps we could use a public bookkeeper. Perhaps we
could use our accountants. Perhaps he (or someone working for him) could keep a bare-boned QuickBooks and our accountants would review and scrub it two or
three times a year.
Would not listen.
We fired a client.
