Tax Preparation and Truth in Advertising

Several of the tax software companies advertise that they can turn you into accountants if you pay to become one of their software subscribers and talk to one of their representatives a few times. Voila, you can instantly become an accountant.  What is wrong with this story?

Critical Questions

While some will be able to make entries of some kind on their software, most will lack the education and experience to know how to use that data for their business and address questions such as:

  • What is important to banks when looking to extend a line of credit or loan?
  • Are bankers just looking for a profit and loss statement or do they need other financial data?
  • What debt equity ratio is the bank looking for?  Where would you find that ratio?
  • What’s the “current” ratio for the business? Where do you find it and is it important to you as an owner?
  • What are your tax position choices?
  • Should you expense an asset or depreciate it?
  • Is a bonus depreciation advantageous to your business and personal financial position?
  • Should you use Section 179 options?

Using your “self-entered” data for business decisions without the knowledge and background of what that data means and how to use it to best avoid paying taxes and preserve working capital for your business is risky.

Don’t be misled. The advertising is not for your benefit!

Solid Accounting & Financial Planning

Several years ago, a new client joined our firm and owed almost $500,000 in back taxes.  Revenue for them at that time was about $1.6 million per year.  We were able to discharge most of the taxes owed and since that time have helped the company grow an average of 11.5% per year.  The company set a new record this year with revenues at $5.3 million.  It took solid accounting, cash planning, and changes in processes as we reviewed monthly all of the critical numbers for the company and met with them for planning.

If I were given a hammer and some tools then asked to build a house with no idea of the size of the house or how any rooms they wanted, while I may have the tools, the house would never be built.

Focus on what you know and find qualified partners to help you with the rest.

If it sounds to good to be true …..

Two of the Larger national accounting firms also advertise that they can help you with old owed taxes and can give you a price before they ever start the work!   If they really intend to provide solutions for your old taxes owed, giving you a one-time price for the work is impossible.

Not one of the tax-mediation companies, including us, can tell the IRS which revenue officer to assign your case to, what city that officer will live in, what work load that revenue officer be under, etc.

We have had cases that were resolved in a few months but that’s not the norm.  Some IRS tax cases require a submission and multiple appeals to reach a settlement with some going all the way to the Federal Tax Court.   One $1,250,000 case took us five years to resolve but finally was resolved for $28,000 of payments per year for five years for a total of $140,000 which is about 11% of what is owed.

It is a Marathon, Not a Sprint

Contending with the IRS is rarely a sprint but most often is a marathon won by patience, determination and skill.  Don’t be fooled by a one price offer for mediation.   If you accept that kind of nonsense be prepared to lose your case.   Contact our office to get started.