HELP!!
Just reviewed a previous return for a new client. Old CPA (disbarred last year!) took several deductions that I think are wrong.
1) 179 deduction for full cost of 2004 Pontiac GTO purchased in 2004 (this is a car, not a truck) - don't think this qualified for full deduction
2) Bad debt deduction for cash basis sole proprieter activity (don't know that amount was included in gross income, but most likely not)
How do you tell the client, "Not only do you owe this year, but we need to ammend your previous year and you're going to owe several thousand in SE and income tax because your last accountant took deductions you weren't eligible for".
Just those two deductions will increase income by roughly $60,000, with a resulting tax of almost $20,000, not to mention penalties and interest. What do others do in a situation like this?
Just reviewed a previous return for a new client. Old CPA (disbarred last year!) took several deductions that I think are wrong.
1) 179 deduction for full cost of 2004 Pontiac GTO purchased in 2004 (this is a car, not a truck) - don't think this qualified for full deduction
2) Bad debt deduction for cash basis sole proprieter activity (don't know that amount was included in gross income, but most likely not)
How do you tell the client, "Not only do you owe this year, but we need to ammend your previous year and you're going to owe several thousand in SE and income tax because your last accountant took deductions you weren't eligible for".
Just those two deductions will increase income by roughly $60,000, with a resulting tax of almost $20,000, not to mention penalties and interest. What do others do in a situation like this?
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