Whoops! CPA Tax Mistakes Caught by Financial Advisor

Filed under: The Advisor's Blog

Accounting Series - Senior FinancesPartnerships between CPAs and financial advisors can be mutually beneficial in many ways, including the fact that each can double-check the other for costly and embarrassing mistakes. In fact, a recent Wall Street Journal article details exactly how a financial advisor caught a CPA’s disastrous tax error.

In this particular circumstance, a woman held a trust with investments in natural gas and oil companies. Concerned that her current accountant might not be familiar with the complicated tax rules regarding oil and gas investments, the investor asked her financial advisor to check her income tax records for

The advisor, Rebecca Pavese with Palisades Hudson Financial Group, specializes in oil and gas partnerships. Upon checking the client’s investment and tax records, Pavese did indeed discover several
costly oversights. The client’s accountant had incorrectly managed the tax implications of the account’s
intangible drilling costs (IDC), and had missed several other important deductions. Because of these
errors, the client had been overpaying income taxes to the tune of $17,000 per year.

Luckily for the client, Pavese was able to file amendments to her income tax returns over the past three
years. The client received a refund of $50,000 for the overpaid taxes, and was saved thousands more in
future years. In fact, now that the client has found an advisor with this particular expertise, she wants to
increase her investment in oil and gas partnerships.

Unfortunately for the CPA in question, the client decided to discontinue their relationship, and Pavese
is now managing this client’s taxes.

We can learn two important lessons from this story: First, when a client’s investment situation causes
complicated tax questions to arise, it’s always a good idea to consult an expert in that particular field. It
never hurts to double-check your own work!

The other lesson is that preventing such a disaster with a client is quite simple, and yet many CPAs
aren’t taking measures to protect themselves. Tax situations surrounding certain types of investments
can quickly become complicated, but a consistent partnership with a financial advisor can lead to a
mutually satisfying relationship for everyone involved.

Source: http://online.wsj.com/articles/financial-adviser-catches-a-cpas-tax-mistakes-1403879618



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