Biggest Tax Mistakes Hall of Fame
Update as of July 2024
As of July 2024, Epic Trust Financial Group is now Guardian Financial Group.
When it comes to taxes, anyone who’s ever forgotten to enter a form, check a box or been audited will tell you it can get ugly.
There’s nothing good about tax mistakes, but they’re a good opportunity to learn the hard way.
Better though, to not make them in the first place. That’s where a CPA (Certified Public Accountant) can help.
Greg Stewart-Longhurst, CPA and the semi-retired principal of Stewart-Longhurst, PS Certified Public Accounting in Spokane, will take us through some of the biggest tax mistakes he and his wife, Hanna Stewart-Longhurst, CPA, have helped clients navigate over the years.
Epic Trust Financial Group acquired the Stewart-Longhurst firm in September 2022 and will be continuing operations in Spokane under the Epic Trust name. Greg is staying on through 2023 to ease the transition.
“So many of these come down to people trying to handle things themselves when they shouldn’t,” Greg said, recalling a business client who didn’t want to shell out for an accountant to calculate their payroll taxes.
“They just ran with it, and all of a sudden, the IRS and State are knocking on their door saying they didn’t pay. It gets more complicated when filing and paying late, plus, there’s a 100% penalty on some payroll taxes for not paying those fees on-time.”
In another case, a new business client came in who had been using a franchise tax preparation service for his corporation for several years. After Greg started looking over his books, he discovered that his client had been incorrectly taxed on both dividends and profits, which resulted in the client getting $40,000 back after amending and fixing the return.
A small business client who needed a tax deduction decided to go out and buy a brand-new truck on December 31st under the impression that if it was intended for work, he could write it off. He was surprised when he couldn’t, due to not having driven any business-related mileage before the end of the year.
“He was able to write it off later on, but it was painful at the time. All they had to do was call us. We encourage clients to talk to us throughout the year as things change, not just when they need their taxes done,” Greg said.
“Anytime someone owns a business or a rental home, it’s time to hire a CPA. There’s just so much that can go wrong, so many deductions that can be missed. My rule of thumb is that we can save them enough taxes to pay for our bill.”
One of the worst cases Greg helped untangle involved a business client who was being audited by the IRS, but didn’t want to pay Greg to help him.
Two weeks later, the auditor himself called Greg and said he was going to assess a $90,000 tax bill.
He said his client was almost in tears over the situation. “He had volunteered too much information. CPAs know how to handle tax auditors. The audit report was full of errors and miscalculations that could have been avoided, much of which had to do with inventory value that my client didn’t know how to appropriately answer questions about, so the auditor made assumptions.”
After six months of battling with the IRS, Greg got the tax bill negotiated down to $10,000.
On the personal taxes side, Greg’s seen some dicey cases there too.
“A lot of issues come up when people enter into some fandangoed expensive transaction and don’t think about the tax implications. In one common case, a client sold an investment home, but wasn’t familiar with the ins and outs of a like-kind exchange where taxes are deferred to the future. Well, they did it themselves and didn’t do it right and were shocked when a tax bill for $27,000’s worth of capital gains came in.”
Another client was on Social Security and Disability and didn’t want income from a part-time job to show on her tax return. Panicked that she was going to lose her benefits, she put the 1099 in her daughter’s name. Then her daughter didn’t file a tax return.
Several letters later, it was corrected. The kicker was that it wasn’t even enough income to jeopardize her benefits.
“If she would have just called…” Greg trailed.
There’s a common thread between all of these stories: a simple phone call could have saved thousands of dollars and a lot of time and hassle for both client and CPA alike.
“We’re on their side, not the IRS’,” he said. “The main reason clients fail to call is they think they’re going to be charged for it, but it will save them money in the end. The advice they get will be invaluable, they can sleep at night and not have to worry about their taxes or receive nasty IRS letters saying they did something wrong.”
At Epic Trust, calls are welcomed. Quick questions or those that don’t require research or require a deliverable such as a tax projection, tax return or written letter are free of charge.
In short, it really never hurts to just ask.
