WHEN SHOULDN’T YOUR CPA AMEND YOUR TAX RETURNS? HOW TO MAKE BETTER DECISIONS! By Jeffrey Brooks, CPA, CFP, MBA FOR JBrooks Wealth Advisors, PC, a CPA and CFP firm. jeff@jbrookswa.com

I always try to follow the Golden Rule when I make a decision that affects one of my clients. The CPA profession is a great profession that has been built on the ethical foundation of putting the client first.
Recently I received an amended partnership statement of income and loss (called a K-1) from an individual tax client. The amended K-1 had a lower income number. The client asked me to amend their tax returns.
Technically when the K-1 changes, you’re supposed to file an amended tax returns for Federal and state.
I agonized with the decision whether to amend or not because the tax savings was less than my fee to amend the tax returns.

This is how I made a good decision that was in the best interests of my client:

1. How much time did I have to make the decision? I did not want to make a snap decision or always having to “sleep on the decision”. Fortunately, I had plenty of time to decide whether I should advise the client whether to amend the tax returns and pay my fees. However, I had other clients who needed my help so I did not want to spend too much time.
2. Next, I defined the problem. The client would get an additional refund of $85 but my fee for amending the tax returns would be $275. I was ready to advise the client that they should not pay me the money to amend the tax returns. Before, I did that I wanted to make sure the client would not get in trouble for not amending the tax returns when there was an obvious change due to the change in their tax.
3. So, I gathered the facts and listed the pros and the cons.
4. After reviewing the ramifications to the client of not amending the tax returns, I looked at the “odds” of a future problem with the IRS and state versus the fee savings for the client by not amending the tax returns.
5. I recommended that amended tax returns not be filed. I said “although I cannot promise that the IRS would never question why an amended tax return was not filed, the odds were extremely low that this question would ever be raised. Economically it is not in your best interest to pay me for filing amended tax returns”.
How to learn from past mistakes is what I call my “lessons learned”. Here are a few of the lessons learned:
• Never work on specialized areas where my firm does not have the expertise. For example, we have rarely prepared Form 706 Estate filings of Assets and Liabilities. Because we have rarely prepared these non-income tax returns, we would spend many hours of study and still not understand everything that needs to be known to prepare an accurate return. Clients appreciate it when you are “straight” with them and refer them to someone else.
• When a decision is not simple, I have learned to discuss the issues with a person I respect. From these discussions, I have gained different perspectives that have altered or even changed my decision by 180 degrees.
• It is impossible to force a bad decision into being a good decision. No one is always right. When you make a decision that in hindsight is a bad decision, admit it, get started on fixing it and learn from it. What I do, is I write down and vocalize out loud what I learned and what I will do next time.
• Keep focused in the present instead of regretting what went wrong. That is easier said than done. When you’re self-talk criticizes you for the past, say “No one is perfect and all I can do is live in the present!” or invent your own Mantra!

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About Jeffrey Brooks

Jeffrey Brooks, CPA, CFP, MBA since 1976 has specialized in helping clients save significant taxes, help businesses increase their cash flow, revenues and profits while increasing their control and satisfaction. Jeff and his accounting firm sincerely cares about the happiness of his clients.

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JBrooks Wealth Advisors, PC.

Certified Public Accountant
Address: 4647 N 32nd Street, Suite B245
Phoenix, Arizona 85018
Phone: 602-292-2009
Email: jeff@jbrookswa.com