You see how we all have different views on this, so at the same time, you can’t blame the clients for trying, but at the same time, when you know information are false, you want to have as much as back up so it won’t come back later. We do their taxes, so obviously, we know something about their finances. We know if they are lying or not
Tax - everything in tax where the entitlement is not spelled out specifically (eg RRSP max) is ALWAYS a mixture of FACT and LAW. There are no exceptions.
The job of a tax professional is to use one’s best judgment to ascertain what those two “buckets” contain and to make a call based on that, your experience, a review of case law where justified, and occasionally referral to someone more attuned or experienced in the area.
Clients will (more or less) generally try to spin something to their benefit – using what they see as “facts” to support a claim under (what they think is) the law.
Where a claim contains an issue of judgment, it is up to you to explain to the client, as best you can WHY you lean a certain way…and sometimes that means calling the client on a “misinterpretation” of the fact case (“the lie” if you will).
READ CASE LAW - it is VERY instructive. As a junior doofus in Appeals at CRA I read a LOT of case law…THAT is actually the base of any claim, and why I go back to CANLii whenver I need to check on something.
But those mixtures NEVER go away…all you do is learn how to handle them better. And sometimes that means making the judgment on whether the claim is actually wholly improprer…not merely an argument over fact/fiction/law. Where it is wholly improper you should not make such a claim. Where you can provide an argument base for the claim, apprise the client of the risk factors, and let the client make the choice. That is THEIR job.
Lol, most the time, I think clients handled things better than I do, my wife always asked me why yelling at clients when talking to them, I was like, I am trying to make a point to them. I remembered one time, a client wanted to use interest on principal residence on the rental property, I refused it, the next year, she came back, refinanced the rental, and paid off the principal, I still refused, and then things got heated. the facts are, she got contracts, so any accountant would be okay, but I am not. Most the time, I find we wasted the time on all the case law, ruling so they are just playing around with it.
I usually consider whether I or my firm could be held liable for filing a false return. Again, for this scenario - whether to capitalize or expense (or do neither), I asked my tax lawyer acquaintance. He says that an accountant would have to go far out of their way to get in trouble over this. It would be very rare. Given that it is a grey area, and the taxpayer would have to explain his reasoning to CRA, and CRA would not hold my firm responsible, I trust that his position might be reasonable, even if I don’t agree with it. Like @SmallBizGuy - it’s the taxpayer’s choice, and THEY have to bear responsibility for it - not you.
That’s usually what I do, but when you see things like that, excessive expense, not reasonable claims etc, I usually list them all in the engagement letter, and verbally discuss with them, everything mentioned will be documented to protect my firm. It just seems like you keep on pushing clients away with that.
Respectfully…that is not (IMO) the basis on which a tax decision is to be made. The decision - whatever it is (or a plan) MUST be defensible. If it is - THAT, and that alone, is your defense against a false return. The very term “false” indicates some degree of culpability, either willing blindness, complete and utter ignorance of the law or the facts, or some other malfeasance.
I can be risk-averse and suggest to my client that the claim is likely to fail…but is not “improper” (or worse)…just likely to fail…and I’m in a defensible position and so is the client. If the client insists on pursuing what I feel is NOT justifiable, defensible or proper..they can go pound sand.
A good-faith, researched and papered investigation should NEVER land you in hot water. You might lose the claim…but that’s all.
Are you sure you can bill your clients all these hours checking and research? I mean, most the time, I thought I am just being too fuzz about things
@SmallBizGuy
Yes, I agree. I was not saying that I will file a false return. I was saying that I consider whether what I am filing IS or IS NOT false. And, if it is a grey area of the LAW, I don’t KNOW whether it is false. Per my discussion with the tax lawyer, expensing all property renovations could be a true representation of what the client believes is allowed under the ITA. I’m not a tax lawyer, so I trust the advice of one who is.
It is similar to a business owner that does his own bookkeeping, and provides me an income statement to fill out the T2125. I am not auditing the financials, so I don’t know if the numbers are completely fictitious. I get the client to sign an engagement letter stating that what they give me is true and factual. Then I file it as they have provided.
In these or other cases, if there is something obviously false, I will discuss it with the client. There have been several instances where I discovered something that was not true, and told the client I will not file their taxes if they insist on reporting in such a way. Some clients get upset and leave; some concede and listen to my suggestions/advice.
Depends on the case. Sometimes yes, sometimes no.In the tax field, as in law or IT, one often eats time.Just the way it is.
AND…one learns.
One certainly can adopt a practice of not doiing complex work…sticking to more straightforward issues. But that’s where the fun is.