Will Your CPA Cost You an Audit?

This post is in: Business


When it comes to finding the best CPA tax preparer, there are a number of things to consider. On Friday, January 21, 2011, I’ll give you an USTaxAid Advisor Checklist that you can complete for your own due diligence on your advisors.

Generally, there are two big extremes you want to avoid when it comes to finding the best CPA tax professional. You want some who:

  • Helps you pay the least amount of tax legally possible, and
  • Doesn’t do something stupid/illegal/risky that means you’ll get hit with an audit

In other words, you don’t want the CPA tax preparer who doesn’t know the law or is afraid of using legal tax loopholes to pay the least amount of tax. And on the other hand, you don’t want a tax preparer who is so aggressive that you end up getting an unnecessary audit.

How Much Does an IRS Audit Cost You?

An average audit will cost you $5,500 in extra taxes. That’s before you count in the penalties, interest, accounting and tax representation fees. Add all that in and you’ll, on average, need to write a check for $8,000 or more.

How Much Does it Cost to Not Have a Tax Strategy?

It’s hard to say how much you’re overpaying in taxes right now, or if you even are. If you’d like to get a FREE! CPA tax review of your current situation, please Contact Us.

The ideal tax strategy and tax preparation will put you right between those giving you both less tax and less risk.

Five Signs Your CPA May Be Costing You An Audit (Part One)

#1: Dramatic reporting changes on your return.

This past year, one of my clients got tagged for audit. We’ve been practicing audit defense for our clients and their returns for so many years, that I was actually a little rusty in defending a return. In this case, the year under question had not been prepared by us so I had to first see if I could spot what caused the audit.

The auditor gave us the answer to that one. The audit came because there had been a change on the reporting on the return. An expense item was moved from one line item to another. That’s a big no-no if you want to slip under the IRS radar.

Luckily, we prepped using some Audit Survival handbooks we’re currently developing and other than a little bit of hassle getting ready for the audit, the whole experience didn’t cost my client a dime.

#2: You feel you have to educate your CPA instead of the other way around.

If you find yourself educating your CPA and asking more questions then you’re being asked, you might be working with a very hard working CPA. And when it comes to tax strategies, that’s not a good thing. The average CPA tax preparer works hard in his business. He is buried with tax work, especially at tax time.

There’s a reason that I only take 12 clients at a time as my personal clients. That’s because I want to take the time to keep current on tax laws so that my clients are getting the most forward-thinking tax strategies possible.

I’m currently not taking any new clients and there is a waiting list started. If you’re interested in learning how you can be a client of our firm (and work with one of our specially trained CPAs), please Contact Us.

Come visit the USTaxAid blog tomorrow for the remainder of Five Signs Your CPA May Be Costing You an Audit.


  1. Clint says:

    Great info as always Diane!

    We can’t stress it enough ourselves that all CPAs and preparers are NOT created equal! It’s not just about how much their fees are, but also in the “unseen” costs of either overlooked deductions/credits/adjustments OR overstating them and setting the client up to be audited.

    In fact, we wrote a similar article here: http://www.jeffersonfranklintax.com/2011/01/08/the-dreaded-audit-tips-from-tax-patriots-on-how-to-avoid-or-alleviate-this-issue/

    In it we state some of the common audit triggers and another public misconception is CPA = best, where as an EA might be a better choice. Not only because of a lower price tag, but because of a more thorough tax knowledge. Best of all would be a CPA/EA- someone who knows accounting as a whole, but is also a certified tax expert who needs plenty of CPE on taxes specifically to maintain the EA status(as opposed to a CPA who can get their CPE in any accounting subject from book-keeping to corporate auditing).

    Bottom line is you can learn a lot about your preparer in how they conduct an interview. If they’re not thorough and just want to rush through it, this tells the client that they don’t want or care about your business.

Leave a Comment