Saving a Client from an Inaccurately Calculated Tax Liability

A small business was significantly behind on payroll taxes and had a mixed situation consisting of some years of taxes filed and others unfiled with the IRS. This involved many quarters over nearly five years. Haines & Lagerquist CPAs downloaded the IRS transcripts over a multiyear period and began to analyze payments, penalties, interest, and other factors across each quarter for 941 taxes due. The goal was to understand how the IRS was applying each payment against the outstanding tax liability and related penalties.

After a detailed, quarter-by-quarter review, Lagerquist Accounting & Advisory discovered a discrepancy of nearly $35,000. Upon further investigation, it became clear that the client had filed W-2s in a year where some quarterly tax filings were not made. The IRS and Social Security Administration adjusted the annual liability to agree with the W-2s that had been filed.

When the returns for the two missing quarters were later filed, that liability was added to the amount due by the taxpayer – but the original adjustment was not revised. As a result, a liability that was already included in the annual adjustment then got incorrectly doubled up for those two quarters, exposing the client to enormous additional tax liabilities.

Lagerquist Accounting & Advisory notified the IRS, provided all applicable documentation, and successfully petitioned the IRS to address the problem and make this correction.

If the discrepancy had not been discovered, there is a good chance that the issue would have gone undetected and the client would have ultimately paid out a huge amount to the IRS in inaccurately calculated tax liabilities, costing them tens of thousands of dollars.

This story demonstrates the importance of the Lagerquist Accounting & Advisory commitment to client advocacy as well as accuracy. The firm’s approach to client work is centered on precision and proactiveness.

This client gained enormous benefit from the Tax & Compliance services offered by Lagerquist Accounting & Advisory. Learn about all four of the firm’s areas of Expertise.