A CPA posed a question online about whether he should help a person who had not filed income tax returns for years but now wants to come clean and catch up. It was surprising to me that almost all the CPAs who responded said they would not help. Many had strong logical arguments for their position. I felt strongly with the opposite opinion and I suspect that my position is based on past personal experience. This post explains why I would help a delinquent taxpayer.
Years ago I moved into a rural area where the government knows that the region’s major industries (agriculture, fishing and illegal drug and alcohol imports) generate substantial unreported income. There are decades of history of violent disputes (i.e. the oyster wars, prohibition agents and now the DEA war on drugs) between citizens and government taxing authorities. Coincidently, today’s newspaper carries a story about a new expanded effort to curb illegal drug imports coming through the Delaware Bay.
Unreported income is still a huge issue here. A substantial number, perhaps the majority, of self-employed individuals around here do not file tax returns on this income. State documents verify that state tax officials they know this is true.
Two men I knew (both older American born neighbors) did not even have social security numbers. They apparently lived to an old age with no interaction with government. As the accountant in this community, I’ve slowly been involved in bringing some of my neighbors into the modern world. This involved mundane issues like obtaining verification of identity, getting them access to the Internet, requiring that they get drivers licenses to borrow my truck, etc. It is arguable as to whether I’ve made life better or worse for them. In fact, sometimes I am accused of destroying the old nostalgic lifestyle of the region. But the clear end result is that I’ve increased revenues to government. In that I take some degree of confidence. Sure, we they still have a long way to go until we reach what a CPA would call a state of compliance. Yet I have no fear of professional retribution while I follow this path and know it is the right thing under these circumstances.
Even small progress toward a desirable goal is better than completely ignoring the issue. I would hope to stick to these well-supported professional principles in my work:
1) If I believe that a business person honestly wants to “come clean” and come into tax compliance I have no ethical problem helping them,
2) Filing a tax return, even with errors, is always better than not filing at all,
3) Estimates are a perfectly reasonable basis of filing when other evidence is not available,
4) In most cases a creative and diligent CPA can find adequate support for the positions taken in a tax return,
5) Past behavior, even criminal behavior, should not bar a taxpayer from professional representation. Just as an emergency room physician does not refuse to treat a gunshot patient in a drug deal gone bad, I would not refuse to represent a criminal solely on that basis. If we support the right to professional representation then this right is not tested by representing those you like, but by giving the same vigorous effort to those whose opinions and actions are not in line with our own.
In addition, I add these two personal beliefs that are not supported by any professional position:
1) I should consider taking on a client in this situation when I can afford to do so as a service to society even if it is unprofitable,
2) I won’t run my business based on fear of liability.
I would avoid getting into any discussion as to whether a client’s past behavior indicates future behavior. Not that this is not a valid point but rather simply that I do not think that I am qualified to discuss the topic intelligently.
The bottom line is that there should be room for professional difference of opinion on this sensitive issue in order to meet the wide range of real life situations that exist in the world.