Accountants are granted with a great deal amount of trust and care with other people’s information and money. Because of that, accountants are held to a higher standard and have to follow guidelines in a lot of different areas. Tax is one of those areas and accountants must turn to the Statements on standards for Tax Services for their guidelines on tax preparation. With that being said according to SSTS #3 paragraph 4, “When preparing a tax return, a member should consider information actually known to that member from the tax return of another taxpayer if the information is relevant to that tax return and its consideration is necessary to properly prepare that tax return”(AICPA, 2009). It would be my job to reasonably suspect this information on the tax return and to make a reasonable inquiry about the information that Guadalupe submitted. At this point, I would look at the Quinn Corporation’s tax return, if already filed, to examine to see if Quinn Corporation return matches the $10,000 dividends paid to Guadalupe Piaz.
There are two interesting possibilities to follow during this return. Either Miss Piaz doesn’t’ know that cash dividends from an S Corporation is not taxable or, Quinn Corporation is no longer an S Corporation. Either way this needs to be looked into further to garnish knowledge to properly proceed with the return. It is also my responsibility to inform and educate Miss Piaz with the findings while correcting the return.
Reference
(2009, November). Statements on Standards for Tax Services. Retrieved November 11, 2016, from http://www.aicpa.org/InterestAreas/Tax/Resources/StandardsEthics/StatementsonStandardsforTaxServices/Pages/default.aspx
Post2
Quinn Corporation being an S Corporation, is not liable for paying the taxes as a corporation, but the burden of the taxes is passed on to the owners, in this case the shareholders, of the business (gcu media page 2-6). Previously there were only three owners and the company was highly profitable, in the millions, so the fact the Ms. Piaz is only claiming $10,000.00 is a red flag on the tax return. This could be explained by many scenarios. Possibly Ms. Piaz is small portion owner and her portion of income was only $10,000.00. Ms. Piaz could be engaging in tax evasion and committing fraud on the government. Luckily, this situation can be answered by applying SSTS #3, where the CPA can use prior years tax returns, and Quinn Corporations tax returns as backup and research for her claims (AICPA, page 27).
It is possible the Ms. Piaz is not engaging in fraud and has just made an error on her return especially if she is a new partial owner of the corporation and this is the firwt time filing the earnings. The corporation could have seen losses this particular year and income was not as high as past years. Many scenerios can occur, but is is up the the CPA to make sure the tax return if filed as correctly as possible with the information given and the information that can be obtained.
Reference
http://www.gcumedia.com/digital-resources/cengage/2014/concepts-in-federal-taxation_ebook_21e.php
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