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Lane
Lane, CFP, MBA, CRPS
Category: Tax
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Experience:  Providing Financial & Tax advice since 1986
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3 years ago, my former CPA had power of attorney to represent

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3 years ago, my former CPA had power of attorney to represent me and helped my S-Corp through a sticky sales tax situation. Today, he is seeking 35K in "value payment" for those services with the statement, "Think real hard about the issues you were facing when you engaged me and how they were resolved." For 4 years the only invoices I ever had were for time and materials. Is this a shakedown because I let him go? What am I facing here?
Submitted: 11 months ago.
Category: Tax
Expert:  Lane replied 11 months ago.

NPVAdvisor :

You're facing a shakedown.... (not to make light at all ... you've nailed it) ... If this person did not disclose that this invoice was coming at the initial engagement, and if there was no engagement letter or retainer agreement, then not only is this questionable business practice, but I would be would be frowned upon by AICPA

NPVAdvisor :

Here's a web site you might want to take a look at : http://www.tsbpa.state.tx.us/enforcement/filing-complaint.html

NPVAdvisor :

Not only has he set precedent by billing you for time and materials, if he has never indicated that there would be additional fees, this is essentially "sour grapes" ... and unprofessional, at best

NPVAdvisor :

What you may want to do is let him know that you know about the process for filing a complaint, offer to pay for any un-billed time, as per the expectation he has set through practice over the years, and ask that he cease and desist the harassment.

NPVAdvisor :

If you question is simply do you owe anything ... If there is no contract or engagement agreement, the answer is no ... and if he tries to collect through a local magistrate or other court, don't let him bully you .. without some sort of agreement, he hasn't a leg to stand on

NPVAdvisor :

You can also let him know that you know (not only about complaining to the state accountancy board, but that you understand there is a way to file a complaint with the AICPA

NPVAdvisor :

The Professional Ethics Division investigates complaints against AICPA members. All letters of complaint should be mailed to :



AICPA
220 Leigh Farm Road
Durham, NC 27707
Attn: Professional Ethics Division



The AICPA will conduct an initial review of the complaint and, if necessary, investigate the matter in accordance with the procedures of the Joint Ethics Enforcement Program. If an investigation is deemed warranted, the results of the investigation will be shared with you on a confidential basis once it is concluded. Please note that the procedures of the Joint Ethics Enforcement Program require that an investigation be conducted in a confidential manner and that the results not be made public, with the following exceptions: (a) if after investigation, the matter is referred to a hearing panel of the Joint Trial Board, and the panel finds one or more members guilty of violating the Code of Professional Conduct, or (b) the investigation results in a settlement agreement involving membership rights (ie. suspension or expulsion) and the member agrees to publication, the results will be published.


To determine whether an individual is a member of the AICPA, please call Membership at(NNN) NNN-NNNN

NPVAdvisor :

Lane

NPVAdvisor :

Hope this helps

Lane, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3630
Experience: Providing Financial & Tax advice since 1986
Lane and 4 other Tax Specialists are ready to help you
Customer: replied 11 months ago.

Thank you. Everything you've said makes perfect sense to me. The implied threat here is that he would go to the Comptroller and whistleblow that additional taxes are owed. However, since he was the CPA who prepared and represented me at audit, isn't he going to be complicit and at risk in that scenario? (Maybe not as much as me, but wouldn't both the State and AICPA have an issue with him here?)

Expert:  Lane replied 11 months ago.

Absolutely.

Just for preparation's sake, look at the cover letters he used and see if he put in disclaimers, such as ....

I relied solely on information provided by the client ... or

We make no representation to the accuracy of the numbers, but rather compiled them information provided by the client.


Basically there are three levels of responsibility of the CPA

(1) Highest level is audit ... they are guaranteeing by virtue of their professional designation, that the numbers represent reality.

(2) Review, still making an attestation to the numbers reflecting reality, but without the higher scrutiny of a formal audit

(3) Compilation, compiling numbers for the preparation of financial statements and other purposes.


But for tax work ... by CPA's ... unless they've disclaimed everything, they are supposed to be part of the tax compliance system, and the expectation is that they will disclaim if they have doubt.

Hope this helps

Lane

Expert:  taxmanrog replied 11 months ago.
I agree with NPVAdvisor! This guy has no business being a CPA. In fact, if he stated exactly what you said, contact your county's State's Attorney. What he is doing is legally called Extortion!

Unless you signed an engagement letter that states he can bill based on value, he cannot do it! It is also against AICPA rules to try to collect a percentage of tax refunded or saved without a specific understanding (i.e., engagement letter) prior to the start of the engagement.

If he has billed you for time and costs for everything else for a number of years, he would be hard-pressed to prove that this was something different without a specific clause in the engagement letter.

I would report him! This kind of stuff is what gives CPAs a bad name! I am sure that NPVAdvisor and every other CPA/EA tax expert works hard for their reputations. I know I defend mine fiercely! You just don't do those kind of things!
Expert:  Lane replied 11 months ago.


Thanks Much for the rating.

Let us know if we can help further!

Lane

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