Broker Check

Four Ways to Know You Are Getting Ripped Off on Payroll Taxes

| April 21, 2016
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Tax Advice, Fraud, Money Management

Recently, I was sent a somewhat cryptic message on email from what I presume to be a disgruntled former employee of a local CPA spreading unflattering news about his former boss.  He offered a simple intro and then an article titled, “Accountant accused of siphoning payroll taxes”.  In short, the CPA who was subject of the article has been accused of re-directing his business owner client’s payroll taxes to his own personal account in lieu of paying them to the Internal Revenue Service.  His unsophisticated cover-up was to explain to the IRS that the businesses owed no payroll tax because they didn’t have employees.  Not a particularly elaborate scheme but allegedly he made away with more than $2.5 million.  This begs the question, how do I know if I am getting ripped-off on my payroll taxes?

In professional services, the primary way most professionals gain new customers is by referrals.  This is true for CPAs, attorneys, financial planners, insurance agents, and even medical professionals.  While Aunt Suze’s recommendation to work with the local fee-only financial advisor may be sound advice, it is always recommended that you at least run your own background check.  Start with Google.  See what you can find out about them and if you do find anything negative, don’t be afraid to ask them to answer the accusations.  Ask if they’re licensed and if they are, with what regulatory body.  Don’t be afraid to ask them how you can research their licensing status.  Professional licenses exist for a reason- your protection.  Asking does not make you overly paranoid and if the person is truly a professional they should never act annoyed at your request.  Also ask if they are bonded and insured.  If so, for how much?  If not, ask, “Why?”

Specific to payroll taxes, you should always receive copies of the forms that are filed on your behalf.  I understand that many business owners decide to hire book-keepers and professional advisors who can take these administrative responsibilities off of their shoulders.  But to turn a blind eye to any professional and assume that they are handling it without any back-checking or even record keeping is negligence and is asking for trouble.

One easy way of back checking is to contact the IRS every quarter to be certain that your taxes were paid and posted to your account.  In the article where the CPA was pilfering the businesses payroll tax, the businesses are not relieved of their duty to pay these taxes.  Yes, they were wronged, stolen from, and cheated.  But the IRS still wants their money and these businesses are going to learn this lesson the hard way and it just might burry them. 

Ultimately, if your book keeper or CPA is holding your records on your behalf and paying your bills for you, it would be wise to ask for at least an annual meeting at their place of business to inspect their record keeping system.  Not only should you meet with them at least annually from a planning standpoint, it is also good for them to know that you will be checking in on them periodically. 

None of this has to be done (nor should it be) with a suspicious presumption of guilt.  In other words, you don’t have to be a pain in the butt about it.  Asking kindly for license history or better yet seeking it for yourself and following these easy steps could keep you out of trouble and boost the trust you have in your CPA or bookkeeper with something so important.  If they’re doing nothing wrong, they’ll have nothing to hide.

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