Or, A Message From Garcia

Gregory S. Larson, 2018 T. C. Memo. 30, filed 3/19/18, is the recipient of the message that formed the plot of the famous short story by “The Sage of East Aurora,” Elbert Hubbard, from which I get my sub-head.

Gregory was a lawyer and he hired a bookkeeping firm to do his taxes. A certain CPA, Mr Garcia, worked on the return. Gregory “did not provide receipts to the bookkeeper, ‘just [his] checking account and descriptions of whatever the check was for’.” 2018 T. C. Memo. 30, at p. 2.

But the point of this blogpost (and, dear readers, note how quickly I got there) is that “(A)lthough the C.P.A. was designated on the returns as a person with whom the returns could be discussed, the C.P.A. refused to assist petitioner when the returns were audited.” 2018 T. C. Memo. 30, at p. 3.

Although Gregory obtained other representation, the case did not end well. To avoid penalties, Gregory claims he relied upon CPA Garcia.

Judge Cohen: “He acknowledges that he identified the purposes for which checks were written and did not provide receipts to his bookkeeper. He could not state definitively whether he had provided to the preparer backup receipts for the totals claimed as travel expenses on his returns. He testified that he gave the preparer the items and amounts claimed for the casualty loss. Petitioner testified: ‘Mr. Garcia didn’t ask me any questions. I relied a hundred percent on him after I handed him those materials. He didn’t ask me any questions’. Petitioner did not describe any specific advice that Garcia gave him before the audit. He testified that after the audit began Garcia said: ‘[Y]ou’re on your own’.” 2018 T. C. Memo. 30, at p. 4.

I don’t know the ethical rules for CPAs, so I won’t comment. Perhaps Mr. Garcia’s version might vary from Gregory’s.

But I suggest that if the CPA who prepared your return tells you when you get the audit notice that “you’re on your own,” be afraid. Be very afraid.