In mid 1999 I had lunch with an accountant who suggested it was time that I chrystalized my Capital Gains exemption. It's a fairly common tax move in Canada. At the same time he was going to help me rearrange my financial affairs and help set up things for the future for my family.
That is a general explanation of what they were doing. The fees were $7,000 for the accountant and $2,000 for the lawyer. I was assured that it would not create any tax liability whatsoever. I even have that in writing - and saved a copy!
Well - some 4 years later, Canada Customs & Revenue Agency, has determined that the things that were done attract what in Canada is called the Alternative Minimum Tax. The bottom line is that I now owe $28,000 in back taxes. The interest and penalties compound daily! I have a meeting set up on Tuesday with tax officials to take care of it.
The question becomes - what do I do about the accountants and their failure to disclose the ramifications of their actions?
That is my current dilema. I'm not a sue minded person, and I have spoken with the senior partner in the firm, and with my lawyer. Hopefully there will be a satisfactory resolution.
Thanks for letting me vent!
Good night Posted by Thom Mackesy (Member # 264) on :
quote: I was assured that it would not create any tax liability whatsoever. I even have that in writing - and saved a copy!
It sounds to me like it is costing you about $35K At the very least, their "error" should be investigated very thorougly...
That's a pretty big hit to take.
Posted by 2002Z4CSS (Member # 1393) on :
That is a huge amount of cash to throw at the Government. Hope you work something out with the people who mislead you.
Posted by JohnS (Member # 1073) on :
quote:Originally posted by Hawkeye: The question becomes - what do I do about the accountants and their failure to disclose the ramifications of their actions?
We rely on our lawyers, accountants and financial advisors to give us the proper advice regarding our financial affairs. We put our trust in these people and just hope these guys know what they're doing.
If the accountant is certified and chartered by the Institute of Chartered Accountants of Ontario, you can issue a formal complaint through the Institute. It probably won't get your money back, but it will prevent the guy from doing the same thing to someone else.
Even with the exchange rate ( which is getting better for you every day), that's still a lot of $$$. In the US, no one would even consider not sueing; we are a very much more litigious nation than Canada is.
Posted by KevinA (Member # 139) on :
Honsetly, I would sue them. You were mislead.
Posted by Joey Red (Member # 550) on :
I would. At least so you break even. Speaking of break, you want me to take care of these guys?
Posted by 35TH ED/ed (Member # 1709) on :
quote:Originally posted by Hawkeye:
That is my current dilema. I'm not a sue minded person, and I have spoken with the senior partner in the firm, and with my lawyer. Hopefully there will be a satisfactory resolution.
Thanks for letting me vent!
Good night
I dont think that you would willingly give up 30K . Hope every thing works out for you.
Posted by mhayman (Member # 146) on :
Brian
This is truly unfortunate. It sounds like they did not do their job very well. The others are right...most people here in the US would sue and it sounds like you have a case too.
The problem is that, at least here in the US, the individual is ultimately responsible for their taxes. Even if someone trusts someone else to prepare returns and plan and advise for them, the individual bears the final responsibility.
Unless it can be shown that the accountant or lawyer was careless or negligent, anything you sign is pretty much worthless. In fact, most accountants here won't do any work unless you sign an agreement that states what I just said. However, many of the better accounting firms will stand by their advice and if they make the mistake, they will eat it. I have known this to be true. They won't pay your tax bill but they may be willing to pay interest and penalties.
At any rate, it sounds like they mislead you to say the least and were truly negligent in advising you. It is the things like this that make all of us accountants look bad! I am sorry to hear of this but hopefully you can get it all taken care of as quickly as possible. Good luck and keep us informed!
Posted by Hawkeye (Member # 88) on :
Right you are Mark. I used a very well known National Firm, and they "are looking into it".
They did not realize that the changes would trigger a tax situation for me. I understand that people make errors, and I have still have faith that they will correct the mistakes without resorting to lawyers. I'm not like that.
You are right - I have to pay the taxes regardless of who's fault it is. Revenue Canada doesn't care how the situation arose, they want to be paid. I'll pay them on Tuesday. I am going to negotiate the amount of interest and penalties, since it took them 4 years to discover the error. I am told they may reduce the amount of fines. But I still have to pay.
After that - I shall approach the accountants and see what they will do to right the situation. With any luck, we'll resolve it amicably. One of the senior partners in the firm is a neighbour of mine, so I really want this to come to a reasonable conclusion.
Have a great weekend.
Brian.
Posted by mhayman (Member # 146) on :
That's good to hear that they may be willing to standup to their mistakes. My old firm would pay the fines and interest if we made the error.
taxes!!
If they didn't keep me in business, would I ever hate them!
Good Luck Brian.
Posted by Sizzle (Member # 503) on :
Man that stinks Brian. Sue the pants offa them, especially the lawyers.
Posted by Bill Mason (Member # 1807) on :
As a thought, would you be able to take a representative from the accounting firm with you to the meeting with Revenue Canada?
They can help explain how you got into this mess. But more importantly, since you will want them to pay any interest and penalties they will have been present during those discussions with the "tax man". Makes it harder for them to say later on that you settled too high with Revenue Canada and pay you a lesser amount.
Bill M 98 TA
Posted by RagSS (Member # 1127) on :
Brian, I hope this works out as best it can ... Bill has a good point/thought...
quote: They can help explain how you got into this mess. But more importantly, since you will want them to pay any interest and penalties they will have been present during those discussions with the "tax man". Makes it harder for them to say later on that you settled too high with Revenue Canada and pay you a lesser amount.
Posted by Hawkeye (Member # 88) on :
My brother is a Chartered Accountant. He's given me some advice, and I'll be meeting them tomorrow.
I had to put off today's meeting for a number reasons
Just means more interest - on a daily basis.
Posted by poSSum (Member # 119) on :
Missed this first time around. Sure doesn't sound like fun. ):
My 2 cents.
What are the long term benefits of the changes you made? Would you have made them if you knew you had to pay the alternative minimum tax (less interest and penalties)? What would you have paid in the meantime if the changes hadn't been made? Perhaps looking at "undoing" all of it is an option?
Posted by Hawkeye (Member # 88) on :
Way too far along for the undo!
I'll be heading down to the tax office shortly with some revised returns that my brother did for me. I hope to minimize the effects. You asked some questions I've asked myslef and depending on today's meeting I'll have some anwers! Wish me luck!
Posted by 35TH ED/ed (Member # 1709) on :
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