Advice on accountant error in Tax return

Hi all,

Myself and my wife are PAYE employee's and are jointly assessed, I work full time & she works part time.
We use a chartered accountant to file our tax return for two properties we rent out, owned in both name's.

I discovered a fundamental error in this years Tax return. My accountant has been putting (as he calls it) all the rental income against only my PAYE total income.
This has resulted in us being exposed to the full marginal rate of 41% on our rental income.
Shockingly he has not been using up our combined €65K 20% allowance, as my wife has unused credits.

After challenging him on this he said he was just doing the same as last year! The ammended return resulted in a reduced tax obligation of €1,600!!
I immediately asked him to contact revenue and request a refund for the previous 5 yrs. I await his reply.

My question's are:

1> What are Accountants responsibilites/obligations to their client's in such cases?

2> Can I hold him responsible for my over payment in tax due to his negligence for years beyond the 5 claimable years?

I appreciate any help or advice.

Are the properties jointly owned.

Are the mortgages in joint names.

Did you sign the tax returns for the years in question.

Hi Joe 90,

Yes, both are jointly owned.

Yes, both have have mortgages in both name's.

Yes of course I signed the tax returns in trust, Incidentally, after many call's he only emailed the return to me late in the evening of the 13th of November, giving me little time to look them over. I always check all our declared incomes are correct. It also always states "jointly assessed" on top, so I had no clue an error like this was a occurring or possible.

Surely He more than anyone knew he was exposing me to too much Tax? Besides I pay him as a chartered accountant (professional) to correctly fill in the boxes for especially something so simple as Tax free allowances?

We are truely shocked that this has accured & our trust is broken.

I merely would like to reasonably know my rights our to recourse?

Thanks for the reply.

You can go back to 2010 and file amended returns and you will receive any refunds for those years but you can't go back beyond that.

I don't see any negligence here.

If the husband is the assessable spouse and if the rental income (lease, bills, PRTB registration etc) is recorded in his name, then it would be normal practice to complete the tax return on the basis that he is the recipient of the rental income - unless of course the couple have given instructions to the contrary.

For jointly-owned properties, its not always a given that it is more tax-efficient to split the income 50/50 between spouses (given the effects of variables such as home carer credit & minimum PRSI charges) and Revenue have issued warnings in the past that it is not acceptable to juggle rental income between spouses to create a tax advantage.

Normally if there is a clear tax advantage in doing it differently the accountant might suggest a revised basis to the client - but it isn't always obvious at first glance - particularly if the work is being done in a rush to meet a deadline.

On that note, if your accountant did your return on 13 November, they were doing you a favour. If you want to avoid getting caught in the end-of-year rush, send them your records in January. This way, everyone wins

You don't even have to file amended returns to obtain refunds back to 2010, simply write to Revenue asking them to amend their assessments on foot of the changed basis for sharing rental income. This is best done through your accountant but if you're acccusing them of negligence, they might quite understandably be reluctant to assist you.

Sea view said:

2> Can I hold him responsible for my over payment in tax due to his negligence for years beyond the 5 claimable years?

I appreciate any help or advice.

Click to expand...

You seem to be under the impression that your accountant should do his job 100% perfectly. In an ideal world, this would be the case.

But stop and take a step back and think of your own workplace. Do all your colleagues do their job 100% perfectly? Surely there's a "Carnage" or a "Mongo" or a "insert_chosen_nickname_here" where you work? There are those people in every workplace. Your accountant may be one of these. Or he/she may not be as bad, but be similar.

You've gotta expect mistakes to be made. And where someone, such as an accountant, isn't known for making mistakes, they get recommended to you. How did you find your accountant in the first place?

Hi all,
Thank you for the replies, firstly I did give him my tax return weeks in advance of the deadline & everything was itemised & neatly arranged.

Am I not right to expect as a given that our €65K 20% tax allowance as a jointly assessed couple with everything in both names be used in the first instance, before having to pay the Marginal rate?

I certainly reasonably expected this as a given.

I appear to be correct given the saving's of the ammended return.

Some of you seem to be pointing out either expected failings in all business or my possible failing's i.e. late returns.

The fact remains, he done the Tax return.

This accounting error has exposed the fact that we have been paying thousands in extra Tax over the past number of years!

I notice no one has yet answered my question as to the responibility of the Chartered accountants responsibilities to their client who pay them. What exactly is the contract between the two? What can Clients reasonably expect of the service?

I for one have no confidence.

I will however take your advice, & will contact the revenue commissioners.

Thanks for the replies.

Sea View;

Looks like you have lost (for now) a pretty sum and you are well entitled to be (crankey)

1. You say you left in returns weeks before deadline.
All accountants are swamped coming near deadline ,so they do not have or can take time to properly peruse /review acs.Given this was a chartered accountant ,he should not take returns he/she can,t properly handle.He/she have an obvious responsibility here. However if you can get your funds back ,I see no (profit) in pursuing. Maybe just change accountant and get returns in earlier.
From what you state he/she did not do their job.

As Chartered accountants they have failed you and clearly broken the trust/contract twix you and them.
Breaking trust and having accountability are 2 different things.

You are entitled to be vexed but if you get your money back , I suggest take that as a win and keep the (jaundiced) eye on all professional services!

Thank you Gerry,

I appeciate your clear understanding of my issue, & common sense advice.

I agree will all you said.

A salutary lesson for all trusting users of accountants!

Kind regards.

Gerry Canning said:

Given this was a chartered accountant ,he should not take returns he/she can,t properly handle.He/she have an obvious responsibility here

...

As Chartered accountants they have failed you and clearly broken the trust/contract twix you and them.

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You are making a lot of assumptions here, Gerry. Did you read the earlier posts?

The OP has approved and signed returns prepared on a certain basis, over many successive years. Over this long period, they clearly have never bothered reading any of their returns. And they accuse others of being "negligent"!!!

Dear T Mc Gibney,

I signed my returns after checking our income was declared correctly & in trust of his professionalism as as a chartered accountant to do his job filing, Is this not a reasonable expectation? What are we paying for?
I am shocked and speechless at finding out my accountant applied the marginal rate to us, & failed to use our jointly assessed remaining 20% allowance in the first instance over a number of years.


I'm sorry but what else is it but negligent!!!!

Come back to me after you've read my earlier posts above.

In fairness to the OP it's a fairly basic thing to know whether someone is using up their full 20% band or not. There isn't really any excuse for not noticing that IMO.

Also if this is going on since pre-2010 then you won't be getting refunds for any years before 2010. For the tax years 2010-2012 you should be OK getting the refunds.

Sea view said:

Dear T Mc Gibney,

I signed my returns after checking our income was declared correctly & in trust of his professionalism as as a chartered accountant to do his job filing, Is this not a reasonable expectation? What are we paying for?
I am shocked and speechless at finding out my accountant applied the marginal rate to us, & failed to use our jointly assessed remaining 20% allowance in the first instance.

I'm sorry but what else is it but negligent!!!!

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Before you go any further down this line, I think you need to be clear on exactly what services you contracted for... The reason I'm saying this is because there is a difference between paying someone to fill out your tax returns on the basis of the information supplied, which the accountant seems to have done correctly and optimizing your tax situation which it appears he did not do. Now while I would expect the accountant to point out an obvious tax saving to me, one does not necessarily follow the other.

So my first question would be did you if in fact pay for a service that you did not get or is it simply an expectation on your part? If it is the first then making a complaint would be straight forward, but if it is the second then it is not going to be an easy road.

Hi

Firstly thank you DB74, That is exactly how I feel about it.

Hi Jim2007,

I pay him hundreds, & his invoice for last year say's" For professional service's and filing of tax return, sundries etc"

I am going through my old returns now, & looking in detail of the lack of Tax allowances applied, in so far I can acertain it looks like the figure of over payment going back to 2004 could be over €10,000K!

Speechless!

Sea view said:

Hi all,

Myself and my wife are PAYE employee's and are jointly assessed, I work full time & she works part time.
We use a chartered accountant to file our tax return for two properties we rent out, owned in both name's.

I discovered a fundamental error in this years Tax return. My accountant has been putting (as he calls it) all the rental income against only my PAYE total income.

Click to expand...

Can I clarify my understanding of the error here as "putting all the rental income against my paye income" doesn't mean anything to me.

He attributed all the rental income to you.

He should have attributed half the income to your wife so she could have earned an additional €23,800 @ 20% instead of 41%. So the total rental profit was c. €15,000. Your wife should have been allocated €7,5000 and so would have paid around 21% less or €1,500.

Tommy McGibney has pointed out that there may be advantages to doing it the way he did. However, I do think that the accountant should have been alert to the issue and should have discussed the options with you.

I am not sure that most people would understand the benefits of splitting the income over the two people, so the fact that you signed the return is not really a defence for the accountant. I can find the issue having been discussed only once before on askboutmoney: Form 11 - Division of rental income between spouses

If you gave him the paperwork in good time, and he rushed to submit it just before the deadline, then I think you have a valid complaint. Of course, we would have to hear his side of the story.

I suggest
1) Get in your claim for the overpayment as soon as possible
2) Quantify the loss suffered as a result of overpayments which you can no longer reclaim.
3) Submit a complaint in writing to the accountant and see how he responds.

When you get the reply from the accountant, decide then how to proceed.

He may admit his error and offer you compensation. He may have a perfectly acceptable explanation. Or he may try to evade responsibility.

Hi Brendan,

I'm not sure about your €23,800 @20% but yes you are correct "He attributed all the rental income to me"

Hence my issue!

I really appreciate your clear advice & obvious understanding of the error.

He had my tax return for weeks as it was sent when he requested it.

When I spotted the error after thinking the bill was too high, he split the rental income exactly as you said resulting in a bill €1600 less, which also alerted me to the previous years unused 20% tax credits.

I have contacted him regrading the previous years overpayment & await his reply.

Kind regards.

Sea view said:

I pay him as a chartered accountant (professional) to correctly fill in the boxes for especially something so simple

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Don't get too hung up on the chartered word. What matters is that he is a member of a professional accountant body and there are several in Ireland.

The word "chartered" is an archaic term, coming from when Victoria said it was ok to form an accountants' organisation in 1888 in Ireland.

http://www.charteredaccountants.ie/General/About-Us/

You can complain to your accountant and look for a fee discount or you do have the choice to get another accountant to do next year's work as you lost out by overpaying tax for a few years, but you ultimately must accept responsibility as you signed the returns.

I can accept that customers have to bear some responsibility to understand/read what tax rules apply to them.

Most people in any business rely on common professionalism eg the Plumber to plumb,(they don,t ask what size of tubing to use)the painter to paint (they don,t ask for exterior paint if it is outside work).
It is understood that these tradesmen will do their job.

I make this comment..
It appears that yet again another sheltered profession, in this case a Chartered accountant has got away with shabby work.

We appear to have a Plethora of regulations setting up sheltered professionals ,yet accountability ???
I ask why employ a sheltered professional when they remain lax and effectively unaccountable??

Hi Steiner,


Ordinary people such as myself use & pay professional fee's to qualified accountants to do a job on our behalf. And in the reasonable expectation that the Tax filing is done correctly with all relavent Tax free allowances are applied. basic book keeping stuff, no complex off shore scheme.

I hired him as I didn't trust myself to navigate the tax system as I'm not familiar with what I'm looking at. it's not my area. I hired a professional.

But maybe your right, I should have saved my money & hired someone out of the classified ad's seems the risk to me is the same eh?