Another accountant screw up!

[Pushka]

We received, well, hubby received, a letter from the ATO today saying that he had not declared around $800 in joint interest from his 2006 return

So I went into panic mode, and thought I had forgotten to declare the interest to the accountant, and as our accounts are all in joint names, then I too would be receiving a similar letter. So I duly got out all our records, as well as the spreadsheet I send to the accountant each year. And our tax returns for that year. And on the spreadsheet I had correctly listed around $1600 as joint interest income.

Now, people like Depreciator and Mry may remember we had some stunningly bad accountant issues that year due to the sale of our IP; our accountant knew nothing about building depreciation etc. Thanks to Mry and the D, we got that sorted from having to pay $12,000, to around $3000 tax.

But it seems that the Accountant 'forgot' to insert Item 10 (gross Interest earned) into Husband's tax return, but did remember to put it in mine!
So now hubby is being fined etc etc for non payment of taxes.

I have sent them an email, and my new accountant is going to prepare a letter to the ATO saying that we had submitted the amount to the accountant, but they neglected to include it on hubby's return, but had put the right amount into my return so he is confident the ATO will be reasonable.

I know we have to sign off on tax returns, but as mere mortals, there is the time when we have to trust that the accountants get the details right (the way the do all their depreciation etc is way over my expertise!)
And even the ATO completely understood that there was a limit as to how much an individual could ensure the accountant's 'fiddlings' were correct.

But sheesh, this takes the cake!

 

[MattR]

As an accountant one of the things I really dread is the old "Omitted Income" letter from the evil empire. Generally it comes about because a client hasn't informed me of interest income.

Since 2007 (tax year) the incidence of this has been greatly reduced because of the ATO's pre-filling report. Your tax agents should all be using this now as a standard procedure in checking what interest/dividends have been reported to the ATO.

 

[Pushka]

Hey MattR, believe me, I dread seeing these kinds of letters too. As we informed the accountant of the interest (and the fact that he halved the amount I gave him as a 'joint bank account' in my return - meaning he did see it but didnt apply it to my hubby's return) if we are charged interest, is it reasonable to ask the accountant to pay the penalty on our behalf? It just seems so incompetent to me.

Being a complicated return, checking amounts of Bank Interest just didnt occur to us as it is so obvious and simple a thing to insert.

 

[MattR]

Yeah...I'd ask for them to pay for any late interest. But you may find the ATO already remits it anyway, lets hope so.

 

[JoyBoy]

Pushka,
I wouldn't be too worried about it. This is what will most likely happen:
1. Your tax agent will lodge an amended tax return;
2. The ATO will charge you general interest charge on the tax shortfall, approximately 15% on the amount of the shortfall
3. The ATO will consider penalties, at either 25, 50 or 75 percent of the tax shortfall, depending on whether the income was omitted due to failure to take reasonable care, recklessness or intentional disregard. I think you will fall into the first category.

However, in most circumstances, the ATO will remit penalties in full where it is your first offence. GIC however is generally not remitted unless there is financial hardship. This is so that it's fair to other taxpayers who have properly organised their tax affairs and lodged their returns correctly. You've basically had the benefit of the money whilst they haven't.

I think that in your particular circumstances, it was a bona fide mistake and the ATO will take this into account