Eighteen days before the end of the manufacturing company's fiscal year close, MGA, LLP gained a new client that had immediate concerns. While MGA is a well-established Houston-based accounting firm, this client came from quite a distance away after he realized that his controller and the former CPA firm had resigned and his books were is disarray.
The company had not deposited its estimated taxes, was undergoing a sales tax audit, and had an ongoing dispute with a former associate regarding his employment status.
Tackling Those Tax Returns Came First
The immediate need was to identify the company's current income so that year-end tax planning could be performed. Unfortunately, the financial statements required substantial adjustments. The accrual basis taxpayer kept its books on a de facto cash basis. Capital transactions had been expensed, and depreciation had not been booked. Interest income was unknown because it lay in an off-balance sheet account. With the clock ticking, the only solution was to send in MGA's Rapid Response Team.
How Does a Rapid Response Team Work?
After grappling with the unknown for two weeks, the financial statements fairly represented the taxable income for the year. With only four days left to devise and to implement a year-end tax plan, calls went out to the owner and his attorney. The recommended transactions were explained, and the necessary documentation was completed. Potential interest and penalties were averted, and taxes were deferred.
The sales tax audit was similarly difficult. It had been underway for almost a year. The previous CPA firm had resigned. The state auditor was losing patience and had issued a deficiency letter. The manufacturing company, not knowing what to do, deposited thirty boxes of various records at the door of MGA. Realizing that another challenge was before us, the Rapid Response Team acted again.
How Do You Clean Up Years of Sales, FAST?
To avert another major problem, we went to work:
- Boxes were inventoried to identify relevant information.
- Forty-two months of individual sales invoices were reviewed to determine those requiring exemption certificates.
- With the fax machine humming for three days, many missing certificates were received. Records were organized for the state auditor and presented for the state's review.
Then Came the IRS Inquiry
The associate claiming to be an employee presented the usual risk of IRS assessments for unpaid social security, Medicare, and unemployment taxes, as well as failure to withhold income, social security, and Medicare taxes. The issue required an investigation of the facts and the drafting of a response to the IRS inquiry. The answer from the Service was unexpected. The Service, as allowed by law, declined to become involved in the dispute. The third issue was closed.
We Hope This is Never Your Situation
We are often brought in when a business is facing a complex financial, accounting, or auditing situation and their current firm or staff do not seem to know how to find the right solutions. While we can act like an emergency room, we much prefer to work with you and your financial team to avoid such problems.
Since this engagement, MGA has assisted in a reorganization, substantially reducing the state and federal tax burden. We have developed operating budgets and advised on the upgrading of accounting software and the local area network.
We are here to help take your complex problems and find the right solution.
When You Are Ready, We Are Here For You.
Learn more about our full range of services and how we tackle your problem to solve.
Our F.A.S.T. (Finance Accounting Support Team) program, in particular, provides a full range of accounting, controller, and financial management services, and is able to act as your Rapid Response Team if needed.