There are many things wrong with where I work, and from what I am told those wrong things extend to the public accounting profession in general. Its not that they are necessarily doing something illegal (although the example I will talk about later is definitely against the tax code), its just the greed and drive for money that bothers me
A little over a week ago we had a tax class for all the first year tax accountants. It dealt with how to handle mortgage interest, and other Schedule A writeoffs. It is actually a long convoluted story, but I will just shorten it down. The mortgage interest that is deductible on Schedule A is only from an original home loan (or combination of two homes), and is limited to 1.1 million dollars. Any interest on the value exceeding the 1.1 million dollars is not deductible.
If you get refinanced, a second mortgage, or any other additional loan (such as home equity), that interest is NOT deductible under the Internal Revenue Code. Nor can you claim any deduction on interest exceeding that first 1.1 million dollars. However, our trainer told us that we will in fact make those deductions, no matter what we thought was going on.
I brought up that I noticed several clients were claiming $200,000+ on mortgage interest per year, and not even counting if they were home equity or second mortgages, that total of interest is far beyond the value of 1.1 million dollars worth of homes, so far in excess that there is no way they are only claiming for that value (the most you really should see is about $100,000 and thats only if they get really hosed by the bank). He told me that no firm would check into those numbers, and that I should just set the deductions up. He even admitted that the IRS would have full legal reason to audit and charge fines because it is against the tax codes. Yet he told us we should do it. He said its worth “rolling the dice” against getting an IRS audit.
I did bring up that it sounded like what we were doing goes against the AICPA codes of conduct. He pointed out there is nothing illegal about taking the clients at their word (when obviously they are lying, but as long as we don’t have obvious direct proof it doesn’t matter) and that it was worth it both for the client to risk the audit, and for us to keep these clients, to continue. It all came down to profit for the firm. That was the day I was positive I didn’t want to do public accounting.
Somehow I felt slimy, and wondered if lawyers were above me on the ladder of social mores (there is a lot more to talk about, even worse stories. I will post later about those).