The Psychology Behind Good Judgment
by John Lauck, CPA, Ph.D.
Understanding decision-making weaknesses can help CPAs avoid mistakes.
How to use psychology to your advantage
Understanding certain psychological concepts can help CPAs and others maintain professional skepticism, make better decisions, and improve their performance. Here are some tips on how to put psychology to work:
Consider your motivation: Be aware of the potential to seek and emphasize information that supports your initial ideas or your client's position. Taking care to search for and evaluate all relevant information can provide the objectivity necessary to avoid invalid conclusions that can be brought about by a form of motivated reasoning known as directional goals.
Don’t rely on first impressions: According to the "halo effect," we rely so heavily on our first impressions of people that we ignore later information about them. Maintaining an awareness of this tendency and developing systems to eliminate bias can keep the halo effect from causing problems.
Responsible Person Rules in the Wake of Wayfair
By Chris Hopkins, CPA
November 1, 2019
The U.S. Supreme Court's June 2018 landmark ruling in South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018), has led to greatly increased exposure to sales tax for businesses with interstate sales. Because of the responsible person rules existing in many states, the increased exposure to sales taxes on interstate sales caused by the decision also could lead to a substantial increase in exposure to personal liabilities for a wide range of unsuspecting individuals working for these businesses — from corporate officers to tax and finance managers.
And it is not only sellers of tangible property and their employees who could get caught up in the expanding web of economic nexus and tax liability. Sellers of services and digital products — including cloud computing, information services, data processing, audio and video content, and various online subscriptions — are now more vulnerable than ever, leaving individuals who are responsible persons for those companies at a greater personal risk.
The collision of Wayfair's greatly expanded boundaries for imposing sales-and-use-tax collection and reporting obligations with statutory responsible person rules has the potential to burden unsuspecting individuals with hefty tax bills as well as civil and, in some cases, criminal penalties. Companies should act now to evaluate their sales-and-use-tax nexus profile, assure compliance going forward, and, if confronted with material historical liabilities, consider pursuing voluntary disclosure agreements to mitigate tax audit and assessment risks.
IRS Must Initiate All Future Examinations by Mail; Never by Phone
Taxpayers are legitimately concerned about phone a scams.
On May 20, 2016, John Dalrymple, IRS Deputy Commissioner for Services and Enforcement, issued a memo outlining immediate procedural changes to initial taxpayer contact in examination cases. All correspondence with taxpayers to begin an IRS examination must be made by mail using the appropriate initial contact letters listed in the Internal Revenue Manual.
In the past, the IRS contacted certain taxpayers via phone to commence an audit. However, due to the continued threat of phone scams, phishing and identity theft, the IRS has changed its policy. Practitioners and taxpayers complained that receiving a call from the IRS to start an examination was confusing since the IRS doesn't initiate collection enforcement action via phone. After all, why would the IRS call in some instances, but not in others? Taxpayers are legitimately concerned about any phone call that appears to be a scam.
Practitioners should continue to educate their clients about how the IRS conducts business and warn them of potential phone scams.