Advisor”s Liability for Errors

L1: Advisor”s Liability for ErrorsI don’t know how far the IRS delves into clients’ actual beginning 72(t)calculation when they are audited, but could the client hold theadvisor liable for an incorrect calculation if it’s found that client needs to pay IRS?
-kt2005-09-29 11:46, By: kt, IP: [66.166.8.83]

L2: Advisor””s Liability for ErrorsHello KT:
The IRS completely delves into the beginning calculation when auditing a taxpayer requiring the taxpayer to produce: pre-1st distribution account balance(s), interest rate used, life expectancy used & methodology. Then, the IRS does its own math & comes up with a maximum annual distribution or MAD. If taxpayer’s annual distributions are less than or equal to MAD, okay, if greater than MAD then 10% surtax.
Could the financial advisor be held liable for an incorrect calculation — CERTAINLY. However, and these are huge howevers:
1. Was the taxpayer penalized because of a plan calculation error or an executory error?
2. Did the advisor just do the math computations or did the advisor actually (or apparently) opine on the plan?
3. Can the taxpayerconclusively prove what happened in (2) above?
4. Did the taxpayer sign exculpatoryagreements which invariably say stuff like “we do not provide tax advice…etc.”?
All of the above will, most often, provide the “outs” the advisor needs to get of the hook when, in reality, the advisor has erred.
TheBadger
wjstecker@wispertel.net
2005-09-29 17:03, By: TheBadger, IP: [66.250.23.21]