Creative Accountant vs. Skillful Accountant'
'Creative accountant' is a term I hear, regularly, in this field. I am uncomfortable with this term, and here's why.
I believe that it is a euphemism for making up numbers, creating numbers where there are no numbers, no documentation, and no reasonable basis even for an estimate. A convenient number is just slapped down onto the tax return, with no articulation or description. Believe me, I have seen this many times. Unfortunately, it is obvious to the trained eye.
This method is quick and easy, and saves the preparer and client much time and effort. It requires little knowledge of the tax system. It is the preferred method of uneducated, unprofessional, and lazy tax preparers.
This approach leaves clients in a vulnerable position, in the unlikely event of an audit or any other inquiry. The client will have no basis and no documentation for the numbers they have claimed. They may be subject to additional taxes, interest, penalties, audit representation fees, possible legal expense, embarrassment, stress, etc…
In fact, I am currently representing 3 clients before the IRS, who had a 'creative accountant' foolishly prepare a return, obviously based on nothing. Several years later, they were audited, and realized that they were in a very dangerous position. Their memory of that year had faded, and their documentation, which was poor at the time, is now even harder to reconstruct.
By contrast, a skillful accountant has extensive knowledge and experience of the tax code and court cases relating to it. He does not need to create fictitious numbers, because he teaches clients how to document their income and expenses, then gets accurate numbers from them. He can make reasonable estimates of numbers retroactively, even if clients did not realize how to record and document their activities in advance. He knows of tax deductions allowable with no documentation, because in specific court cases, judges have ruled that this is reasonable and acceptable.
A skillful accountant can utilize many provisions within the tax code, to structure the affairs of many diverse clients, so that their tax affairs are as efficient as possible, and they will pay the lowest possible amount of taxes. See my articles Tax Efficiency and A Question of Tax Structure.
A skillful accountant can comfortably work with diverse clients across a broad spectrum of attitudes, from very conservative to very aggressive. He can give professional guidance to prevent clients from taking foolish risks, which might have a high possibility of creating problems, which are difficult and expensive to resolve.
In my professional opinion, a skillful accountant is preferable to a 'creative accountant.'
What do you think?