Tax journal article offers warning on risky clients

Sometimes a client can get its consultant in trouble. Tax professionals who rely on financial data provided by a problem client, might run the risk of damaging their reputation and that of their firms, according to an article co-authored by William Raabe, who teaches tax courses at Fisher.

The article, “The Problem Tax Client: Opinions from the Field,” was published in the April/May 2007 Journal of Tax Practice and Procedures. The article addresses the risks and dangers that a professional services firm can take on by working with questionable clients.

“The best course of action in response to such questions may be a disengagement from the client, to protect the integrity of the tax system and the reputation of the tax professional,” the authors concluded.

The article’s other co-authors were Damon M. Fleming, Martha Doran and G.E. Whittenburg, all professors at San Diego State University.

The “trick,” the researchers said, is “identifying clients who pose a problem before the damage is done. The authors identified more than 10 indicators that might identify a potential problem client, including:

• unwilling to accept advice;
• solely focused on self-interest;
• prefers ambiguity and acts evasive
• lack of comprehension, perspective and awareness
• listening behavior; “have all the answers”
• cynical attitude

The researchers developed the indicators through an online survey of tax professionals, asking respondents to rate risky client behavior on a five-point scale.

“No one signal may indicate the need to be concerned with signing the tax return, but taken as a cluster of indicators, these signals should give the tax professional reason to reconsider the client’s reliability,” the article said. The end result might be that the tax consultant obtains a “divorce” from the client, to avoid future issues brought about by the client’s behavior.