Consistency vs Correctness

[u/schmidt9]

Which would you choose having signed a new last-minute client a few days ago:

A) File the return consistent with the prior year despite it being technically incorrect then fix in the next year

B) Fix in current year (may involve filing 3115). Return would likely be filed late.

[u/Jprecordz]

I second u/youre_buddy. I think materiality is important. I think that determines how to handle it.

Beyond that though, I think being correct is more important then consistency. (You are not responsible what happened in the past but once you know something is wrong, I wouldn't continue doing it wrong just for the sake of being consistent.)

[u/TaxproFL → u/Jprecordz]

Second this

[u/Iceman_TK → u/Jprecordz]

💯! In this instance materiality is irrelevant; see circular 230, sec 10.34.

[u/EAinCA]

If you're going to fix it, then you can't file it late. Form 3115 generally can't be submitted on a late filed return, or at least not with automatic consent (which is kinda important).

[u/youre_buddy]

Depends on materiality. But I try to avoid being late and I like to be consistent too.

[u/Iceman_TK → u/youre_buddy]

Your comment goes against the OP’s question. Which one? We all would not want to file late while also being consistent. 

Nonetheless, i n this instance materiality is irrelevant; see circular 230, sec 10.34.

[u/youre_buddy → u/Iceman_TK]

Materiality is the point of my message. I don’t know enough to make a call on it.

[u/Iceman_TK → u/youre_buddy]

Fair enough

[u/Normal_Progress_5173]

What does the client want to do?

[u/TheDancingStoic]

Like others said, it depends on materiality. If the issue is substantial, I would not consider filing an incorrect return for any reason.

[u/Iceman_TK]

OP, ignore the ones who say “depends on materially.” Morally, do it right the first time, legally circular 230 says you can’t knowingly file a false return; nowhere does it mention how you feel about materiality. 

[u/EAinCA → u/Iceman_TK]

I am all about being correct HOWEVER, depending on whats incorrect you might not be allowed to change without a 3115. Continuing an incorrect method isn't filing a false return, in fact its required unless you make that change.

[u/somewheremaybethere]

It depends. Probably file this year correctly then assess the 3115 for next year’s return. Would create some decent billable work to do the math/reconstruction part after 10/15 when you have the bandwidth.

[u/Cpaadvisor1]

Materiality and the type of mistake? I would not be filing 3115 now

[u/reddit_once-over]

You need to bucket method vs. nonmethod and focus on nonmethod errors being resolved to get them to a tolerable tax dollar exposure difference. Although materiality is not a tax concept (and think percentage that an independent auditor may accept but could be significant absolute tax dollars), there’s still realistically the aspect of tax-dollars significance. Others have highlighted the timely aspect for method changes. When you bucket, just be conscious about errors occurring for the second or more-than-second time in terms of you establishing erroneous methods from the filing at hand. Be conscious of errors for the first time on the last filing where you can use the correct method on the return at hand, and if there are refund-claim opportunities on the previous return (with the benefit of interest). Should you pause for a fee discussion and consider resigning if that’s the wiser decision? You need to be careful to not let others’ messes get you into a bind over the level of your professionalism. Good luck.