Something is wrong

A business owner’s wife came to me to inquire about our services for their medical related business.    They were looking for a new accountant because their former accountant was always extending their tax returns and they needed someone who could get the work finished so that they could apply for a loan. She also said that she felt like something was wrong, because they were not getting all that much money out of the business but they were paying a lot of taxes. Upon looking at the old tax returns it was easy to see that their old CPA forced the owner to take an unnecessarily large salary which also resulted in a large amount of employment and income taxes paid. This seemed excessive, and is usually the sign of a overly conservative accountant. Upon looking at the past tax returns, I noticed that the owner had not been given credit for his losses in a prior year, and that over $200,000 in new equipment purchase arrangements had not been properly booked and written off. I amended two years of returns and the owner received a  $48,000 refund from the IRS and $3,000 from the state.