For those who may not understand this comic, it goes back to last year's revelations about creative accounting that was done by some large companies by reporting phony income. Most of the companies that did this only used the fake numbers on the financial statements that they presented to the SEC and investors, while they reported their true income to IRS in order to avoid paying taxes on fictitious income. This practice of keeping multiple sets of books is what prompted many of us to call for the release of corporate tax returns to investors so they can better see the discrepancies.

For some reason, some of the corporations using creative accounting tricks opted to pay income taxes on income that didn't exist. Now that they have been busted for the phony numbers by the SEC and investor lawsuits, they are trying to recover the overpaid taxes. Because of the statute of limitations with IRS, those companies will find that they will only be able to recover the overpaid taxes from the past three years. Anything from before that is lost forever.

The fact that this kind of phony income was allowed to be reported on corporate books for so long is why the CPA profession is under such scrutiny right now and the largest firm, Arthur Andersen, is no longer in existence.

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 5/07/2003 12:17:00 PM Send this post: