Monday, February 9, 2009

inventors of audit insurance?

New York Times: Teresa Riordan Jan 21, 2002:

AS workers begin receiving their W-2 and 1099 forms this month and start preparing their 2001 tax forms, they may want to ponder Dan Walker's big idea: tax-audit insurance.

Mr. Walker, a certified public accountant and former tax auditor, has long been aware that the prospect of an audit can be anxiety-provoking for most people.

But it was not until one wealthy client came ''unglued'' when he faced an audit that it occurred to Mr. Walker that such anxiety might turn out to have some entrepreneurial currency.

As Mr. Walker recalled, the client said: ''Dan, I don't care what you have to do but I want this behind me. I'm fighting with my wife, I can't concentrate, my business is going to hell -- just let me know how much stock I need to sell.''

In the end, the client's records were in order and he did not owe anything in back taxes. So it set Mr. Walker to wondering: could he make a profit selling audit insurance to conscientious taxpayers willing to pay a modest premium for peace of mind?

This month the United States Patent Office published patent application 10,044,734, submitted by Mr. Walker and three co-inventors covering the concept of tax-audit insurance, to cover back taxes and penalties that might arise from an audit.

According to the article, former Deputy Treasury Secretary of the Treasury from the Reagan era, Tim McNamar, provided financial backing for the new audit insurance company and served as its initial CEO.

I've been unable to determine whether the inventors above were actually successful in their attempts to secure the patent they applied for, but did run across an interesting report of another inventor who was successful in obtaining a patent in 1988 on a method for what is now known as the the Refund Anticipation Loan (RAL). Since patents expire after 17 years, that concept is now in the public domain.

Tax software has made it relatively easy and profitable to offer both products.

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