Our Taxing Times

Buyer Education II

This is the second in my series of consumer education on tax professionals for taxpayers. This series is not to be a replacement for all the basic articles on choosing a tax preparer like this one from the IRS. Instead, the concept is to focus on what I hope will be part of the IRS education program when tax preparer licensing passes. This one is a little out of order but tax software has been in the news with the Tax Court rejecting the Turbo Tax defense and Wandering Tax Pro's blog After Thoughts - Part II

Tax Software

Tax software has been a big part of my tax career. I learned on paper but from my first job, at least part of the tax season, our returns were computer generated. In those days, we used input sheets to give the data processor the numbers and they entered and printed the returns. We then checked them over for mistakes. Early on the computer was just a tool to help with the math and create clean and neat returns. As software progressed, so did the quality of the software.

As tax software has developed, home computer products and online filing have made it easier for the DIYer to prepare and electronically file a return. This has given rise to two problems. The first is the taxpayer who did his own return by hand and then switched to a program and doesn't check the results. Joe Doe has been preparing his own return for years by hand and discovers one of the boxes. Before when he ran into something he didn't understand, he would grab the instructions, Pub 17 or call the IRS to find out about his issue. With the box, if he can find something like his issue, he is less likely to research and more likely to rely on the software handling it correctly. These don't worry me since they are more an IRS problem, in fact, I get many new clients from this group. The group that worries me is the DIYer, who tries to bring in a little extra money preparing returns. The boxes make it easy and too many people are tempted to do something they can not do by hand. I include in this group the guy or gal who did a few returns by hand but the software gives them the ability to do higher numbers and more complicated returns than they should. Too many tax business begin or grow too fast because of tax software. This includes all those car lots, pawn shops and beauty/barber shops who offer tax preparation.

The increase in tax software has also lulled some tax prepares into a false sense of security. No matter how good the software is, there can be errors in the returns generated. When my software is shipped in November, I and many others start putting it through it's paces to find errors. Better in December than in March. Most come from fixing one issue causing a problem in a related area. A basic software problem. Some are interpretive issues when the software tax analysts don't interpret the Tax Code they way I might. Or the problem could just be an obscure issue that wasn't tested. (Last March I ran into this with a very unique situation on a personal return.) Too many preparers automatically assume that what the software is giving them is right and they are too lazy or unable to check it.

What can a taxpayer do? First, remember that you are the one responsible for the info on the return you signed. And that just because the computer came up with it does not make the return correct.  Garbage In/Garbage Out. Be proactive and ask questions about the software they use, their training, taxes or the return. If it is your first meeting with the preparer, come in with a couple of question (Will increasing my 401K contribution at work cut my taxes?) Can they explain your return to you? If you hear, "I don't know the computer does it that way." to anything but a formatting question - run. If you have concerns, ask for your W-2 and other papers back, you have that right (a future installment).

I would not want to go back to preparing returns by hand for anything but a class. Tax software allows me to do more returns and focus on giving my clients the attention they deserve. I don't have to worry about doing check tapes for the math or reading the wrong line from the tax or EITC table. Good software also gives the preparer tools that help them help the client. Tools I use include comparison charts between years, projections of future depreciation and tax planning. I don't have to maintain paper copies of the return and that allows me to provide clients with prior year return easily from the software. But I recognize that too many preparers use the software as a crutch not a tool and that the public needs to be on guard.

Comment Policy

Opps, I meant to do this a few days ago and just realized that I hadn't.

I like comments and welcome them. I don't always respond but I do read them. I also will pull them if I need to do that. I have Typepad set to automatically post a comment and send me an e-mail. Once I see a comment with a problem, I use the tools they give me to delete the comment and take any other action I need to take.

Why would I pull a comment:

• Bad language - I don't get too hung up with a colorful phrase if it is clear it was carefully chosen for a specific reason but mostly they aren't and the comment goes.
• Pornographic - Under no circumstances will it stay.
• Comment Spam - I don't like being used. This is the major reason I pull comments.
• Stupid Disagreements - I like discussions and throwdowns can be fun from the sidelines but I will step in when it gets nasty, goes on too long, or the issue is plain stupid.
• Disrespecting others - this goes for anyone not just other commentators.

If you don't agree with my post, please feel free to tell me why. I can't guarantee to respond if it won't add to the discussion but I probably will.

Buyer Education I

As the debate rages on the licensing on tax preparers, I would like to indulge in a small taxpayer education series. Most are issues that I hope will be covered as part of the public education of the new licensing law. The first one isn't and will probably be the most controversial as I want to take on some marketing lines many preparers (including myself) use. The issue isn't the actual talking point but either making it a stand alone criteria or not understanding the spin involved.

Titles Don't Mean Nuthin'

Now that I have your attention let me back up and qualify that remark. Titles don't necessarily mean what we assume them to mean. I am an Enrolled Agent. That means that I passes a killer tax test and background check and maintain the status with continuing education. That does not automatically mean I know how to prepare an actual return. The study guide I used to prep for the EA test had a testimonial from someone who passed the test on the first time with an average 80% correct, and bragged that they had never prepared a return. There are CPAs who specialize in accounting audits and do just a few returns or focus on corporations and not individual returns. As you check into a tax preparer, initials after their name can be a good indication of tax return skill but you've got to dig further.

The same goes for the big chains. Some have good preparer training but that doesn't mean that individual preparer is following the rules or should be doing that type of return. What initials and the big chains have in common is a perceived accountability. There is someone to hear your complaints. If you have a problem with a preparer at a chain you can work your way up the corporate ladder. You can file a complaint with the CPA's or EA's licensing organization. It may not do any good but you can try.

And we all know that just because someone has given themselves a fancy title or claims to be an expert, like Joe Doe the Tax Refund King, only means they gave themselves a title.

Experience Isn't a Good Teacher...

unless you are willing to learn. I have 21 tax seasons under my belt and done over 10,000 returns. Each year I am confronted with new issues and forms to learn. Continuing ed is a major part of off season.  But there are preparers who don't keep up with the changes. At least once a year, I see a return prepared using rules from 5 years or more before. The client comes to me because their beloved preparer retired, died, is too far away. As I review the prior year return, the clients tells me about the preparer and they have been doing returns for 10, 15, 20, 30... years. And the return is wrong. There are good preparers who have just started and tax fraud artists who have been doing it for years.

No News Doesn't Mean the Return Is Right.

Recently, I have seen a couple of websites where the tax preparer used the lack of IRS audits against their clients as proof as their quality. Being audit free is good but we all have to be realistic that it could just be we haven't gotten caught. We all make mistake or have clients who lie to us and, as a result, the return is incorrect. For example, I catch an error on a new client's prior year return and point it out to them and 70% of the time they will say, "But the IRS didn't catch it." The implication is that, therefore, I must be wrong and the deduction is okay. Nope. Sad thing is the IRS can't catch all the errors that could appear on a return. Example, client with a business has been taking a deduction for their draw. That mistake won't be caught by any of the automated checks. Even if a live person sees the entry, it might not trigger a closer look unless the discription seems out of place. Now, if the return gets pulled for audit, the taxpayer is in trouble (and it opens up back years too). 

What Does That Leave Us?

I have tried to poke holes in a few marketing myths that tax preparers use to get you business. None should be used as a stand alone justification for your business but become part of a whole gestalut of who is a good fit for you. What are their qualifications, how long have they been in business, what types of returns do they prepare, who actually prepares the return, what continueing education do they do each year (and staff if they have one), if they do returns by hand are the returns neat and professional, if they don't e-file why don't they, what professional organizations do they belong to, what support materials do they have on their desk? Ask your friends and family who they use to prepare their return and are they happy with them? There is no one "right" answer but asking the questions gives you facts and impressions you need to pick a preparer who is someone with whom you can work. Don't be blinded by the talking points they want you to know.

Twitter vs Facebook?

Just a quick post about how I am using the internet's social media site for business and personal. The reason for this post is today I "approved" three new followers for my Twitter account but I think they are going to be a little disappointed.

I maintain three Facebook identities. The first is my personal account. You can find me under Trish McIntire or the user name of mactax. I also created fan sites for the McIntire Tax Center and Winfield Community Theatre. The office site is a work in progress with basically the feed from Our Taxing Times blog showing up there and a few random posts. WCT's fan page is more what a fan page should be with lots of interaction from fans and the theatre's news blog. 

While I do oversee the Twitter account for the theatre (WCT67156), most of my twittering is done is on my personal account. And most of it is - personal. Occasionally, I might post a tax related link or note. Mostly, it is the usual life comments about my feelings and activities.

So if you signed up to follow me on Twitter, you will get a wide varity of topics. If this isn't what you expected, you won't hurt my feelings if you stop following my tweets. Life is too short to read all the web throws at you. If you are looking for tax info, my blog, Our Taxing Times, or Facebook page might be better choice.

Census Scammers

I want to point to Taxgirl's great blog about the census and possibility of scams arising from the count.  Nothing I can add except be very cautious with your tax info and SSN.

Spring Cleaning Gone Amuck

The idea was to work with the typelists and gadgets but I was really tired of the old look and decided to try something different. How long it will last I don't know. I was planning an overhaul of my website and blog this fall so this may just be a toe in the water. 

You're Out-

I just dropped a book out of the typelist- Books I Recommend. This author has a blog, which I follow, for the self-employed person. I haven't always agreed with her advice but I understand that taxes are in some cases interpretive. My problem is her recent reaction to other bloggers who disagreed with her view that a separate business checking account is not needed. She choose not to honestly debate the issue but resort to sniping about spelling and grammar and back her position with examples no one would support. Finally, she dismisses these professionals claiming they don't understand small businesses. How does she know they don't understand small business? Because they disagree with her? I don't know how she is making that claim. It's not evident to me from that post.

I won't use an expert who feels the need to belittle professionals who disagree with her. It's not professional. And I don't recommend anyone or anything I wouldn't use and trust. So her book is gone.

The good news is that it has put me in the mood to do some blog spring cleaning. Nothing major. Just freshen the place up some. 

Thank You Congress?

I have long stated that Congress should not be allowed to play with taxes. I still mean that. But since it is bound to happen, I should be happy when it results in the IRS issuing a new form to track the changes. A new form means I get to charge more. 

The IRS has recently added two forms to the 1040 series for 2009. The first was the Schedule M. This form calculates the Making Work Pay credit that is part of the Obama stimulus package. This is a form almost everyone is going to have to use and I see a lot of confusion arising. Not only a form to charge but the possibility of new clients. 

The new Schedule L documents the additions to the standard deduction for non-itemizers. Last year, I just added the real estate tax to the standard deduction since there was no form. Now we have a form. Congress added new car sales tax and net disaster losses to the deduction and that required a form to keep track of it all. Ka-ching.

It may seem rather crass to think of new forms as money in the bank. But, both new forms further complicate an already convoluted tax code and make it harder for the average taxpayer to confidently prepare their own return. The forms are needed to calculate and document the deductions and credits. Could these programs have been done outside the tax system? I don't know. The Cash for Clunkers program isn't run through the IRS and it seems to be working quite well. Something to think about Congress. 

Also, please think about why the taxpayers have to pay more to prepare their taxes because you insist on using the tax code to distribute pork and look good. (Oh, and drop any finger pointing. You all use the tax code as a reward or punishment.)

The Scary Truth About the Business of Taxes

Saturday night, after extending my office computer/internet network, the nightmare began. I couldn't get on the internet, sometimes. It would work for a while and then quit in mid-browse and start back up a hour or two later. At first, I wasn't worried since I assumed that AT&T was having problems. But it was still happening Sunday. When I finally got a chance to work on the issue on Monday, I traced it down to the modem. The new modem. A few hours with 2 very helpful DSL support techs and I was back in business. While the problem was solved, more issues were raised.

On Monday morning, the real world of taxes and the internet merged. Saturday and Sunday's concerns were about checking mail, Facebook, Twitter, getting directions to a baby shower, nothing that would effect business. Monday brought concerns about EFTPS filings for a client, e-filing a return and picking up acknowledgments. Without the internet, I can't use e-Services to help clients or find info on IRS.gov or the KDOR website. Nor can I up-date my software or receive IRS Quick Alerts and other e-mails. Tech support becomes less convenient when you rely on phone support hours. Off-site back-ups end. The way my business is set up, I can't run it effectively without a reliable internet access. 

The basic cause of this incident is unknown, but I would put money on my error. While configuring the new Time Capsule and extending the network, I accidently changed a modem setting. But it was easily fixed and won't happen again. And I know better than to make system changes between the middle of January and April. But what if something goes down that is out of my control? Not just spam and viruses hitting servers but Mother Nature pulling down lines. Bad weather doesn't stop clients who want their refund now and they will go to whoever can file for them. I don't know what the answer or answers will be. I have thought about bringing in cable as a backup to the DSL. And I won't be dumping all hardcopy reference materials in favor of online sources. But this is a problem my business will have to think about seriously.