Our Taxing Times

Do's and Don'ts

Caveat: This post is totally from my point of view. Every preparer runs their office a little differently. But it should act as a guideline as you plan for your trip to the tax preparer.

 

This post started as a list for my receptionist to help her field questions when people make their appointments. But I realized I need a blog post too. As you are planning your visit to the tax preparer, please let me give you some do's and don’ts to help make your visit easier for everyone.

Do's:

• Make an appointment. I will take walk-in clients when I can but priority goes to appointments. My goal is that no one waits more than 5 minutes after their appointment time. I will not go over that to slip another client in ahead of them.
• Bring last year’s return if you are a new client or your preparer requests a copy. It’s good to have last year’s for comparison. I can’t explain why there is a big difference from last year if I don’t know about last year. This is especially important for a business, farm, rental or if you have carry forwards from the previous year.
• Bring in Social Security cards for everyone on the return and IDs for the Taxpayer and spouse if you are a new client. If you’re a returning client, please bring in the info if there is a new dependent or a change in the info.
• Bring in all your W-2s, 1099s and other tax info. Not sure if you’ll need it? Bring it in. This includes info on your deductions.
• Bring your glasses.
• Turn your cell phone off. Don’t take calls or text while we’re working. A tax interview requires both of us to pay attention to the return for a few minutes. Neither of us can do that if you’re talking to your BFF about what happened at work.
• Leave the kids at home. If you absolutely have to bring them, bring something for them to do. It’s not the responsibility of my receptionist or me to amuse them.
• Do call if you have to cancel your appointment or it looks like you’ll be more than a couple minutes late. Show up too late and you might find your appointment was given to someone else and you’ll have to reschedule.
• Do be quiet. You don’t have to talk through the whole interview. I can’t focus on your return if you expect me to carry on a conversation. Also, you might say something that will change the return.

 

Don’ts

• Don’t make spec appointments. I’m not looking for that type of client.
• Don’t expect me to wait while you run home for something you forgot. This is a small town but it will still take too long. It’s better to re-schedule.
• Don’t bring in your box of receipts and expect me to total them during the interview. A few receipts are okay, but plan on leaving the bags and boxes.
• When I ask about deductions, don’t ask how much you deducted last year. And don’t tell me to use last year’s figure (and by the way, the numbers aren’t on my ceiling. No, they really aren’t!)
• I hate being in the middle of your family fight. If you can’t be civil for an hour, make separate appointments. This includes using me as a threat to keep your kids in line.

 

Bottom line: I have great clients, mostly. But I also have others who are never prepared, on time, or are really inconsiderate. And they make the experience harder for both of us. It doesn’t affect their tax return. But, it does come into play when they want to negotiate the price or want me to do something special for them. All it takes is a little planning.

An IRS App?

Yes, there is an app for iPhone and Android from the IRS. Is it worth downloading? Not in my humble opinion.

What do you get with this app?

1. Check your refund status
2. Sign up for e-mail tax tips
3. Sign up to follow then on Twitter
4. Call them if you are on a phone but not if you're in an iPod Touch or iPad

2 and 3 become worthless once you're signed up (if you're not already). If you're not on a phone, pushing the call button does nothing. No message that you can't make a call. No phone number to call from a phone- nothing. And check your refund? That's a one time trick. Once the refund is in hand, there is no use for that option until the next year.

This is a novelty app. It only does a little and once it done that there is no need for the app.

Now IRS, if you really want to do a useful app, I have a few suggestions.

• How about the Tax Maps with downloads going to my Dropbox so I can view forms or pubs at home.
• Or a basic refund calculator so when I get stopped at the grocery store I can answer their questions.
• A W-4 calculator for the same reason as the refund calculator.
• Phone numbers with the option to make a call if the app is on the phone. So I can give them to people who stop me at the store.
• Enrolled Agent Directory.
• E-File provider Directory.
• Once it's up and running, the directory of Licensed Preparers.

The new App is just a novelty with limited usefulness. The calculators, phone numbers, and directory are items the general public might be interested in and use more than once. Make them easier to get to than going though the web site on a phone or iPod and you might have an app that is a winner.

PTIN Relief

The IRS has announced procedures for tax return preparers who tried to to get their PTIN but their application got logged jammed in the IRS system. They are giving tax preparers who have applied in "good faith" the ability to prepare returns until they officially receive their PTIN. If you have attempted to apply for a PTIN online, you will get an e-mail outlining the procedures you need to take to be considered "in good faith". Paper filers will receive an acknowledgement of receipt of their application. Again, they need to follow the directions in the letter before filing. Then they can use their old PTIN or SSN until the IRS finishes processing their application. Once the new PTIN is received, the preparer needs to switch to that number (if different).

All the details are set out in Notice 2011-11.

Tax Map

I use IRS.gov a lot but sometimes searching the site can bring up a lot of junk.  The results include not only the pub or forms with your search term in the name but also when it appears in the  article. Sometimes it takes the 3rd result page to get what I would've thought should have been one of the first results. So, I am happy to see the IRS Tax Map.

Tax Maps were created by the IRS as a tool for their phone operators to find information more easily. The  home page has basic info about the service and how to use it. But the left sidebar has the important stuff. Besides the traditional search box, Tax Map allows you to drill down to your topic through lists. The first list uses the alphabet. Looking for info on depreciation, click on the letter "D" and you get a list of tax words beginning with "D". All you have to do is find and click on "depreciation" Besides the alpha list are lists of forms, publications and Tax Topics.

What do you get? Run a search for "enrolled" and in the main screen there a 11 links for the word. Some are pub/form titles the rest are topics. If I click on the "Enrolled Agent" link, the website brings up 3 categories of links. The first is "Forms and Instructions", then "Publications" and finally "Links Inside Publications". Most contain links to a HTML version of the form or pub. But if there are other options available, links are provided to those options. I especially like the direct link to the publication's index.  To the right of results, the IRS provides you with a linked list of related topics if you need to expand your search. Need to find something from a previous year pub or form? There are links to the Tax Maps for 2009 and 2008 at the bottom of the left sidebar.

I've only played with the Tax Map site but I think it will become my first stop when I need to find something in an IRS form or publication.

Valentine from the IRS

Okay, that's pushing it some but the IRS has announced that they will start processing returns with the delayed items on February 14th. These returns can be e-filed once the software companies have made the changes. They will hold the returns until the processing date.

The forms being held are the Schedule A (Itemized deductions), the 5405 First Time Homebuyer's Credit (if repaying, if the taxpayer is filing to get the credit the return will have to be mailed) and returns claiming the educator's expense deduction and the higher education tuition and fees deduction.

Get Past the Spin

The airwaves are full of tax ads this time of the year. In fact, I wouldn't be surprised if the national chains were spending more this year than in previous years. The spin is at an all time level. If you are familiar with the world of tax prep, you can see through the spin as well I can. But if taxes are not your interest/bread and butter, please let me go over a few basics.

How your return is prepared is up to you. While paper forms are harder to come by, you can download or request forms from the IRS and states and complete you own return. Or, you can use computer software instead of paper. And my favorite, you can hire a tax professional to complete the return for you. No matter how your actual return is prepared, you have two filing options. The return can be mailed or it can be electronically filed. The choice is the taxpayer's. You always have the right to mail in your return. The e-file mandate did not change that. Even if you prepare your return on paper, there are businesses that will transmit the return to the IRS and state agencies. Many preparers offer this service for a set up fee. My credit union has offered e-file for members for years. For most preparers, the actual e-file is free. It's part of the service of preparing your return. It's quicker and easier and some preparers actually charge extra if the return is mailed. So, those ads that brag how they will e-file for free as if it's some special perk they give their clients are spinning their services.

Once the return is filed you have two ways to get your refund or pay your balance due. Just like filing the return, payment can be by mail or electronically. If you qualify for a refund, the IRS and states would love to direct deposit your refund into your bank account or have you sign up for the new debit card program(for the IRS refund). But they will still send you a check if that is what you prefer. Owe money, you can send them a check by April 18, 2011. Or you can set up a debit from your bank account if you are signed up for EFTPS. And there are other electronic options to have your balance due come out of a bank account or be charged to a credit card. Are they extra fees? Not for a direct deposit of your refund. And a debit from your account probably won't cost you anything but charging to a credit card will have a service charge. But your preparer isn't charging you that. The company handling the payment is passing on the service fees a business usually absorbs to you. Be wary of a preparer/software that charges extra for that service.

So, what you pay to get your return filed and refund/payment settled is the cost of the software program you are using or the preparation fee your preparer is charging. And that preparer is going to charge you something. Unless they are a VITA or AARP site, that advertised "free" return may not be free. First, the taxpayers who can use a 1040EZ are very limited because of income and dependent qualifications. And you still have to file a state return which is not included in the "free" promo. Don't be surprised if you walk out having paid for something. But remember, if you aren't happy with the way the interview and pricing goes, you can get your W-2s and other documents back with no charge as long as the return has not been filed. And the preparer can't charge you, that applies to all paid preparers.

There are a lot of other services that preparers and tax software makers promote at this time of the year. While the ads may only mention them in the fine print, they are fee based. The biggest money maker is the Refund Anticipation Loan (RAL) and the Refund Anticipation Check (RAC) (this goes by several names). The RAL program is on life support this year and most tax preparers who offered these loans in prior years, can't offer them this year. And the offices that can do RALs are doing credit checks (not mentioned in the ads) and limited the amount of the advance. The rest of your refund will come when they get your refund from the IRS.  Some of the offices that can't do RALs this year are offering regular loans with special rules. They are hoping that their RAL clients won't catch the difference until the return has been filed. The RAC program can be a good program for certain taxpayers. But they are not a faster way to get your refund. They operate on the same timetable as the IRS Direct Deposit. You are paying for preparation fees to come out of your refund not speed. (Even waiting for a mailed check will only add about 10 days to your wait.)

This year taxpayers need to take special care with tax ads. As the major players, both software and preparers, have seen their business change drastically, they have taken to the airways to convince you that nothing has changed, they can still give you the same programs you are use to. Be wary, ask questions, don't assume it's the same programs you've don't before. Oh, and the spin is not limited to the national chains.

Wait for It - It Will Come

Remember when you were a kid and waiting for Christmas or your birthday to come? It seemed that it would never get here. You would count the days and maybe even minutes until the gifts would arrive. For many adults, waiting for their W-2s and other tax documents is like waiting for Christmas. The only difference is that you don't know the exact date anything will arrive. They check their mail several times a day and are frustrated when there is no mail. These are the ones who call complaining that they still haven't received their W-2, 1099 or Social Security statement. They are the ones who rush in the minute they get anything and are disappointed when I make them wait for the rest of their documents.

I understand that these taxpayers want their refund. In some cases, they have an urgent need for the refund they are sure is coming. But the return isn't complete until all income, deductions and possible credits are included. And that means the taxpayer has to wait until all the little pieces of paper are in hand.

As a preparer, it's very frustrating to have a client bring me their info piecemeal. I can't finish the return and will have to schedule more than one appointment to do a basic return. I lose some clients because they take the papers they have and try somewhere else. They think the new preparer will let them file with what they actually have (generally because the taxpayer doesn't tell them what is missing.) Then there is being on the receiving end of "forgotten" documents brought in after the return has been filed. The amended return generally results in a balance due and it's ignored (until the IRS matches everything.)

The bottom line is that employers and payers are not required to have W-2s and 1099s and 1098s in the mail until January 31st. So taxpayers just have to wait for those missing documents. They will come and watching your mailbox isn't going to get it to you any faster.

 

The Wait Is On

Electronically filing of 2010 individual tax returns began yesterday. E-filing generally opens the 2nd Friday of January and this year it was the 14th. I actually sent several returns on Wednesday. Drake (my tax software) holds them in the pipeline for the first IRS drain.

Right now, e-file is converting from legacy to modernized e-file. The advantages of modernized e-file include the ability to add PDF files to a return (this would have been a great help with the documentation for the First Time Home Buyer's Credit), e-filing back year returns and amended returns, and faster acknowledgements. Under the legacy system, the IRS "drains" the returns we've uploaded 3 times a day during tax season. A few hours later, they begin posting acknowledgements (ACKs)that the returns have been accepted or rejected. Returns are  most commonly rejected for mis-matched names and SSN (or EINs), dates of birth, or a SSN being used on another return. The preparer fixes the return and re-files it. If the problem can't be fixed, the return has to be mailed (with a completed form 8948 on top).

But the first weekend of e-filing is different. We don't get ACKs before Sunday. The IRS wants time to make sure their systems are working correctly. But that doesn't stop preparers from checking early to see if they have their acknowledgements. I can guarantee that someone will post tonight asking if anyone has ACKs yet. I don't know which tax bulletin board the first will appear but it will start a flood of comments. Especially once someone says they got their ACKs. Panic will spread. Why haven't I got mine, is there a problem, who do I call? Once the IRS begins releasing ACKs, the wait begins again for those preparers who can do RALs this year. They now have to wait for their bank to post who is going to get a loan and who won't. 

By Monday, most of us will know that our system will work this year and we're not going to have an issue with the new PTIN system. Relief. Whether the returns were accepted or rejected there is one less thing to worry about: we can e-file.

More info on the new modernized e-file; Bye, Bye, Batch Processing.

 

Messed Up Posts

The idea is to post from my iPad in the evening as I unwind. It's still the plan but I'm having problems with the mechanics of the process. At the office, I write in Typepad using the Firefox browser with no problems. But in the iPad's Safari browser, I can't scroll while in a box(categories or edit) or preview what I've written. I've been using Blog Press. It works well to compose and preview the post but it doesn't want to publish. The previous post is an example of what happens if I write in Blog Press then cut/paste into Typepad. So for now it looks like I'll have to write in Pages and upload to Dropbox. Then at the office, I'll paste it into Typepad in Firefox. Isn't technology suppose to make your life easier?

Too Late, Try Again Next Year.

Re-edited Post.

The Treasury Department has announced that it will be sending letters out to 600,000 low to middle class taxpayers next week. The notice will be to offer them a change to sign up for a debit card that they can have their tax refunds deposited into. This is a continuation  of a government initiative to stop sending checks and direct deposit government payments. In June, I wrote about this program in the post, Better Than A Check. At that time, the program was limited to Social Security and VA Benefits. Tax refunds were down the road. It appears this was changed. In a Press release, the IRS announced the tax refund program. The problem is that they are too late for this program to be effective this year.

Let's look at the time table. The letters go out next week. I'm assuming the usual Friday mailing (the 21st). The taxpayer gets the letter, fills it out, and sends it right back. The processing company won't get it much before the 31st. Then there is the time to process the application, create the card and mail it back. I'll estimate two weeks. So, we're talking the card in the taxpayer's hands about the middle of February. By which time most of the target group will have already filed their returns, received their refunds, and, for too many of them, spent it all. This should have been started a month ago.

This isn't the first time the IRS hasn't thought about timing for this taxpayer group. How many times have they offered a webinar or Tax Talk on EIC in February? For as long as I have prepared taxes, I have been able to say that I do half (number wise) of my returns by February 15th. That's a third of the tax season. After February 15th, the returns get more complex and the EIC almost disappeared. I bet most practitioners with a similar client base will say the same thing. This could be a good program, but the IRS needs to study the results knowing that they missed too many of their potential taxpayers. And they need to start planning earlier next year and get the letters out in Early December.

A special thanks to Kay Bell for the heads up. Don't Mess With Taxes

My post about debit cards for Social Security and VA Benefits. Better than a Check