Abby Normal Posted February 17, 2017 Report Share Posted February 17, 2017 Elderly client had half a million in a savings account. Someone talked him into investing in 2015. 2015 was a down year so he sold everything after losing 80k. BUT the investments that the Wall St. broker put him in paid 55k in dividends. He didn't need the income! So he lost money overall but still has to pay a lot of tax. And he'll never live long enough to deduct that 80k at 3k per year. Somehow, we never got the 1099, so we just got an IRS notice... with a substantial understatement penalty. He'd be miles ahead if that money was still in his savings account. TGIF! 4 Quote Link to comment Share on other sites More sharing options...
Catherine Posted February 17, 2017 Report Share Posted February 17, 2017 I really detest it when shysters sweet-talk the elderly into doing *stupid* things with their money. Couple years ago a client got convinced that converting her IRA to a Roth IRA was the cat's meow. Oh, she and her husband got *slammed* with tax that year. But the shyster got his juicy commission so what does he care? 5 Quote Link to comment Share on other sites More sharing options...
ILLMAS Posted February 17, 2017 Report Share Posted February 17, 2017 We all hate when this happens because we are not sales people, maybe we are not charging enough. 4 Quote Link to comment Share on other sites More sharing options...
Catherine Posted February 17, 2017 Report Share Posted February 17, 2017 5 minutes ago, ILLMAS said: maybe we are not charging enough My husband keeps telling me that. New client this year paid $750 last year to [big box store which shall remain nameless] when my fee for that same return is about $280. It only took me a half hour; I felt bad charging that much - until I saw the prior-year bill. 5 Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted February 17, 2017 Report Share Posted February 17, 2017 When I see the previous year's bill, mine is never less than 50% of what they paid last year. 2 Quote Link to comment Share on other sites More sharing options...
Catherine Posted February 17, 2017 Report Share Posted February 17, 2017 19 minutes ago, Jack from Ohio said: When I see the previous year's bill I thought about that, but it's just too simple a return. Wages, $1 interest, social security, capital loss carry-forward but no brokerage transactions or dividends. That's it. It's close to a 1040A and I'd gag trying to tell her she owed me $375 for that return. 7 Quote Link to comment Share on other sites More sharing options...
SaraEA Posted February 18, 2017 Report Share Posted February 18, 2017 Abby, your client has an SEC case against that broker. His first step is to contact the brokerage's compliance department. They do not want complaints lodged against them! Usually they try to deny everything (investor signed something that indicated his risk tolerance was X), but tell him to keep pursuing it. He is elderly, did not understand, these investments were not appropriate for someone his age, etc. If some were advisable only for long-term investors, that's a case right there. This person should not be in anything risky or long-term. Several of my clients had the same nasty broker and lost mega bucks. Some of their investments were things I never heard of so I called a trusted broker who explained that these instruments were meant to be held for at least 5 years and that if he had frequently bought and soon sold them in his own clients' accounts he would have a message to see the compliance dept on his desk in the morning. Some of these clients were made whole by the brokerage firm. One sweet old man who lost over $200k was asked by the broker not to report him "or I'll lose my job." But he promised to get the money back. How? By making the riskiest investments in the world? I have kept a careful watch on brokerage statements that still show him as the advisor and haven't noticed any hankey pankey lately. Sometimes they just need to know someone is watching. 4 Quote Link to comment Share on other sites More sharing options...
NECPA in NEBRASKA Posted February 18, 2017 Report Share Posted February 18, 2017 I just lost one that is going to the tax preparer associated with the broker (relation) that talked her into cashing out her annuity that he had sold her to the tune of just short of $1,000,000. She was crying when she called me over the taxes that she has to pay and said that her recently deceased husband would be turning in his grave over the money that he had worked so hard for. I have been furious and sad over the treatment of her, but it's a relative and I can't say a word. 4 Quote Link to comment Share on other sites More sharing options...
FDNY Posted February 18, 2017 Report Share Posted February 18, 2017 I think the only way to protect our clients from these people is if the client called us for an opinion on such an investment. Many clients do, but the older ones are just too trusting and fall for the slick sales pitch. 4 Quote Link to comment Share on other sites More sharing options...
BLACK BART Posted February 18, 2017 Report Share Posted February 18, 2017 14 hours ago, Catherine said: My husband keeps telling me that. New client this year paid $750 last year to [big box store which shall remain nameless] when my fee for that same return is about $280. It only took me a half hour; I felt bad charging that much - until I saw the prior-year bill. I feel the same way. The worst one I ever saw was about 20 years ago when a young lady brought me a cardboard box crammed full of papers & junk. Her husband, a young farmer, had died of cancer the year before and she was the sole heir to his enormous life insurance policy . She had already lost lots of it (in ridiculous investments) and had a lawyer do her taxes the previous year. She asked my price and while I felt sorry for her, the size of that box was daunting. So anyway, I said "Ma'am, I hate to tell you this, but I'd have to charge you at least $500" (which was a huge price around here at the time). And she replied "Whew! That's a relief. That lawyer charged me $3,800 last year." So I got a new customer and she got a good deal. (There was a funny sequel to this, but...some other time). 5 Quote Link to comment Share on other sites More sharing options...
RitaB Posted February 18, 2017 Report Share Posted February 18, 2017 Another good one is when a sole proprietor starts up her craft business and decides she just HAS to be an LLC because, you know, every person in business, especially the craft industry, gets sued and loses their home, and apparently liability insurance is just not good enough. Lawyer charges her $1500 to fill in the blanks on the two pager with Department of Revenue. A couple months later, I meet her when she brings all her letters saying complete your applications for city business license. county business license, business taxes, etc. That's all he did. The two page fill in the blank. He did tell her she had no liability protection as a sole proprietor and cashed her personal check promptly. 3 Quote Link to comment Share on other sites More sharing options...
taxxcpa Posted February 18, 2017 Report Share Posted February 18, 2017 I had a client who was advised to take her money out of an IRA and buy an annuity. I told her "Don't do it. 5 Quote Link to comment Share on other sites More sharing options...
Abby Normal Posted February 18, 2017 Author Report Share Posted February 18, 2017 There's an insane tax preparer in my county who advised a retired lady turned 'artist' to start an S corp and rent a space so she'd look like a real business and be able to deduct huge losses. She sells about $500 of paintings each year. Fortunately she came to me before she did put any assets into the S corp, but she's still paying rent on that lease. I explained to her that buying deductions is a losing game and a hobby is still a hobby even if you put it in an S corp. 4 Quote Link to comment Share on other sites More sharing options...
Abby Normal Posted February 18, 2017 Author Report Share Posted February 18, 2017 3 minutes ago, taxxcpa said: I had a client who was advised to take her money out of an IRA and buy an annuity. I told her "Don't do it. Those annuity sales reps must get big commissions on those damn things. 5 Quote Link to comment Share on other sites More sharing options...
ILLMAS Posted February 18, 2017 Report Share Posted February 18, 2017 I had a client that was convinced by a broker to refinance their home and to invest the money, they lost $30k like in seconds. 5 Quote Link to comment Share on other sites More sharing options...
Hahn1040 Posted February 18, 2017 Report Share Posted February 18, 2017 Longtime client has a disabled son, so she was advised to set up a trust for him. She asked me if the legal fee she paid to set up the trust in 2014 is deductible. She did not ask me in 2014. She paid another $3,500 in fees in 2016 because it was not done properly in 2014 when she had paid $6,000. I asked her, "What is in the trust?" She has no investments. The only asset she had was her house which she sold in 2016. Her income is a government pension and Social Security. She told me she has a life insurance policy for $400,000 that is for the disabled son. She gave the not disabled son $200,000 from the sale of her house for him to buy a house. So she has about $10,000 in cash remaining. For this she paid $9,500 in legal fees! 4 Quote Link to comment Share on other sites More sharing options...
Catherine Posted February 18, 2017 Report Share Posted February 18, 2017 2 hours ago, RitaB said: and cashed her personal check promptly Sounds like a good candidate for a hug. 6 Quote Link to comment Share on other sites More sharing options...
FDNY Posted February 18, 2017 Report Share Posted February 18, 2017 5 hours ago, taxxcpa said: I had a client who was advised to take her money out of an IRA and buy an annuity. I told her "Don't do it. Oh yeah, putting a tax deferred "investment" in an IRA, what a novel idea. Advisor should be tarred and feathered. Unfortunately many older people fall for this with high introductory rates, only to be a victim to the surrender charges when they need the money. And the absolute worst is putting a variable annuity in an IRA, a guaranteed loser with charges up the Ying Yang. I believe many states do have laws to protect individuals from these practices.. 2 Quote Link to comment Share on other sites More sharing options...
Catherine Posted February 19, 2017 Report Share Posted February 19, 2017 5 hours ago, FDNY said: I believe many states do have laws to protect individuals from these practices. Maybe, but they do NOT do enough to strip bad "advisers" of their licenses - or even "just" penalize them with some type of preparer-penalty analog. I have myself seen several utterly egregious cases where the family lodged formal complaints against bad advisers, and NOT ONE of them was made whole and not even ONE adviser even got a blemish on their U-4 record. Disgusting; utterly disgusting. If any of us pulled the type of shenanigans I have seen over and over again, we would have our EA or CPA licenses rescinded and multi thousand dollar preparer penalties assessed. 3 Quote Link to comment Share on other sites More sharing options...
SaraEA Posted February 19, 2017 Report Share Posted February 19, 2017 My stomach is churning over these stories of greedy crooks taking advantage of innocent people. Worst I saw was an elderly lady who came in with a stack of 1099Rs and had no idea what they were for. Turned out her advisor had sold her an annuity and every single month cashed it in and sold her another one. Big commissions on the sales, big penalties to the lady for early cashouts. We called the state insurance commissioner and the offense was so egregious everything got fixed. I have noticed that when I tell a client to contact their advisor to find out why their fees are so high, or ask about what the heck is this investment, or whatever seems to me to be questionable in their account, I will often get a call from that advisor. Client likely called and said "my tax person told me to ask ...." Sometimes they defend themselves, sometimes we get to talk about the person's financial situation and the advisor is grateful to get a better picture (e.g., hey, this person needs income, not tax-free investments that carry risk, they have minimal tax liability as it is). I believe some of these people then do a better job for the client because they know someone is looking over their shoulder. Sad that the fiduciary rule is about to be tabled before it goes into effect. 4 Quote Link to comment Share on other sites More sharing options...
Ringers Posted February 19, 2017 Report Share Posted February 19, 2017 I just had a client tell me about his "advisor" that told hi8m to issue quit claim deeds for his personal residence and a vacation home to his son to transfer the property now before he dies and it is forced into probate. Nothing was mentioned about step up in bassis upon death if put into T/P estate or a Grantor Trust that would be lost if deeded to son before T/P death. I told him to get a new advisor!! 3 Quote Link to comment Share on other sites More sharing options...
Cathy Posted February 20, 2017 Report Share Posted February 20, 2017 My last client who had a local broker that wasn't up to snuff....no, a guy who pretended to be a broker....had a nice racket going on...a local ponzi scheme that although did enough damage, wasn't allowed to continue it. Hate saying this even today, but after my discovery and a lot of heat from law enforcement sources, he committed suicide. I still feel bad, however, there's a lot of investors out there that feel even worse than I do. My client was the fortunate one who was told to try to get all of his money back (plus fake earnings), which he did, while the powers to be was assessing the situation. Funny thing about this is that my client tried to warn his friends who referred him to the pretend "broker" that it was a ponzi scheme, however, several and one couple in particular, stands out in my mind as they chose to keep their money with the "broker" because it was making so much (on paper). The couple's professions were nothing to sneeze at. One was a college professor, the other a nuclear scientist. Nothing shocks me any more! 4 Quote Link to comment Share on other sites More sharing options...
Catherine Posted February 21, 2017 Report Share Posted February 21, 2017 2 hours ago, Cathy said: they chose to keep their money with the "broker" because it was making so much (on paper) You just can NOT save some people from themselves. 4 Quote Link to comment Share on other sites More sharing options...
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