Rant for the Day

[Edsel]

Some time ago I prepared taxes for a hairdresser who owned her own shop, and had another hairdresser pay her "chair rent".  She didn't really have much in records to support either revenue or expense but we did the best we could with a bank account.  I have 6-7 other cosmetologists with varying income so I have somewhat of a grasp, but certainly not as much grasp as would have been the case with adequate records.  Most hairdressers are better cosmetologists than they are record-keepers.

She ended up owing some money.  She then proceeded to order me to remove revenue until her tax liability was reduced to zero. 

Nope.  Not this guy.  Bye Bye hairdresser who owns your own shop and turns in only $150 a week.

She did have a child.  A friend of hers told me earlier tonight that she found another tax preparer, and that she ended up with a $4000 refund.  She and all her friends think her new tax preparer is a genius - and I am not very good at all.

Grrrr!  I have found out that the IRS is much more interested in penalizing preparers than they are going after the taxpayers themselves when cheating is determined.  A couple years ago, a colleague of mine called his congressman whom he personally knew.  In a day or two the congressman wrote him the intent of the earned income credit was to redistribute income and that tracking down cheaters was counter to their purpose.  The interception of violations is basically now upon tax preparers.

From the mass numbers I've been made aware, a good 25-50% of EIC recipients are not due, similar to my experience above.  Aggressive claiming of social security numbers not entitled, social security numbers for sale on the black market, phony relatives, etc.  In my county, the existence of 2-3 audits per year would scare off most of the cheaters.  It is amazing how much they know about earned income credit.  Yet the 8867 places all the burden on the preparer where in almost all instances, the preparer has no vehicle to be aware of violations.

You've heard all this whining before, of course.  Most of you have experienced it first-hand.  But where is the light at the end of the tunnel?

 

 

[Possi]

The light at the end of the tunnel, IMHO, is when the IRS stops making our offices the stopping point for welfare checks. Nobody should ever get more refund than they pre-paid in taxes without going to a government agency and qualifying for free money. It infuriates me, can you tell?

But, I smile and do the Dorito Dance with every big (honest) refund because that's my job.

I have a few substantial LLC single owners who routinely use their business account for personal use. I am now insisting they hire a bookkeeper or I am no longer doing their tax returns. Fortunately, I have enough clientele to make these demands. The risk to us tax pros is too great these days, to play around with Sch C's and refundable credits.

No refundable credits on this particular return, but I recently had a Single Owner LLC tell me that she did her own taxes this year. She just used MY work from last year, took my numbers out and plugged hers in. I have been doing her taxes for at least 15 years. My only response was, "Good luck with that. I hope it doesn't blow back on you." I felt like I was robbed at gunpoint. Oh, and the best part? I was dropping off the Easter Cantata booklet and CD so she would sing in the choir with us. Praise The Lord!

ermagerd

 

[JohnH]

My solution several years ago was to stop preparing returns claiming EIC.  I know that isn't practical for everyone in this business or even everyone on this forum  (and there's always that issue of the adult child of a regular/profitable client), but I simply started telling people who have large EIC that they needed to have a preparer with deeper pockets than I have. I usually just gave them the address of a local HRB office and tell them they will probably pay a lot more than I would have charged, but "that's life". In recent years I haven't received that many inquiries, but when someone would approach me, that's one of the first questions I'd ask.  Along with whether they own any rental property, whether they use the Obamacare exchange,  and whether they regularly  have lots of stock/mutual fund transactions - all of which are usually deal killers.

[jklcpa]

24 minutes ago, Possi said:

The light at the end of the tunnel, IMHO, is when the IRS stops making our offices the stopping point for welfare checks. Nobody should ever get more refund than they pre-paid in taxes without going to a government agency and qualifying for free money.

 

I'm right there with you on this!   We're supposed to work for our clients, not act as gatekeepers for the IRS.  

[easytax]

44 minutes ago, jklcpa said:

 

I'm right there with you on this!   We're supposed to work for our clients, not act as gatekeepers for the IRS.  

/s       BUT JUDY:   The IRS gives us so much and asks so little.   Besides along with "other sites" they are always with us,   that is why you and Eric protect us and are always watching ....

            Be well and enjoy before the snow flies!

 

[schirallicpa]

Thank you for this rant!  I have taken the advise of another tax attorney/EA who has raised his fee significantly for EIC and 8867 based on the number of hours the IRS says it takes to prepare.  I placed a large notice out front that your return fees are going up if you have EIC.  I lost a couple clients and I have steered a few away just because I know what kind of people they are.  EIC is a game that the welfare have mastered in my area.

 

[SaraEA]

We stopped taking new EIC clients when the due diligence rules were tightened and the fines went way up--too much risk.  We only do a handful now, all from long-time clients we know, but we did raise their fees $25.  Like John H, we send others to HRB and tell them their preparers have more training in this area, which is true.  But how can you turn away clients with rentals or security transactions?  Between those items and small businesses, that's the majority of our client base. While the forms for clients who purchased insurance through the exchanges are a pain, we don't discourage those clients.  You have to tackle the forms anyway for those who had a lapse in coverage or are insuring a nondependent under the age of 26.  We are seeing a number of audits for those who "forgot" to bring us their 1095As.  If we could turn down anyone, I'd vote for those with education credits.  We get a lot of audits, especially if there were 529 distributions.  Hopefully this year the 1098Ts really will have the "amount paid" instead of "amount billed."  I am so sick of putting returns on hold while parents try to get the financial transcripts from the schools.  We'll still have fun determining the nontaxable portion of the 529 distributions, but that's why we charge the big bucks.

So John H, if you don't have clients with EIC, rentals, and brokerage statements, who's left?  After this busy summer, I don't want anymore clients who will get audit notices.

[Evan S. Golar]

One of the things I have noticed over the years is that we as tax preparers are now required to enter data into a tax return that we were never officially trained to be experts on - health insurance, EICs, investigative fact checkers, dependent Social Security numbers, divorce issues, lifestyle changes, engagement letters,  etc etc that all create a larger liability for reporting than we ever bargained for - and we become the first victims IRS and tax authorities look to should a return have an issue. And we have to rely on the reliability of third party information. Until we can control our clients' honesty and reliability of data we're given, these problems are never going to stop.

[Jack from Ohio]

3 hours ago, SaraEA said:

If we could turn down anyone, I'd vote for those with education credits.  We get a lot of audits, especially if there were 529 distributions.  Hopefully this year the 1098Ts really will have the "amount paid" instead of "amount billed."  I am so sick of putting returns on hold while parents try to get the financial transcripts from the schools.  We'll still have fun determining the nontaxable portion of the 529 distributions, but that's why we charge the big bucks.

I just heard, at an update seminar, that the date has been extended till Jan. 1, 2019, on the mandate for colleges to fill in box 1 of the 1098-T for all college students.  So, for tax year 2017, we still have to play the billing statement game.

Just like the usual IRS.  Make a deadline (or so called), then extend it because of pressure from the people involved.

[MDEA]

Any one in the Baltimore Washington area who does not want to do EITC returns you can send them to me. They are more than 50% of my business my staff and I are happy to do them.

[Jack from Ohio]

3 hours ago, MDEA said:

Any one in the Baltimore Washington area who does not want to do EITC returns you can send them to me. They are more than 50% of my business my staff and I are happy to do them.

Same for Ohio residents.  I am ready for new clients.

[SaraEA]

In 2002, colleges were supposed to report amount paid for qualified education expenses.  They whined that their computer systems weren't up to it so were given the option of reporting amount billed.  Every time the deadline has come to eliminate the amt billed box, they whined some more that they still weren't ready.  It takes supposedly the brightest among us who inhabit our institutions of higher learning FIFTEEN years to figure it out, and they had 15 years warning.  Guess they knew this was an easy pass and didn't bother, or else they really don't belong in a place that teaches our young. 

I understand that colleges use academic years, bill for calendar year semesters, and receive parent/student/financial aid payments at different times.  Sounds like an easy coding solution to me.  So we beleaguered tax pros will have to spent yet another year combing through unintelligible bursar statements while the brilliant IT staffs spend their time inventing with more ways to use the student ID cards for off-campus pizza and stadium seating lotteries.

[Abby Normal]

I understand the difficulties of determining how much was paid for tuition vs. room, board, etc., but if they could change box 2 to total payments received plus loans applied, that would be awesome. One smart college has a 1098T with an account statement printed on the back. Such an easy solution.

[Catherine]

On 10/30/2017 at 11:03 AM, Abby Normal said:

Such an easy solution.

Which is why it's absolutely *beyond* most college financial offices.  (If you think you hear a tiny bit of cynicism, you're not wrong.)

[RitaB]

I keep waiting on the Feds to show up at the car and moonshine places with TV shows and stacks of Benjamins  

[Roberts]

On 10/28/2017 at 7:47 AM, MDEA said:

Any one in the Baltimore Washington area who does not want to do EITC returns you can send them to me. They are more than 50% of my business my staff and I are happy to do them.

It's good to have a niche you are good at.

I do maybe 3 EITC returns, don't see the horrific issues others have mentioned. JMO but the irregular health insurance junk annoys me far more.