SaraEA

Except for dependents, we have a minimum charge of $100 (one W-2 and maybe some bank interest). With Sch A minimum is about $200, and with Sch E $275. We have increased fees for clients with Sch D in recent years because the 8949 is time consuming. We do very few EITC returns but increased those fees by $25 to cover the added due diligence questions and preparer risk. Our problem is clients who have been with the owner for decades, long before he started the current business. He's never raised their fees more than $5 or $10 every few years, so now they way underpay for the amount of time their returns take. Most of them bring in good referrals so that helped compensate for the low fees. Now, however, we have more clients than we can handle and are trying hard not to take anyone new. We're even firing some PITA clients. We too have a few dozen clients whose return costs are in the five digits and some in the six digits. Some of these take no time at all because we've been doing them so long we have a routine. Others get only more complicated each year and take days to complete so you'll never get your desired hourly rate. One situation that crept up is when you do a child's return for free, or no more than $50. (I'm talking about a couple W2s from an after-school job, not kiddie tax returns.) Eventually that child grows up and graduates from college and starts a high-paying job in a different state of course. Mom and Dad still bring his or her tax docs in and still expect to pay the same fee.

Tell your son that things happen for a reason. Maybe the girl of his dreams isn't going to MIT. He'll meet her at his second choice. My son refused to apply to MIT. Part of the reason was that despite the chorus that "We're all a team here. We don't compete with one another because we were all smart enough to get into MIT so now we're a brotherhood," he didn't see that with his own eyes. While waiting for a tour to begin around noontime we sat in a huge rotunda that was apparently a passage to and from the cafeteria. Aside from some girls who went to and fro in small groups, almost all of the guys walked by themselves. My son picked that up as a lack of friendship and "brotherhood." He ended up at Carnegie Mellon. Just a few years out, he now makes more than his parents PUT TOGETHER ever made in a single year in their entire careers. He made many lifetime friends there. So see, MIT is not the only place that can train engineers and it might not be the best place to go if you want to have a life outside of your studies.

My client sold baked goods. Bought about 1000 pounds of sugar and a million pounds of flour and $25k in baking equipment to sell one cake or cookie platter or box of cupcakes per month. I'd love the challenge of a client who built battleships, My hunch, though, is that the naval shipyards are HUGE corporations whose coffee machine or postage expenditures alone contain more digits than will fit into my software.

I agree with Mr Pencil that you should go ahead and ask. Write the letter as he suggests (under the client's name) showing that the client has reformed her ways. Charge for your time, and make in clear in writing that there are no guarantees that the IRS will accept the excuse. We do this fairly often in our practice. The only purpose in some of these cases is to demonstrate to the clients that you are going to bat for them, are there for them trying to fight the nasty ole IRS (which is only doing its duty and following the law!). Sometimes we get surprised and the IRS abates. The real point of the exercise is client relations. Also, these are the type of desperate people who will go to one of those "penny on the dollar" places. Your being there for them might prevent that, so your effort will end up saving them a ton of money even though they end up paying the penalty that by law they are required to pay.

I agree with cbslee that use of readily available public information is not spying. How often do local police nab someone for vandalism or mugging because the hoodlum was stupid enough to post and boast on Facebook? Government doesn't need a search warrant to browse social networks like they do to enter your home or business. Remember when the IRS used to have "lifestyle" audits? They'd see what kind of house you lived in, what car your drove, whether your kids went to private school, and then question how you did it all on your reported $20k income. Now they reconstruct your income through subpoenas of bank and credit card records etc., which is much tougher than the audits they replaced. They can still do lifestyle audits if they suspect unreported income, but they have to suspect someone first. People who want to cheat or break the law better learn to be more surreptitious about it. I don't understand why people bother to rob banks or convenience stores anymore because the next day their mug is posted everywhere. So if you want to claim $10k income from your grinder shop, don't drive around in a new BWM and live in a $600k McMansion. Don't start a "church" with an address in the middle of 12 miles of cornfield you don't own. The IRS used to find out the truth about such things before, but it took them a while. Now they can use the internet, just like anyone else in the world. kcjenkins is right on that we as preparers should be using these tools too. I had a "new" business that only sold one product a month. Invoices for raw materials were for huge amounts, but there was no inventory. The company had moved during its first year and I looked it up on the internet just so I could find the date of the move so I would know which town to file the assessor's report. Lo and behold, this "new" company had had a Facebook account for three years and customer review sites had reviews going back at least that long. I can only conclude that the gal had been doing this from home for some time and only decided to make it legal when she moved into a storefront. I didn't break any laws by googling the company, did I? Not anymore than a potential customer would by using the same tools. The IRS has the same right to access that public information as the potential customer and I did. If the owner didn't want the IRS to know, she shouldn't have advertised her wares on the internet.

"It is extremely easy in MA provided the taxpayer give you a form called 1099-HC received from the insurance company." Taxed, you've got to be kidding! It's "extremely easy" provided you enter the correct number from the HC, which is about 164 digits long. I had to check about three boxes before the software stopped charging a penalty for not having insurance for an elderly client who not only had Medicare but was dead. Then there are the quirks that arise with part-year residents (who also get a very generous credit for being renters). I definitely charge extra for MA returns, not because I want to make a "big deal" out of it but because it IS a big deal! Do you also consider California returns "a breeze"? If so, can you please move to New England and work in my office? We could really use you.

A couple of weeks ago I was at a seminar where two CT DRS employees were presenters. Several people asked this exact question about the state sharing with the feds. (They were mostly concerned about EITC claims; the states audits what seems like all of them and disallows many.) One presenter said the state doesn't share. The other got up and had written down a few questions directed at the first that he wanted to chime in on. He said the state DOES share. So there we have it: Yes and No. That's the same answer I heard at a different seminar when the same question was asked. There was only one CT speaker, but his response was so convoluted I could only conclude that the answer is Yes and No. Best to play it safe and be sure the taxpayer can pass the state's stiff EITC standards before claiming EITC on the federal. They literally ask for ALL business records, proof about who lives in the house, everybody's birth certificate. The IRS must love it when the states do their auditing for them, providing the outcome gets passed up. Does it? Yes and No!

A couple of years ago when I was taking courses for my Masters in Taxation, 6-9 of my classmates were IRS agents or employees (varied by class). When we took the much-dreaded partnership course, they shared the fact that the IRS really wanted to audit more partnerships but did not have the expertise to do so. I don't have to tell anyone on this board that partnerships are complicated (especially when they buy in with property or services instead of cash, or when someone inherits a partnership interest). IRS employee training is excellent, but does anyone here really think they've been able to train enough people to audit these groups? In recent years many of us have found ourselves mentoring "green" auditors on reasonably straightforward 1040 and Sch C returns. There are not enough hours in the day to teach them about partnerships! I suspect their thrust will be toward S corps, maybe estates and trusts (all of which have well-known opportunities to cheat). Partnerships, where in my experience a lot of cheating occurs, will remain out of their league.

Drake's questionnaire is 45 pages long??? I bet you get 44.5% of them back blank! (Kind of like organizers--the longer they are the more daunting they are to the client and the more unlikely they are to even begin.) I'd eliminate all redundancies to get the thing down to a manageable length. For example, the first #s 4, 5 and 6 ask essentially the same thing; ditto for the second #s 4 and 5. Can you edit this in Drake?

The interview method is used by the chains just in case their employees didn't learn enough in their basic courses. When I refer college students with their one or two W2s to the free sites, I always tell them to answer "no" when it asks if they are a student. Answering "yes" will only lead them to a bunch of questions about their education expenses, which their parents claim. I explain to them that they are not lying on their tax return, only lying to the software so it doesn't take them down a dead end. On the other hand, the interview method can come in handy even for pros. How many of us remember to ask every client if they have an interest in foreign accounts? Some who have family in other nations actually do keep a foreign account so they don't have to bother with currency exchanges when they visit. And do we always remember to ask if their direct deposit/debit info is the same as last year or did they change banks? Do we always ask about unemployment or gambling winnings? With the interview method you can't miss these things. Taking a day off on one's first week of work is not good sign. On the other hand, getting sick can really happen. It would be a nightmare to spike a 103 fever on your fifth day of work, but it can happen. Was he engaged and trying hard for the first four days? I would think that changing from the crutch of the interview method requires self-confidence in one's abilities. Maybe you should encourage him to write down every area of concern or doubt on each return and then address it with him. My hunch is the lists will be long at first but will dwindle as he learns to rely more on his own knowledge than on the software's "reminders."

I just finished a two-day tax seminar where one of the speakers was a 30-year IRS employee and a tax attorney. He got a similar call. Boy, did they call the wrong person. He actually did call back (after his federal friends instituted call tracing) and he's playing along. Your scammer was dumb, not including an agent number (even if made up) and stating that this was his personal line. It's time to remember that the IRS never, ever calls taxpayers and asks for personal info. They have to follow something called the Internal Revenue Code which is very specific that letters (not calls) have to go out at specified intervals. I think the only exception is when Criminal Investigation is involved. Those guys are cops, carry guns, and show up at your house in the middle of the night rather than call to make an appointment. You were obviously the target of a scammer and you did the right thing to ignore.

Why doesn't the IRS just go back to the way it used to be, a KC suggested, when you had to enter last year's AGI in order to efile? ID thieves wouldn't be able to sign the returns electronically (Form 8879) without this info. I recall that the IRS dropped this rule to encourage efiling back in the days when it was still catching on and they had goals to meet. Well, efiling has caught on and the agency is way ahead of its goals. So let's take a step backward and require last year's AGI. It would cut the problem of identity theft with little effort at all.

Sounds like you went to a seminar sponsored by an insurance carrier. I went to one a couple of weeks ago (the boss got a discount on E&O if we attended). We came home with the lesson not to do accounting, not to do taxes of any kind, and never EVER do planning or projections. The presenter started off with a couple of slides of fine print that he summarized as saying "We [the insurance company] were not here today, did not say anything, and you never heard it from us." Talk about covering your behind, which was the gist of the whole conference. The seminar actually was quite informative because it detailed the kinds of claims the carrier sees most frequently. The take-home message was know the rules and don't do anything outside of your area of expertise (especially do not offer investment or legal advice). We already know that I hope. Won't hurt any of us to reread the ever-changing Circular 230. Another message was when in doubt, call your insurance carrier. Since they are the ones on the hook (and you pay them to be there), go ahead and ask them when the situation arises. So relax, serve your clients, and don't do anything you're not sure about. Didn't need an 8-hour seminar to figure that out.

I too had a client who got a failure to file penalty over the weekend. This client mailed his extension (no return receipt that I know of), so this doesn't bode well. The only reason we didn't efile the federal is that the state he lives in requires payment with the extension request, payment was due the state (but not the federal), and there wasn't enough time to efile the state and have the payment taken out in a timely manner. I figured as long as he had to mail the state might as well mail the federal. Big mistake from what I'm hearing here. Like Taxed, we have had multiple clients who mailed in partnership extensions and partnership returns who got dinged with penalties. There were enough of them, in fact, that we now efile all partnerships and add the extra software fees to their bills. Again, though, the only reason we had the clients mail these is that the state they were in didn't support efile of 1065s, so we just did the whole package on paper. Not anymore.

Clients who are looking for last year's AGI (or depreciation schedules for that matter) have already decided to go elsewhere. I would have no qualms about giving them what they want and saying goodbye. Why make it hard when the relationship seems to be broken? They want to use a preparer who is closer to where they live, who their friend uses, whose price is perceived to be lower, or who will let them deduct the suits they buy for work that you would never allow them to write off. Sometime they come back with their tail between their legs. Sometimes when they try to come back you gleefully tell them you're not accepting new clients. Most often you never hear from them again. I would never do anything to force them to stay. What's the point?

I think the easiest way to eliminate 99% of tax-refund identity theft is to require taxpayers to input last year's AGI when they efile. That's the way efile started, remember? The IRS eventually eliminated that requirement because at that time, they were under pressure to increase efiling and were trying to make it as easy as possible for taxpayers. By now efiling has caught on and the IRS is ahead of its mandated goals. So let's take a step backward and ask filers to report last year's AGI. The identity thieves won't have that info and will be stopped in their tracks.

"My parents willed all the money made from selling of their house to our children for their education .... Are there any concerns if I would inherit the money initially and then use an" accelerated gift allowance" for up to 5yrs. to go into the 529 plans- 1 time allotment for each child." Which is it? The children inherit the money or the parent? If the children get it and the parent is their trustee, the parent can direct money to 529s in the children's names. If the parent inherits it, then the gifting rules come into play. As for inherited houses, costs have nothing to do with it. The FMV on date of death is the basis (except for the one in trust if it was irrevocable). If the house was sold within six months or so after death, the selling price is considered the FMV--no loss allowed. If sold longer than that, it depends on how the house was used between the dates of death and sale. I repeat what I said in another thread regarding financial advice. Ask your E&O carrier what your liability is. They will surely say, "DON'T DO IT!" Any advice you give can and will be held against you. Stick to giving tax advice, which is your area of expertise.

I don't think your E&O insurer would want you to go near this with the proverbial ten-foot pole. Any untoward consequences (already mentioned are corporate AMT, not enough left to pay heirs in full) and they will be looking for someone to blame. Guess who, you. Direct them toward professionals who do this type of thing, cooperate by supplying any financial info needed, and when they get to the point of having to make a decision be a good listener but don't proffer an opinion. The owners might trust you more than they trust their own families, but those families might not feel the same way when the owner is gone.

I have been through at least four elderly relatives in at least six different nursing homes and only had an issue with the quality of care in one of them. In all of the others these people received excellent care and were loved by the staff to boot. The important thing is to visit often. When staff knows someone is watching over their loved one's care, they seem to do a better job. In one home the adult children of people in an Alzheimer's unit who were there frequently set up a little group and each "adopted" a person in the unit who had no one. They visited that person when they visited their relative and advocated for him or her. The administration loved them because they finally had someone to discuss the forgotten one's needs with. When a frail elderly person remains at home there is indeed a risk that relatives take advantage. MsTabby's description is the perfect example. I had a client who moved from another state to take over his mom's affairs, fired the lawyer who was conservator and had himself appointed, and paid himself $50k a year to care for Mom. I prepared her return and his. He was not happy with the results. He was also not happy when he told me he was going to give himself a $10k raise the following year and I suggested he needed Probate Court approval to do so. Never saw him again.

Many developing nations have autocratic governments. There is no guarantee that tax collections and resource sharing will be used for citizens who live in poverty. In fact, they are very likely to be used for the benefit of government insiders and their friends instead of the governed. The IBA's statement addresses an ideal world, not the real one. Whether businesses pay the government their fair share or hide their wealth in off-shore havens probably doesn't make a lick of difference to the family who lives in a mud and thatch hut and spend their days in subsistence farming. They will never see the inside of a school or have enough to eat regardless of internal or international tax policies. Alaska's Permanent Fund could be a model for all nations. The state collects a severance tax from businesses who exploit natural resources, e.g., oil, fish. These resources are considered to be owned by all state residents, and every year each of those residents gets a check for their share of the tax collected. Something like that could certainly help reduce poverty in resource-rich nations, but it more often goes to the chosen few. Think the old USSR shared a dime of the monies made from its oil wells with the peasants?

We still have a least a dozen to go. Most are done except for that missing form or property tax bill or something even simpler. One guy told me he'd leave his info in the lockbox outside tonight. Several are faxing their info in the AM. The returns won't be hard to complete but there will still be craziness because we have to get them done in time for the clients to get to the post office with their checks (all of them owe). And most we'll have to electronically deliver to the clients and then wait for their faxed 8879s. Today we had a new client we begrudgingly accepted (he was referred by a great long-time client) who cancelled his AM appt and rescheduled for tomorrow! Another walked in with ALL her stuff and acted surprised that tomorrow is the due date and not the end of the month. And then there are those who haven't responded to our many reminders over the past couple of weeks. They will just have to mail in their returns and pay the failure to file, etc. penalties. Don't worry that our gov't will default on its debt Oct 17 unless Congress comes to some agreement. By the time these clients pay what they owe it will be enough to keep the country running for some time.

Is it just me, or is the Oct 15 deadline worse than April 15? We're certainly as busy now as we were in April. Yet the clients are different. Most owe money, some LOTS of money. They are at this late date still disorganized, which is likely why they couldn't meet the April deadline. I almost fell over this week when I asked a client (who delivered his stuff on Friday) for 10 missing documents or numbers and the very next day had every single one of them. At this time of year most of our clients prefer the piecemeal approach. Many of these clients have unusual tax situations that require a good deal of research, which I could have done all summer if they had only given me a clue. And then there are those who owe so much money they are getting desperate. During regular tax season we are used to some clients trying to fudge some numbers. Now the clients are downright egregious. Like the one who gave me his entire printout for his "business card," showing expenses for vacations, clothes, jewelry stores, etc. Or the one who purchased 10 times the supplies for the number of products she purportedly sold. When asked for her real income, she said she already gave it to me. Or how about the one with no employees even though her Facebook page proudly introduces the two new hires. Oh and then there's the one who I asked for child care expenses who answered that he hired live-in help. ARGHHHHH!

We are in the process of firing a number of PITA clients we just don't want anymore. Our letter will tell them that given the direction our practice is taking, we feel we can no longer give them the attention they deserve or otherwise meet their needs. We offer to supply any records their new preparer will need and wish them well. No specifics about why we hate them. The clients we are dismissing don't pay reasonably promptly, piecemeal their data to us, call or stop in too often, or clearly are cooking their books, lying, cheating, etc. A few clients are on the fence and we might just double their rates rather than fire them. We did fire one big client this year face to face. He just demanded too much attention and got irate when no one returned his third call of the day within 10 minutes. He was so angry at us for not responding to his 22nd email of the week that he left willingly. It was a big account, but the peace that prevailed in the office after he was gone made us realize it was a good decision and we should make it more often.

"Large practices with a high volume of returns should have an alternate vendor's software actually running on some computers in their office, just so they don't get blindsided by something like what happened with ATX this year." JohnH, is this really practical? Alternate software isn't free. And would returns already have to be converted to the new software so they're ready to go? That's a major hassle. And do you have to train staff ahead of time to use the alternate just in case? The whole thing sounds like a major expense to me, too much for even a large practice to absorb. What you're saying is that no one should trust their software vendor to deliver a viable product. We pay dearly for that product and have every reason to trust that it will work. What happened at ATX this year (and moreso at TRX) is that the product didn't work as expected, but those expectations were based on long histories of favorable results. This event is the exception rather than the norm. It is no reason to double up on software alternatives "just in case." You must be the type of person who built a bomb shelter under their backyard, whereas the rest of us are taking our chances and saving our money. I think the ATX debacle didn't prove the need to have a backup software but did prove the need to recognize when problems aren't being solved and to move on quickly. When every single upgrade created even more issues, it was time to procure something else that worked. The lesson learned is that blind loyalty to a program is not a good thing. It is good to see the soul-searching on this site from people who have been dedicated users for years. For the first time they are facing the fact that the ATX they knew isn't the one they have now and deciding if they should do something about it.

A major private delivery service (NOT the one that begins with "U") for years treated most of its delivery people as independents even though they had to wear company uniforms, drive trucks with the company logo, service assigned company routes, etc. The IRS went after them because the workers failed every test the agency has for employee vs. independent contractor. When it looked like the company would lose in court (or did lose, I'm not sure), the company demanded that the workers incorporate. Most of them were sole "owners," and they were encouraged to team up with others in the area so they could share the expense of incorporating. We have several of these as clients. It used to make me angry when I did their Sch Cs because it was so clear that they were not independents. For example, they had to pay to have their trucks washed every day at the company hub. If they were truly independent, they could have them washed anywhere or wash them themselves. Some of the ones who incorporated are still our clients. It makes me even angrier that I have to charge them for an 1120 and compliance with all the state filings (and fees). Their lot is even harder now. If one has an emergency or is sick and can't complete his or her route, the others have to cover. Before, the company covered. Same when a truck breaks down. They either rent one from the company or add pieces of the route to the working trucks. These people used to work 60 hours a week, now they average more than that. To me this was a blantant instance of a company not wanting to pay a dime in benefits of any kind, including workers comp. When it looked like the IRS was going to force them to, they changed the rules to their advantage by requiring all the drivers to incorporate and thus prove their "independence." I sure hope the IRS and courts aren't done with them yet.