Lion EA Posted January 2, 2009 Report Share Posted January 2, 2009 Everything Jainen and John said. And, after a long explanation with the taxpayer who typically deals with me, then an even longer telephone call with the spouse! And, then maybe a second telephone call with the taxpayer. I expect to be explaining a lot of things more than once this season. I have very intelligent, involved clients; but they're dealing with situations new to them and have had months to let their opinions (and the opinions of their friends) settle into their minds before they get around to asking me the tax consequences of their life changes. I've already been dealing with underwithholding/ES payments -- the person who left employment and has that flaky new Schedule C and expected to owe less, not more, since they made less and never noticed that they've paid less FIT and SIT also. Luckily, some of those who sold investments to get them through the year did call me re capital gains and making ES payments, so had a chance to look into their whole situation. I think this will be a time-consuming season. Those that have called claim their situations are simpler because they have less money, but they've really been more complex from a tax standpoint with sales of investments, job changes with retirement fund distributions and rollovers, self employment, etc. I've been dealing with one gal who claims her lawyer says her settlement will be nontaxable. Her settlement? She's negotiating to get her alimony sped up in exchange for accepting less in total. So, she's bumping herself up into a higher tax bracket by getting alimony in the high six figures over another couple or three years instead of the low six figures for another decade or so. (She's a few years into the divorce and can't live on only $10,000/month!) She doesn't understand why she would owe any taxes since it's a "settlement" and she'll invest it in Dreyfus tax-exempt munis. She wants me to answer her legal questions because her lawyer charges $450/hour. I want to shake her until her brain begins to work! It's going to be a long season here in Fairfield County, CT, the NYC bedroom communities where everyone worked in the financial industry. The wives started businesses selling high-end clothing from wine parties in their living rooms and Arbonne skin care and never separated their purchases for personal use from their actual inventory and HAVE to use the product to show it off and had to buy that $650 lamp for their living room to show off the clothing. Even the husbands roll their eyes when their trophy wives try to explain business concepts. Enough venting. I should resolve to think positively. Quote Link to comment Share on other sites More sharing options...
JohnH Posted January 2, 2009 Report Share Posted January 2, 2009 I can understand why she can't live on $10,000 per month. If I didn't have to work and could spend each and every day trying to figure out how to amuse myself, I'd probably need more than $10,000 per month to accomplish that task. As it is, most of us must get up & go to a job every day, which generally keeps us from having to deal with that kind of problem. I agree that it's unfair for her to pay taxes on that money, and the lawyer should give her a break on the $450/hr. Maybe if you'll keep helping her for free, at least her average hourly rate for getting things the way she wants them will go down; after all, this really is all about making her life more comfortable. She has my sympathy... Quote Link to comment Share on other sites More sharing options...
jainen Posted January 2, 2009 Report Share Posted January 2, 2009 >>her lawyer says her settlement will be nontaxable<< He's probably right, assuming he can get the papers signed before the ex talks to his OWN tax guy. If set up correctly, such a settlement will be considered non-taxable property division, not alimony. Quote Link to comment Share on other sites More sharing options...
Margaret CPA in OH Posted January 2, 2009 Report Share Posted January 2, 2009 I can understand why she can't live on $10,000 per month. If I didn't have to work and could spend each and every day trying to figure out how to amuse myself, I'd probably need more than $10,000 per month to accomplish that task. As it is, most of us must get up & go to a job every day, which generally keeps us from having to deal with that kind of problem. I agree that it's unfair for her to pay taxes on that money, and the lawyer should give her a break on the $450/hr. Maybe if you'll keep helping her for free, at least her average hourly rate for getting things the way she wants them will go down; after all, this really is all about making her life more comfortable. She has my sympathy... What is that protrusion from your cheek? (By the way, your logic is impeccable!) Quote Link to comment Share on other sites More sharing options...
JohnH Posted January 2, 2009 Report Share Posted January 2, 2009 Haven't we all had one or two of these from time-to-time? Same mindset, different numbers, slightly changed circumstances, but still the entitlement attitude. I was on the verge of accusing Lion of stealing a client from me, but I don't recall the one I'm thinking of having moved to CT. But if it is her, I'd like for Lion to remind her to send me the last $100 she never paid me. Quote Link to comment Share on other sites More sharing options...
Tax Prep by Deb Posted January 2, 2009 Report Share Posted January 2, 2009 Raising rates is tricky no matter when it is done. I decided to hold the line this year as I increased rates in 2006. However, I am informing clients about the more stringent requirements for preparers and included a summary again of the substantiation requirements for charitable contributions. About mid-year, I will send out another letter and include the fact that my liability insurance has increased by 14%. That, the increasing complexity of tax laws, and the fact that I have maintained rates for 3 years will be the basis for raising rates for 2010. I do expect to then lose a handful of clients but those will likely be the ones I wouldn't mind losing anyway for financial reasons but always hate to lose those clients who are considered friends, too. Hopefully I can maintain enough clients to make up for the losses. It would be great to get a couple new ones, too! I too have decided to keep my rates the same as last year. I took a substantial increase last year, lost a few clients but gained others, but with the economy the way it is I decided to not raise. I'm expecting a decrease in clients this year due to the economy (preparing them themselves), but I have determined that even if I lose up to half I still should be o.k. No doubt about it, it is going to be a difficult year! Deb! Quote Link to comment Share on other sites More sharing options...
Virtual Managed Solutions Posted January 2, 2009 Report Share Posted January 2, 2009 Out of curiosity - When do all of you guys get "incredibly" busy? I know tax seasons officially starts soon, but the busy-ness doesn't start until some time after. I'm trying to get everyone's input on this, because I do make some outbound calls to tax professionals and I'm curious as to when I should stop calling? Quote Link to comment Share on other sites More sharing options...
Gail in Virginia Posted January 2, 2009 Report Share Posted January 2, 2009 I have no idea which way it will go this year. We will probably leave some clients the same and raise fees on others simply due to the fact that their circumstances changed, requiring us to spend more time on their returns. Of course, that will be seen as a price hike by some of them even though our rates will probably not change. We are prepared for the possibility that we will lose some clients, but so far we have been gaining rather than losing. I am just pessimistic enough to not believe that can last. What I wasn't prepared for was losing one of our part-time, seasonal employees. She had been doing some preparation and a lot of checking returns, but she decided that with the downturn in the stock market, she could no longer afford semi-retirement and she has accepted a position full-time with another firm. But if that is the worst business set-back we face in the current economy, I will count my blessings and go on. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted January 2, 2009 Report Share Posted January 2, 2009 Well, my whiny client has made me raise my hourly rates! I thought about asking her to give me her $10,000/month so I could demonstrate how to live on that for a few years. Jainen, her divorce was final a few years back, including the property settlement and monthly support. She's trying to change the timing on her support now. So, can her lawyer actually change the character of the support to property by changing the timing? Kyle, like everything tax, it depends. For those with a RAL clientele, 19 January or whenever e-filing opens through mid-February is busy with people getting their W-2s and wanting their rapid refunds, with March slower, and then a flurry at the end. My clients are waiting on brokerage statements and K-1s and...so I get busy gradually peaking on 15 April, but with a cluster at the beginning of January needing me to recompute their ES payments due to stock sales late in the year or whatever change happened to them. I promised to hold prices the same for this second year out on my own, but that's just for clients who followed me originally. New clients and new situations for old clients and old clients who came to me after tax season pay my full rates. I'm not trying to compete on price. In fact, I hope to lose a whiny client or two to have more time for my other clients, and to sleep. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted January 2, 2009 Report Share Posted January 2, 2009 Now, if I'd responded to each topic in a different reply, I'd be closer to my goal of 500 posts before I get real busy! Quote Link to comment Share on other sites More sharing options...
jainen Posted January 2, 2009 Report Share Posted January 2, 2009 >>can her lawyer actually change the character of the support to property by changing the timing?< Yes. He has at least three years to pull off this switch, longer if they used temporary support orders while all the money was being counted. By the way, it's the same reason we warn clients not to fall behind in their alimony for the first three years. See page 15 of Pub 504 at http://www.irs.gov/pub/irs-pdf/p504.pdf. Quote Link to comment Share on other sites More sharing options...
RitaB Posted January 2, 2009 Report Share Posted January 2, 2009 I'm also dreading the situation where the client has seen the value of their mutual funds decrease while at the same time having huge capital gain distributions showing on the 1099-Div. Me, too. I have one in particular who will throw a fit. Her very well paid financial advisor kept telling her all year, "Look on the bright side - there won't be any capital gains to pay taxes on." I looked up an article that warned readers that capital gains distributions are likely and mailed her a copy right before Christmas. (My gift to her.) Hopefully, she won't be shocked (shocked!) when she gets the 1099's. I know my own pathetic investments had virtually the same capital gains distributions in 2008 as 2007. Quote Link to comment Share on other sites More sharing options...
JohnH Posted January 2, 2009 Report Share Posted January 2, 2009 Now, if I'd responded to each topic in a different reply, I'd be closer to my goal of 500 posts before I get real busy! Lion, that's a great strategy. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted January 2, 2009 Report Share Posted January 2, 2009 Jainen, I know about the three-year rule, but she's been divorced since prior to 2004. Until their house sold, she got to live in the house and received $5,000/month in support. Since the house sold, she receives $10,000/month. She wants to increase that for two or three years and be done with her ties to the ex sooner than her divorce decree states. So, we're talking about her support increasing a second time and not decreasing until at least 2011 or later. She's been spending her money on lawyers and finally found one who said he could get her money sooner and have it be tax free. Of course, her ex wants to pay substantially less than she's proposing, so the only one benefiting so far is the lawyer. And, she has two sons with the ex, so the ties are still there while her sons are around. I think I'll tell her to talk to her therapist instead of her lawyer.... Quote Link to comment Share on other sites More sharing options...
mcb39 Posted January 2, 2009 Report Share Posted January 2, 2009 Out of curiosity - When do all of you guys get "incredibly" busy? I know tax seasons officially starts soon, but the busy-ness doesn't start until some time after. I'm trying to get everyone's input on this, because I do make some outbound calls to tax professionals and I'm curious as to when I should stop calling? Generally, it is mid to late Feb until the middle of March when the big guns start coming in. However, when I look at last years' appt book, January was incredibly and unusually busy (I assume because of the stimulus). This year, I am getting several calls a day with questions so clients are hearing things and trying to get ready asap. Of course, business clients are hard to predict. Also, remember that in the midst of preparing returns, we are also preparing W-2, 1099 and estimate forms as well as getting some kind of organization together and doing end of the year bookkeeping for clients as well as ourselves. In some cases, that is FULL year bookkeeping. I really don't remember having any lull last year at all. These are all reasons why this board and interaction with each other is so important. All of the text books piled up beside my desk do not equal the knowledge and advice that I gain from this board. :dunno: Quote Link to comment Share on other sites More sharing options...
jainen Posted January 2, 2009 Report Share Posted January 2, 2009 >>I'll tell her to talk to her therapist instead of her lawyer<< In my experience, doctors don't give very good tax advice. Although generally tax professionals have even more respect for lawyers than lawyers have for us tax guys, I wouldn't be too quick to dismiss someone who can pull you ten grand a month. Half of that seems to be related to the children's use of marital property, which leaves quite a bit of room to arrange things tax-free. Quote Link to comment Share on other sites More sharing options...
Julie Posted January 2, 2009 Report Share Posted January 2, 2009 Depends on the practice. Low-income clients are generally getting refunds, and they come in as soon as they have their W2 forms, beginning in Mid-January. So I'm busy by the third week of January. Higher-income clients don't come in for another month, so practices catering to them will have a later start date. Out of curiosity - When do all of you guys get "incredibly" busy? I know tax seasons officially starts soon, but the busy-ness doesn't start until some time after. I'm trying to get everyone's input on this, because I do make some outbound calls to tax professionals and I'm curious as to when I should stop calling? Quote Link to comment Share on other sites More sharing options...
Lion EA Posted January 2, 2009 Report Share Posted January 2, 2009 I'm very nice to her; I charge her a lot for my time. But, I bang my head against the wall when she tries to get legal advice from me. I guess I should be shaking some sense into her instead, but she's usually on the telephone instead of in my office. I have more trouble as time goes by being sympathetic re her money troubles. (Her renovations to her new "cheap" house cost more than three times what I paid for my whole house.) But, I did suggest she engage a lawyer if she was going to try to negotiate with her ex, and she did. What will constitute due diligence on my part when she comes to me with her tax information and says she no longer has to report her alimony? This new automatic six-month extension seemed to create a tax season that never ended for me. Add a few who got behind and came in after 15 October with one or two or three years, and I still have a stack of 2005-2007 returns on my desk. Before, so many people finished by 15 August that the fall did slow down and gave me time to catch up on bookkeeping and taking courses. A client e-mailed me today about sending me his partnership QB file. I was swamped mid-February to mid-April but busy all year long now. Quote Link to comment Share on other sites More sharing options...
jainen Posted January 3, 2009 Report Share Posted January 3, 2009 >>What will constitute due diligence on my part when she comes to me with her tax information<< Good service would require you to ask to review the settlement before she signs it. You must read it sooner or later anyway. Apply the alimony rules specifically to the payments she received. If you still can't agree with the lawyer, ask him to cite some ruling because you can bet you're going to need to defend that position when the ex claims his big deduction. Quote Link to comment Share on other sites More sharing options...
Gail in Virginia Posted January 3, 2009 Report Share Posted January 3, 2009 I am with Marilyn on the subject of when we get busy. We have been mailing out our newsletter, preparing W-2's, doing bookkeeping, and a few fiscal year-ends that are due now. There really isn't a slow time anymore, but the pressure eases from May 1 to October 1 for our office. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted January 3, 2009 Report Share Posted January 3, 2009 Now she's got Jainen calling her alimony a settlement, too! I just don't understand how she can be getting $60,000 and then $120,000 alimony during the last half dozen years and then instead of continuing at $120,000 for another decade she can get $300,000 for the next three years instead and turn it into a tax-free settlement. I have trouble getting her off the telephone and am tired of listening to her whine about how her Sub-Zero refrigerator is out of style and must be replaced with European technology, but I guess I have to call her. She doesn't have anything in writing yet from her expensive lawyer, but Jainen is right that I may as well read it sooner rather than later since I'll probably have to talk with the lawyer to have him explain where he found his tax cites. Quote Link to comment Share on other sites More sharing options...
TAXBILLY Posted January 3, 2009 Report Share Posted January 3, 2009 I wouldn't accept anything less than a written reply from the lawyer. taxbilly Quote Link to comment Share on other sites More sharing options...
jainen Posted January 3, 2009 Report Share Posted January 3, 2009 >>she can get $300,000 for the next three years instead and turn it into a tax-free settlement<< It's as simple as slipping a clause in the settlement about supporting the children. >>I guess I have to call her<< Ask her to give you that old refrigerator. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted January 3, 2009 Report Share Posted January 3, 2009 I do get tired of saying that Jainen is right, but I like his idea about the refrigerator. Mine was from 1975 when I bought my first house in CA, and it came across the country to CT. I think the only thing keeping the motor running was all the refrigerator magnets. I was afraid to remove any. She left me a message saying I should call her lawyer to tell him her tax rate! Quote Link to comment Share on other sites More sharing options...
Margaret CPA in OH Posted January 3, 2009 Report Share Posted January 3, 2009 Lion, I notice that you are making great headway in your 500 post goal. Much of that has been devoted to this particular client issue. I suggest that you consider billing her for the time spent here as "research" or consultation. It is justified, in my opinion, as you've gotten much insight, support and many suggestions here. I especially like Jainen's about the refrigerator. Just make sure it fits the space in your kitchen! Quote Link to comment Share on other sites More sharing options...
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