Tax Season

[samingeorgia]

I've been reflecting on the tax season just past; thinking about what went right, what went wrong, and how to improve for next year. I'd like everyone's input. I'll start:

What went right:

1. The program performed flawlessly for me this year. I did a partnership return with over 200 partners -- of course entering the info was a major pain, but the program worked like a charm. Likewise, E-filing was very trouble free. I laugh when I think that I swore I'd retire before getting into e-filing!

2. The best decision I've made in the past couple of years is to look at tax return production like manufacturing. I have reserved physical space in my home for returns that have come in (raw materials), returns that are waiting for info (work in process), waiting on 8879's (quality control?), and returns waiting to be picked up (finished goods). The only thing that's on my desk is what I'm actually working on. No more files of crap on my desk. The downside is that I have tax stuff all over my house. Well, it's just me, so that's OK.

What went wrong:

1. As some may recall, I had real issues with computers this year. I had a lightning strike that put me out of commission for one week. I have sworn a blood oath to have complete redundancy with regard to technology next year. That means that TWO computers will have all miision-critical programs installed and updated at all times. Thank heaven I didn't lose any data - just time - but back up stuff regularly is the best solution. Computer repair techs don't give a crap, either.

2. Clients are coming in later and later. What's up with that? I'm going to write the slowpokes a letter next January and lay down the law. A realtor with a big schedule C, an attorney with a Schedule C and a K-1 and multi-states, a couple with lots of capital transactions (among others) just cannot waltz in here after April 10th and expect service.

3. Increasing complexity of the tax law, an increasingly hostile IRS, and states becoming more desperate for cash are going to be the big issues we are going to face for the foreseeable future. "Health Care Reform" that hires zero doctors and nurses, but adds 16,000 new IRS agents is going to affect all of us.

What say you?

[JohnH]

I say #2 is by far the easiest to resolve.

Pick a date and say everything that comes in after that date automatically goes on extension. My date is usually Mar 20 (although this year I moved it to Mar 8 for personal reasons). Stick to this rule without exception, no matter how important the client or how urgent THEY think their situation might be. You're the expert and therefore the one who needs to be making that decision, not them.

By filing the extensions as soon as the returns come in, you eliminate Apr 15 as a date having any significance. Then as you approach Apr 15, you can double back and work on some of those returns you aleady have on extension and maybe get a few of them out by Apr 15. This frees you up to concentrate on special situations and to handle any true emergencies (as defined by you). It also makes Apr 15 just another work day, rather than some silly mad dash to the finish. Listening to the way some preparers describe Apr 14-15 reminds me of the wacky scenes in the comedy film "It's A Mad Mad World".

Unless you enjoy marathons, exhaustion and mistakes, you'll find this a better way to operate. Most clients really are not impressed by a tired, harried, cranky tax preparer telling them how foolish they are to wait until the last minute. They generally resent being reminded of their own lack of attention & preparedness and will appreciate being told this can be handled cooly and professionally. If they don't appreciate your efforts to make up for their procrastinating ways and they choose instead to sit at HRB for a few hours just in order to get SOMETHING cranked out by Apr 15, you don't need them as a client.

[OldJack]

>>By filing the extensions as soon as the returns come in, you eliminate Apr 15 as a date having any significance. <<

Of course that would work for you, but what about the client that will end up paying a penalty for not having paid-in enough tax. Many clients have no idea what their tax will end up being and filing an extension creates a risk of penalty even if the client has paid what they think is enough tax to cover for the year. If you can't reasonable expect to prepare the tax return before the deadline, you should not accept the client. I have always had a policy of no extensions unless the client requests one or the client has not provided complete information.

This was a hell of a tax season for me as I lost a couple of weeks right in the middle with family problems. My son-in-law tried to kill my daughter but his shot missed as she got away and ran down the street. He then stole my 4 week old Toyota Rav4 and committed suicide in it. Anyone want to buy a 2010 Rav4 with 2 bullet holes in it?

[Kea]

Old Jack -- That is just waaaay too much drama any time of year & that much worse in the middle of tax season. I'm sorry to hear about your Rav4, but I'm very glad your daughter is out of danger. Best wishes to her & to you & the rest of the family.

[BulldogTom]

What went right:

Advertising was very effective. 14% client increase.

Software was very good (sans bank products and some e-file issues)

What went wrong:

Bank product debacle on January 14th

Getting ATX to help with fee collect to offer something to my clients

Efile issues at front end and April 14th (are you freaking kidding me - they did it for the second year in a row).

Clients with more and more complex returns and not understanding what is going on.

California (need I say more?) More letters to clients, tax increases, confusing withholding schedules, confusing Estimated taxes, HOH questionaires, tax credit reductions. This was a cluster trying to explain why people who never owed are now paying and why their withholding was not enough. Especially if they have lots of kids. A $211 tax increase for every child on your return.

Schedule M - the infamouse question - Did you get the $250 payment. No IRS lookup until APRIL???

Tom

Lodi, CA

P.S. - Jack, this is all minor crap compared to what you went through. My heart goes out to you and your family.

[jklcpa]

OldJack, my heart goes out to you and your family. I'm so sorry for your loss and the pain this has caused.

My season: two blizzards in a week. That delayed some of the early birds, so a lot of work seemed to pile in all at once. Other than that, the program performed well for me and the season went smoothly. SALY.

[Catherine]

>>By filing the extensions as soon as the returns come in, you eliminate Apr 15 as a date having any significance. <<

Of course that would work for you, but what about the client that will end up paying a penalty for not having paid-in enough tax. Many clients have no idea what their tax will end up being and filing an extension creates a risk of penalty even if the client has paid what they think is enough tax to cover for the year. If you can't reasonable expect to prepare the tax return before the deadline, you should not accept the client. I have always had a policy of no extensions unless the client requests one or the client has not provided complete information.

This was a hell of a tax season for me as I lost a couple of weeks right in the middle with family problems. My son-in-law tried to kill my daughter but his shot missed as she got away and ran down the street. He then stole my 4 week old Toyota Rav4 and committed suicide in it. Anyone want to buy a 2010 Rav4 with 2 bullet holes in it?

so sorry about your RAV 4 but VERY glad your daughter is out of danger on you folks don't need to go into hiding!!!

[OldJack]

Daughter is doing fine and glad that the 2 month long ordeal of fear looking over her shoulder is over. He kidnapped her at work and had a gun at her head in my car. She knew he was going to kill her in the garage so she bolted from the car and ran down the street. He chased her and fired one shot but missed. She rounded a corner of a house and barged into a neighbor's house without knocking. He did not know where she went so he stole my car, shot thru the roof, and drove to a state park to end it all. His family thinks that since she was leaving him, that she is the villain while the rest of the small town recognizes she was the victim. She is having trouble putting it in the past as ever one that comes into her business wants to talk about it. I tell her to give it time and it will all be history. She is looking at a 2010 yellow Camero. Oh, my checkbook!

Thanks everyone for the nice comments.

[Kimberly K]

Daughter is doing fine and glad that the 2 month long ordeal of fear looking over her shoulder is over. He kidnapped her at work and had a gun at her head in my car. She knew he was going to kill her in the garage so she bolted from the car and ran down the street. He chased her and fired one shot but missed. She rounded a corner of a house and barged into a neighbor's house without knocking. He did not know where she went so he stole my car, shot thru the roof, and drove to a state park to end it all. His family thinks that since she was leaving him, that she is the villain while the rest of the small town recognizes she was the victim. She is having trouble putting it in the past as ever one that comes into her business wants to talk about it. I tell her to give it time and it will all be history. She is looking at a 2010 yellow Camero. Oh, my checkbook!

Thanks everyone for the nice comments.

I am so happy your daughter is okay and as time passes she(and your family) will heal. I have been on the other end of this, as my son has been suicidal for far too long and is considered an adult( meaning I cannot force him to do anything ). It has been four weeks since his last suicide talk with me. Thank you God! Tax season has been a blessing, as I try to keep busy while keeping my family together. We will get through this and so will your daughter. God Bless

[JohnH]

Jack: I remember your having posted something about this a few weeks back. It is a tragic situation, but good to know your daughter is safe now. It's difficult to imagine what you have been through and what bert73 is dealing with as well.

As for the interest and penalties, I consider them peanuts and all my clients agree when I explain it to them. I say all my clients agree, because by default anyone who doesn't agree becomes somebody else's client (and somebody else's last-minute headache). Interest is 8% per year and FTP penalty is 1/2 of 1% per month. That's a total of 1.2% per month on the unpaid balance, or 14% APR in total. (I consider the FTP penalty to be no different than interest, since neither is tax deductible). Not advisable to borrow money at these rates on a regular basis, but when the ox is in the ditch you have to react to the reality of the current situation.

Now if they want to be SURE they don't pay any penalty & interest, they can vastly overpay the estimate and get a refund when the return is filed. On the other hand, if they want to hold onto the money for a month or so, they'll pay $12 per month per thousand of tax owed. As I said, peanuts in the total scheme of things, especially for someone who already isn't paying much attention to detail. The extension accomplishes avoidance of the 5% per month FTF penalty, which really is the main thing.

IRS is very clever by splitting the assessment into penalty and interest. The word "penalty" is loaded with negative meaning, so they spook taxpayers into worrying about it, when in fact it's just additional interest. Tax preparers should not be so readily spooked.

[bstaxes]

Jack good to know your daughter is alright. This will take time for her to put it in her past. Try to find something to keep your daughter busy, you thankfully had taxes. Taxes may be a pain in the butt but it helps to keep your mind off of other things.