CAUSES OF TAX PRO AGITA

During the second half of the recent tax season I received an email from my editor at NATP asking if I wanted to contribute to an article for the TAXPRO JOURNAL on what causes the most agita for tax pros during tax time.  Since during the tax season, especially toward the end, I barely have time to relieve myself, let along work on anything other than current 1040s, I passed on the opportunity.

 

But now that the tax season is over I can take the time to muse about the topic.

 

I used to say that the biggest time waster during the tax filing season was having to track down cost basis info for investment sales made by clients.  But lately more brokerage houses have been including supplemental gain and loss reports in their Consolidated Year End Tax Statements.  With the new requirements for cost basis reporting things are getting even better.  And over the years I have built up relationships with the brokers of most of my clients and have usually been able to get any missing information from them.  Of course I continually attempt to train clients to keep records of stock and mutual fund purchases, and have been more and more successful.

 

There are still occasions where I must do detective work – such as when a client sells an investment that was inherited years ago, or in the case of mergers and spin-offs. 

 

However since the mid-2000s, when the new category of “qualified dividends” was created, the biggest source of tax season agita has been the fact that brokerage houses now have until February 15^th to send out the Consolidated Year End Tax Statements, and in almost every situation at least one “corrected” report is issued as late as mid-March. 

 

As a result, clients who would have normally sent me their “stuff” in early to mid-February now do not do so until mid-March, at the height of the season.  Instead of being able to work on these returns, which are usually more involved, during February, when I have more time, I must wait until almost the tail end of the season, when time is especially tight.  The bottom line is I end up with more GD extensions. 

 

Of course those damned K-1s have always been a true PITA, and nothing has changed.  If I were still accepting new clients I would add to my list of returns I would not accept, in addition to returns with Earned Income Credit claims, returns of taxpayers who have limited partnership investments that issue K-1s. 

 

The amount of work required to properly report the information from these damned K-1s, for a minimal if any effect on the bottom line of the actual tax return, is truly a waste of valuable time (see my post “The K-1 Blues”).  And, of course, these damned things usually don’t arrive until sometimes April.  If I never saw another K-1 during my last eight tax seasons I would truly be a happy man.

 

I have no idea if these things are actually good investments.  Methinks the brokers get a higher commission for selling them. 

 

If corporations were allowed to claim a “dividends paid” deduction, and all the industry-specific loopholes were closed, I would not have to deal with these problems.

 

So, fellow tax pros, what causes the most agita for you during tax season?

 

TTFN

SO LONG, FAREWELL, AUF WIEDERSEHEN, GOOD NIGHT!

Joy to the world - tax season’s here.

I’ll soon be flush with cash!

Let every client be organized,

and give me all I need, and give me all I need,

and give me all I need to prepare their returns!

My 42nd tax season will officially begin tomorrow - let the deluge begin!

As is my custom, due to the demands of the filing season I will be taking my annual “tax season hiatus” from posting to THE TAX PROFESSIONAL and THE WANDERING TAX PRO from tomorrow through April 15th.

Between now and April 15th I will barely have time to relieve myself let alone blog!  Nor will I have time to respond to comments. If a comment requires a response I will do so after April 15^th.

I promise that once the tax season is over I will be posting more frequently here at TTP.   

“Talk” to you when it is all over!

RDF

BTW – be sure to stop by THE WANDERING TAX PRO tomorrow for the annual posting of my TWELVE DAYS OF TAX SEASON!

MORE MONEY

This past tax season the following sentence appeared in almost all of my comment memos that accompanied finished returns to identify or explain items of interest or concern on the tax returns –

 

“For 2011 and 2012 BO’s Making Work Pay Credit was replaced by a 2% reduction in employee Social Security tax withholding.”

 

In most cases I went on to say that the client did “more better” under the 2% reduction – ending up with more money “in pocket”.  Quite a few clients ended up with two or three times as much “in pocket” under the 2% reduction. 

 

In several cases clients who did not get any MWP credit in 2009 and 2010 due to their level of income ended up with $4,000+ “in pocket” via increased take home pay in 2011. 

 

I do believe that a large number of my clients were surprised at the amount of tax savings the 2% reduction provided.

 

I also pointed out that in many cases their 2011 tax refund was less than that for 2010 because the savings did not show up on the tax return.

 

This seems to be borne out in the statistics discussed by Kay Bell, the yellow rose of taxes, in her post “Tax Refunds Smaller in 2012”.

“The average tax refund amount through the end of April was $2,716.

 

That's $106 less than the average refund amount issued at around the same time last year, according to the latest Internal Refund Service 2012 tax filing season data.”

 

So, while the average refund was slightly smaller, I expect the average actual tax reduction was greater.

 

The 2% reduction in employee Social Security tax withholding came as a surprise to me.  BO had said he did not want any tax reduction for those with “high income” – considered to be $250,000 or more regardless of geographic location.  Yet the reduction put $4,272.00 in the pockets of couples where each member earned at least the maximum Social Security wages (combined $213,600).  And those at the lower end of the wage spectrum actually received less with the 2% reduction than the Making Work Pay Credit had provided.

 

To be honest, I was happy that my clients put more money in their pockets, and was pleased that my workload was somewhat reduced by not having to prepare a Schedule M.  

The 2% reduction is an “evolution” of Dubya’s original tax rebate checks – which produced more agita than they were actually worth, especially to the IRS – as was the Making Work Pay Credit.  This new method is an improvement on the rebate checks to be sure, but still not a solution.

Rather than fool around with politically beneficial gimmicks the idiots in Congress should just rewrite the Tax Code!

 

RDF

THANK GOD FOR SMALL FAVORS!

This year we tax professionals are given three (3) additional 12+ hour days to complete 1040s (and 1040As)!

As fellow tax blogger Joe Kristan put it, April 15 is April 17 this year.  Plus, as it is a leap year, there is a February 29 in 2012.

I no longer work on 1040s on April 15^th, or whenever the last day of the “season” is.  TWTP readers know this is because of Maurice “Moe” Barry, a client who always came in to have his return done on the last day.  He would then take his signed finished returns to the main post office in New York City to partake of the special activities of the day held there each year.

One year Moe can in on April 12^th and we sent him away – telling him to come back on the 15^th.  This is because when we saw Moe we knew it was almost over (there was another consistent last day client who came to us in the early evening – his appearance meant that it was indeed over).

Moe Barry, a PATH police officer, was one of the Port Authority Emergency Response Team members who was killed on 9/11.

I usually stop working on 1040s (and 1040As) on April 13^th, or the second day before the deadline.  This way I can get finished returns in the mail via Express Mail on the morning of the 14^th (or this year the 16^th) and have them in the clients’ hands in time for a deadline postmark.  On the day before the deadline I write up all the GD extensions so they will be in the mail by the deadline.

While for the past few years I have returned to work on the GD extensions on the day after the due date, this year I will begin my much-needed and richly-deserved post tax season recovery at the Jersey shore on April 18^th, returning to my desk and the inevitable GDEs on April 23^rd.

I do appreciate having the extra 3 days – or about 40 hours – to try to keep the GD extensions to a true minimum.   

TAFN