Enough is Enough

[Snaggletooth]

This could be added to Bees' thread "In the New Bill" but that thread has gone in several different directions, so [POOF!!] new thread.

He has focused on parts of the new bill that are totally ridiculous. And we are supposed to LEARN this crap? Many of you respond that with more and more complex tax provisions, we need to learn them so our services will be more valuable. This is only true to a point of diminishing return. Your services are only as valuable as they are perceived. There will not be long lines waiting at your office because you know these new provisions Bees has outlined.

It seems as though tax "sweeteners" are being added to every piece of legislation so as to drum up votes from congressmen who need to be "sweetened." As is always the case with Congress, the effect makes better news than substance.

I had occasion to research the 2007 act which added tax sweeteners to small companies, so that congress could delude their constituents that the effect of increasing the minimum wage would be offset by valuable new tax advantages. Here are a couple of these tax advantages so you can judge for yourself just how valuable they might be:

Previously taxed income for a sub S. In 1996, a one-year window existed for previous S corps to convert back and elect to reduce their E&P by previously taxed income (which dates back to 1983). The 2007 act now brings this election to switched C corps that missed in 1996 if they elect S status again anytime after May 25, 2007. For any corporation to benefit, the corporation would have had to be an S corp prior to 1983, switched to a C corp at some point, and then switched BACK to an S corp after May 25, 2007. WOW!! How many corporations did you bring to your office to take advantage of this????

Reduced September estimated tax requirements for C corps. For required C corp estimated payments in 2010, the September payment (and only the September payment), may be reduced by 20.5%, provided this reduction is paid no later than October 1 of 2010. In 2011, the September payment may be reduced by 27.5% of the amount otherwise due, so long as it is paid by October 1st. To partially compensate for this, the estimated tax is increased for 3rd quarter calendar payments by 0.75% on Corporations larger than $1 billion in assets.

Can you imagine enthusiastically rushing to notify your small business clients of this garbage? Does Congress deserve a "gold star" for sending sweeping tax benefits to companies who have to pay a higher minimum wage??

Guys and Gals, learning this trivia is not going to make you more valuable to anyone except your State Dept of Mental Health. Enough is enough, and it's time that we empower NATP, NAEA, and AICPA to pressure Congress to concentrate on real tax changes and leave the cherades alone. We don't have the political clout to accomplish this, but we may have a surprising partner in the IRS. They don't like having to hone their skills for these games any better than we do.

[Bees Knees]

They pile on the tax rules, then issue the following report:

Treasury Dept. Inspector General Suggests IRS Monitor All Paid Tax Preparers

Auditors posing as taxpayers who visited 28 tax preparation businesses employing unlicensed and unenrolled preparers in a large metropolitan area discovered that the preparers often made substantial errors in completing returns and correctly prepared the return 39 percent of the time, according to a Treasury Inspector General for Tax Administration report released Sept. 11.

The report recommended that the Internal Revenue Service's Small Business/Self-Employed Division develop and require a single identification number to control and monitor all paid tax preparers.

It noted that IRS does not have one list or database that collects information on preparers which contains such information as the preparer's name, associated identifying numbers, or whether the preparer is a practitioner or unenrolled preparer.

Text of the report, Most Tax Returns Prepared by a Limited Sample of Unenrolled Preparers Contained Significant Errors, is available at http://www.treas.gov/tigta/auditrepo...00840171fr.pdf.

Makes me want to go back to playing the piano in a bar.

[Bees Knees]

After complaining about how many errors we make, then they say you should just file your own return:

Treasury Dept Report: RALs Users Could Benefit From Free File Program



The Treasury Inspector General for Tax Administration, in a report released Sept. 8, said many taxpayers who obtain refund anticipation loans could benefit from the Internal Revenue Service's free tax preparation assistance at various sites or could use the Free File program to file their tax returns for free.

The report, dated Aug. 29, said that almost 10 million taxpayers borrowed against all or part of their expected tax refunds using RALs. An RAL, the report explained, is a short-term loan based on a taxpayer's expected income tax refund and is a contract between the taxpayer and a lender.

The report said it surveyed 350 taxpayers whose 2007 tax accounts had RAL indicators. Of those 350, only 250 actually obtained RALs, so those 250 were the only participants asked about the loans, the report explained. Of the 250, 213 said they obtained RALs because they wanted faster access to their tax refunds, and 185 respondents used the money to pay bills, the report said.

An analysis of the taxpayer account data for the respondents showed that more than half received the earned income tax credit (EITC), the report said. The tax return preparation and fees to obtain RALs ranged from 10 percent to 39 percent of the taxpayers' EITC, with the percentage generally higher for low-income taxpayers, the report added.

IRS is expected to develop a plan to target taxpayers who apply for RALs and refund anticipation checks in its marketing campaign for the 2009 filing season.

The report, Many Taxpayers Who Obtain Refund Anticipation Loans Could Benefit From Free Tax Preparation Services (No. 2008-40-170), is available on the Web at http://www.treas.gov/tigta/auditrepo...00840170fr.pdf.

There is of course an answer to all of this...Raise your fees. Taxes are getting more complicated. Tax preparers are making more errors. Taxpayers are not going to be able to do it on their own. Those of us who do pay attention to the rules and file correct returns should all RAISE OUR FEES.

I'm sending a letter to every client this year saying due to increased costs and compliance issues, your fee will be raised a minimum of 30% over last year. I'm willing to bet I only lose 2% of my clients.

[BP.]

There is of course an answer to all of this...Raise your fees. Taxes are getting more complicated. Tax preparers are making more errors. Taxpayers are not going to be able to do it on their own. Those of us who do pay attention to the rules and file correct returns should all RAISE OUR FEES.

I'm sending a letter to every client this year saying due to increased costs and compliance issues, your fee will be raised a minimum of 30% over last year. I'm willing to bet I only lose 2% of my clients.

As always, Bees, thank you for this message.

[Nashville]

Preparer Errors

It's been awhile, but I remember Newsweek used to publish every year a hypothetical tax return prepared by 50 different tax preparers. The return would have 50 different results. Do they still do this?

Of course, the hypothetical taxpayer had stock options from three different employee plans, numerous capital gain transactions, with different holding periods, some of which were inherited, and different investments with limited partnerships, REMICs, and all manner of passive income and loss.

The general tone of the articles and press releases were that the tax preparation industry was inept and not worth the public confidence.

[erchess]

I remember

the Newsweek returns and I remember my local newspaper doing the same thing with similar results. What I noticed was that the writers of the story never tried to sort out what was correct given these sets of facts or even whether the situations in question even had indisputably correct answers.

[ChEAr$]

I remember that

It's been awhile, but I remember Newsweek used to publish every year a hypothetical tax return prepared by 50 different tax preparers. The return would have 50 different results. Do they still do this?

Of course, the hypothetical taxpayer had stock options from three different employee plans, numerous capital gain transactions, with different holding periods, some of which were inherited, and different investments with limited partnerships, REMICs, and all manner of passive income and loss.

The general tone of the articles and press releases were that the tax preparation industry was inept and not worth the public confidence.

Back then I called the magazine Money (in which the returns were sponsored) my
favorite hobby magazine. No longer.

A friend of mine up in PA participated one year and came in right in the middle,
one or two plus or minus from the median. Since there were so many legal options to be
chosen, I thought the whole thing ludicrous.

[S T]

Money Magazine

Yep, Money Magazine is the one I remember as well, that did the report on comparisons of how the outcome of a tax return was reported!

Sandy

[Black Bart]

Yup, I remember it too.

It's been awhile, but I remember Newsweek used to publish every year a hypothetical tax return prepared by 50 different tax preparers. The return would have 50 different results. Do they still do this?

If it's still alive, I haven't seen or heard anything about it many a moon. I had mixed feelings about that survey -- while it pointed out tax preparer incompetence (I guess that was the point), it made me feel a little better in the sense that if 50 pros weren't right, then maybe at least 25 or so of them were dumber than I was.

I don't remember what magazine it was in.

[Snaggletooth]

Revenue Bias

They pile on the tax rules, then issue the following report:



Makes me want to go back to playing the piano in a bar.

"Sing us a song -- you're the Piano Man. Sing us a song tonight!
For we're all in the mood for a melody, 'n you've got us feeling alright."

[Looking back, wish I had a nickel every time I played that song in a pub. Bet you do too]

Bees, I opened the link and read the full report. It appears the entire thrust of this study was to measure the loss of revenue associated with faulty tax preparation. The mentality flies into an Armageddon-like showdown with the public perception that "the best tax man is the one who gets you back the most money." No matter how misguided, that perception is still very real, and those of us running a one-horse shop have to deal with it.

I remember years ago, the better-trained preparers actually COULD get a bigger refund for their clients. Almost everyone itemized, and there was no 2% floor for misc itemized deductions. There were dozens of deductions that the general public was unaware they could take, especially work expenses. There still are, but no longer available to everyone.
There was no disallowance of passive losses - no one even knew what they were.