NT / Where do they get these notions?

[RitaB]

Couple brings in their stuff with "Please give us the standard deduction for contributions."

A bunch of people think they get some mysterious amount instantly for contributions, whether they actually made a contribution or not doesn't seem to be important. They just have to know to tell ME to allow it.

I GUESS they have been told somewhere back there to go with 499 for their 3 bags of clothes so the preparer before me wouldn't have to prepare the 8283, but I don't know...

Same with teachers and aides thinking they can deduct $250 when they didn't spend a dime out of pocket.

[Dusty2004]

0 for Contributions

I tell them "Great - 0 for contributions". They jump pretty quickly when I say that. Then I ask how much they can document that they contributed?

If a teacher says they spent $250 on supplies I do not ask for their receipts but tell them they have to have the receipts.

Dusty

[ChEAr$]

The notion goes back to previous days before the rule of having to have receipts. Preparers found out through the grapevine, maybe from former IRS people, that if contributions are under certain thresholds (different for single, joint, etc) there was very little likelihood of
audit, or even if audited, little likelihood of tax change. Thus these figures became "audit
roulette minimums".

[Koss]

"Standard" Deductions

I certainly agree that there is no "standard," or "automatic" deduction for charitable contributions. This was true even before the IRS implemented the newer, stricter rules for documentation and receipts.

But there are a number of other areas of the tax law which do indeed appear to allow a standardized deduction, with little or no documentation. Some of these actually fall within the scope of Schedule A...

For example, what about the per diem rates for business travel, or the special rates for DOT workers, such as over-the-road truck drivers? Yes, you need to be able to document the fact that you took the trip, and that it had a business purpose. But the per diem rates are intended to be a substitute for actual expenses.

What about the standard mileage rates?

I suppose this is where people get the idea that there is some sort of automatic amount you can claim...

The flip side is that over the years, I've met numerous clients that can't get their head around the concept of the standard deduction. I'm talking about clients that come in with genuine receipts for charitable contributions, or specialized clothing for work, or union dues, or medical expenses, but they don't have enough to itemize. And they just can't understand why these expenses do not benefit them, or why they do not appear on their tax forms.

I've developed various strategies for dealing with these folks. Sometimes I'll tell them that they have a choice: they can take the standard deduction, and get a bigger refund, or they can take their itemized deductions, including the $165 they spent on uniforms and the $411 in union dues, and get a smaller refund. They still don't understand it, but they accept it because they want a larger refund.

In the most extreme cases, I have entered the data into my program, even when it was obvious that they would not benefit from itemizing, and then force-printed Schedule A, and included it with the client copy of the return. That way they can see that I entered the data, and they perceive some benefit from it. Of course, on page 2 of Form 1040, they're still taking the standard deduction. But that's just because... well, I did the return according to the instructions, right? It says to enter the larger of your itemized or standard deduction on line 40a...

Right?



BMK

[RitaB]

I always prepare Sch A

I know EXACTLY what you mean about people not understanding the standard deduction. If they bring me amounts for Sch A, I always prepare the form. I actually gained a client last year because they insisted that the previous preparer would not "let" them claim their deductions. Well, I went so far as to re-do the 2007 return WITH Schedule A to show them that the preparer did the return correctly. These folks STILL brought in their $455 in medical expense, $320 in "tithes", $1200 in mortgage interest for 2008, and again in 2009.

I just completed the Schedule A both years and didn't try to explain. Their refund in 2008 was higher because of increased withholding, but they thought I was a hero.

I am waiting for them to pick up 2009. Their refund is lower than 2008 because of decreased withholding, and the Making Work Pay Credit didn't offset it cause of the $500 from Social Security. Bet my name will be mud...

The only thing many people look at is the REFUND. I swear, I think I could tell half of my clients to increase withholding by $2000, and they would think I'm a genius when their refund is $2000 more.

[S T]

Ugh

Had one come through tonight and yes I always complete the Schedule A for the Clients file in particular. They provide the numbers, I enter them!

Young married couple, Taxpayer is part of my family group - Spouse of course is not, last year for 2008 all was wonderful, as the returns showed great refunds. Of course they changed their withholding, combining incomes, don't own a home, etc. Can't understand why their refunds are drastically down to minimal on Federal and owe State of California.

In the past spouse's Grandfather always prepared "her" taxes. so I go through all the preliminaries, ready to go - give the "sad" news for 2009 (owe State)- and then receive the notice, sorry my grandfather is going to complete.

One of the issues is the "employee business expense" but what the client advised and what was provided is that it on an accountable plan - never hits the W-2 income- and without Mortgage interest, property tax, the Schedule A will never achieve above Standard Deduction.

So I just hope that they give the right info to the "Grandfather" to complete the returns. I am just putting all in writing to CYA.

Just can't win them all

Sandy

[taxea]

this was common practice by some preparers back in the day before computers. My question to them is "where did you learn this and could you ask that person to provide a copy of the law that allows this, because I am not familiar with it." Then I proceed with, "I certain would like to do that for you if you can show me something from the tax code that allows it."

[Snaggletooth]

Maximize

"Please give us the standard deduction for contributions."

I've heard this ever since my early days of practice. This is a veiled request for you to take as much contributions as you can without throwing up a red flag.

It is sometimes called a "standard" amount, or the "normal" amount, or "maximum" amount. The general feeling is there is a threshhold beyond which the IRS will question the return, and we are instructed to deduct a number just short of that threshhold.

It is no more right now than it was 25-30 years ago. My answer is "How much did you give?"

[JohnH]

My clients have no problem documenting their contributions, because they sneak into my office the night before the appointment and write the info on my ceiling. Then if they forget to bring the list, they just look up there and recite every charity and amount back to me line by line. I can assure you this is true, because I've seen them do it so many times.

[Bees Knees]

A History Lesson

The standard deduction for charitable contributions was $78. See 1991 tax year edition of the Quickfinder, page 15-28 under the heading “Remember “Rule Of 78.” The IRS use to allow deductions up to $78 for out-of-pocket charitable gifts without any supporting evidence. It was the same principal as what we still do today for the per diem rate for meals while traveling. A taxpayer can deduct the standard meal allowance for meals while traveling on business, regardless of what the taxpayer actually spent and regardless of whether the taxpayer kept any receipts. The only requirement is that the taxpayer actually spends some money on meals while traveling, even though the taxpayer cannot prove anything.

The rule of 78 for charitable contributions was the same rule. The only requirement was that the taxpayer actually spend some money on contributions, but no substantiation was required. That ended in 1994 when the $250 substantiation rule first came into existence. That same law said that a cancelled check or other supporting documentation was required for contributions under $250, and that a written acknowledgement from the charity was required for contributions of $250 or more.

Thus, the standard deduction for charity ended in 1994.

[dyne]

If a client attempts to itemize I usually complete a schedule A and FORCE it to print
to show to the client that they did not have enough to itemize. Most clients learn and
stop trying to itemize but a few keep trying to itemize year after year. Some people just
will not learn.

[JohnH]

There's one small group of clients who get REALLY confused - filers who have a Schedule C but who don't have enough personal deductions to itemize. Trying to explain the difference between a business expense and a personal itemized deduction can be a real challenge in some cases.

Another group would be those whose itemized deductions only save them $15 - $30 because their itemized deductions are only $100 or $200 over their standard deduction. They will patiently listen to my explantion of why it will cost them more in tax prep fees than they save, and then ask "But why don't I get more benefit than that for my (contributions, taxes, mortgage interest, etc) ?"

[thomtax]

BK - Thanks for the history lesson. It was interesting.

LT

[taxea]

Quote: But why don't I get more benefit than that for my (contributions, taxes, mortgage interest, etc) ?"
I show them the tax rate at bottom of the five year summary on that my program generates and tell them that they are actually only getting that % of every 100. on the Sch A.

[taxmom34]

and you expect them to understand that? they don't even understand the schedule A.