Schedule L with real estate tax

[dyne]

I am seeing more and more clients whose standard deduction including the real estate tax
paid and reflected on schedule L exceeds their itemized deductions. This is a developing
pattern as the standard deduction increases every year. I predict that the standard deduction
will be greatly increased (like doubled) soon. This would reduce the number of returns which
IRS will need to audit.

[zeros]

Pains of Itemizing

What do you charge when after attempting to itemize, finding out that the standard deduction is better? Lot of work for nothing......

[Lion]

Charge

Block used to (maybe still does, I'm haven't been there for a few years) add a charge of about 75% of their Schedule A charge for attempted itemizing when Standard ended up being better. I've been known to tack on a charge when I've had to go through the whole exercise to determine which is best. Not too often, though, as I try to price high enough to fold in some unforeseen items, calls during the year, etc. Mostly repeat business and a few referrals, so have an idea what their deductions are before I'm entering Schedule A.

[Black Bart]

I hope not because

I predict that the standard deduction will be greatly increased (like doubled) soon.

instead of doing this:

This would reduce the number of returns which IRS will need to audit.

It will probably do this:

This would reduce the number of returns which IRS will need...

And some of us will be looking for burgers to flip instead of houses.

[taxea]

I set the options in my program to
1. always do a 1040
2. itemize deductions if they exceed std
3. then I set billing charge for Sch A

this way the Sch A will file and bill automatically when it exceeds the std deduction.

I do this because
retired persons often have Sch A that exceeds the std deduction
to train them into the habit of providing the information.
the state std deduction is frequently lower than the 1040 and it can be used there
donations carryforward if they don't qualify for Sch A

I do Sch A for all clients that own property. Even if it doesn't qualify for the 1040 it will automatically transfer to the State return.

If you want a quicker way to determine whether the Sch A should be used:
1. subtract 7.5% from AGI, save total for medical expense comparison
2. subtract 2% from AGI, save total for misc. expense comparison
3. subtract 50% from AGI, save total for donations expense comparison

Total each of the following:
medical expense if it exceeds 1 above save the total
misc expense, if it exceeds 2 above save the total
donations, divide by 2, if it exceeds 3 save the total
all other Sch A expenses, add to this figure the exceeding minimum totals from 1, 2 and/or 3 above....if this exceeds std deduction use Sch A...if not use Sch L if you have applicable expenses.

[JohnH]

My software does this for me...

[RitaB]

For people who are not even close to itemizing

I try to explain to clients first time around why their $358 in medical expense, $267.34 in "tithes", and $1287 in mortgage interest don't help. No charge and even include the Sch A. I write on the bottom, "This goes to Form 1040, line 40a, if it exceeds $5700 (or whatever), blah, blah, blah."

Some clients have the "Oh, I get it. Thanks for explaining that!" moment, and we don't have to go thru this ever again.

Then, there are the others who NEVER get it and continue to bring all that stuff in every year. Ever notice, many of them bring ALL their receipts, too. And, they not sorted out or totaled, so you go thru the exercise cause you THINK they can't itemize, but you don't KNOW for sure...

I am like RitaL, I charge a little extra for the ones who give me totals, maybe $10 or $15. A lot extra for the ones with the receipts. Full price for the ones who are close but miss it. Sometimes the sales tax (TN) pushes 'em over, sometimes not. Same amount of work for me, either way.