Post Tax Season Data Crunching.....?

[MAJ]

I am going through my client data to determine what clients need to modify their tax strategy (and why) to improve their bottom line. With many, it is a matter of habit and (dare I say) laziness that impedes their ability to lower their tax bill. While not difficult, in some ways many feel it is just not worth their effort. I think the {Medical, Transportation, Child Care} Flex Spending initiatives are incredible. Yet, so many do NOT take advantage of them. Even when they have the option available.

I ride a commuter bus to Wall Street daily.... Do you know how many Wall Street workers DO NOT use this? Where is the financial sense? I wonder some time!!

So, What do we as a collective bunch do with the data Post Tax Season? How do we use this information for our clients to gain additional savings for them and ideally increase revenues for us?

Questions:
1) How many returns do you prepare in an average season?
2 How many preparers on hand to handle the answer from #1.
3) How do you utilize the data within the returns to improve a clients tax standing?
4) How do you use the data to increase business?
5) Do you push your clients to take advantage of Flex Initiatives?
6) Non-Cash Charitable {done right] deductions?
7) Do you attempt to analyze their ROI for any savings or investments they carry?
8) How are the majority of returns processed? In person or behind closed doors? Why?

Thanks Ladies & Gentlement for another fun filled evening...

[Gary2]

7) Do you attempt to analyze their ROI for any savings or investments they carry?

Of all these questions, this one stands out as possibly being a 7216 violation.

[MAJ]

7216 violation ??

I'm not looking to take their information and feed it to anyone. But I routinely see clients with monies sitting in accounts earning nothing. In many cases they can take it to a tax free venue and get more return!!

I am referring to simply building a relationship with clients and pointing out to them more effective ways to increase their net worth. Be it by taking advantage of tax strategies or moving their money to a place that pays better. Sometimes it is the simple advice (non-income producing [for me]) that clients remember the most and tend to refer me.

The sad part is, I had a new client this year and while preparing their return I asked them a series of questions about their prior tax return, their children and college, general things. The client looked at me and said - The guy I used to go to never asked me any questions. He just took the papers and 15-20 minutes later we were done.

Nice!!

Sometimes I wish I was more like that - but am glad I'm not.

[JG EA]

In the interest of letting clients know what is out there I buy TTB non-cash contribution books. Not too many people ever take one, but it lets them know there options are out there and that I am interested in taking the deduction for them if they are so inclined.

One of the biggest things that could help some people - bunching - I have had very few takers. They don't want to think about tax benefits when giving contributions or worry about timing their medical procedures. But again, I like to discuss it with them for the above reason.

HSA's, IRA's, etc. I have these on my interview sheet. I am surprised about how many people don't think of an IRA each year. But I must confess I also don't think of it unless there is a balance due. It has been an easy sell (I'm speaking symbolically as I do not sell IRA's myself) if they owe. e.g. one year I suggested to a Schedule C client a SEP and he instantly took it up and has been doing it each year.

I never touch their investment activities. I leave that to whomever they use for financial advice. That is just me personally - so I can sleep at night.

But, I also tell them things like an equity loan may be deductible but it is also impractical financially unless they really need it. Or I tell them that in most situations (unless they are rich beyond belief and my clients are not) that in financial decisions it is better to think return on the dollar and not tax benefits.

I am also interested in what others do. And you are right that some people could care less - just prepare the return.

[JohnH]

---> But, I also tell them things like an equity loan may be deductible but it is also impractical financially unless they really need it. Or I tell them that in most situations (unless they are rich beyond belief and my clients are not) that in financial decisions it is better to think return on the dollar and not tax benefits. <------


I like how you stated that. I frequently tell clients that if an "investment" doesn't make sense financially, don't depend on the perceived tax savings to change its nature. Most of the time, when a financial move is being promoted for its tax benefits, it's either a scam or they're dealing with a poorly-informed advisor. Never depend on the tax benefits to turn a bad investment into a good one - it ain't gonna happen.

[dtlee]

I'm not looking to take their information and feed it to anyone. But I routinely see clients with monies sitting in accounts earning nothing. In many cases they can take it to a tax free venue and get more return!!

Your motives sound above reproach, but this is exactly what the IRS was eyeing when they made the rules which prohibit any unauthorized use of tax return information.

This does not sound like a use of the information for the purpose of preparing the tax return for the year which you were engaged to prepare. However, this is not necessarily a violation of §7216. If you obtained signed permission prior to completing your clients' returns to perform this analysis, it is not a violation. If you did not, it is too late to ask for this consent now.

Please don't take this as meaning that the IRS would become aware of this or that your clients would complain, but I agree with Gary. Unless you obtained prior signed consent, it does not matter how good your intentions are.

[MAJ]

----- I've been a baaaadd... Tax Pweparer...

Ouch - I feel so -- so..... ashamed!! I never looked at it that way - and in the end game it does not matter how I look at it. It’s how THEY Look at it, RIGHT?

I was under the impression that this meant I could NOT use or provide their information to third parties (like Financial advisors, etcetera, etcetera….. ) or sell their information (email addresses and address information) for various marketing purposes. I did not interpret this as I could not use their data to suggest to them some better ideas. More constructive uses of their money. What they do with this information is theirs and theirs alone. I’m not using their information for financial gain and I thought this was the general concern. Maybe I better read §7216. huh!??
Funny part about it is I actually summaries the Privacy Statement to my clients as part of the review process -- Maybe that's why I'm always broke & late!!

**** it.... Flunked out again!!

Your motives sound above reproach, but this is exactly what the IRS was eyeing when they made the rules which prohibit any unauthorized use of tax return information.

This does not sound like a use of the information for the purpose of preparing the tax return for the year which you were engaged to prepare. However, this is not necessarily a violation of §7216. If you obtained signed permission prior to completing your clients' returns to perform this analysis, it is not a violation. If you did not, it is too late to ask for this consent now.

Please don't take this as meaning that the IRS would become aware of this or that your clients would complain, but I agree with Gary. Unless you obtained prior signed consent, it does not matter how good your intentions are.

[oceanlovin'ea]

But if they question you, then you would only be answering their questions. So maybe that would be an answer to helping them.

Maybe do an email to your clients and tell them if they have questions or would like some suggestions about how to save on their taxes, the summer is a good time to get with you. Then when they call, you will not be violating any code sections.

Would that be acceptable?

Linda, EA

[dtlee]

Ouch - I feel so -- so..... ashamed!! I never looked at it that way - and in the end game it does not matter how I look at it. It’s how THEY Look at it, RIGHT?

I was under the impression that this meant I could NOT use or provide their information to third parties (like Financial advisors, etcetera, etcetera….. ) or sell their information (email addresses and address information) for various marketing purposes. I did not interpret this as I could not use their data to suggest to them some better ideas. More constructive uses of their money. What they do with this information is theirs and theirs alone. I’m not using their information for financial gain and I thought this was the general concern. Maybe I better read §7216. huh!??
Funny part about it is I actually summaries the Privacy Statement to my clients as part of the review process -- Maybe that's why I'm always broke & late!!

**** it.... Flunked out again!!

You do understand that part.

There are two parts of "consent" (which annoyingly cannot be combined into the same consent form). There is consent to disclose and consent to use. In your scenario, you have no need for consent to disclose since you are not sharing their information with another party (or with yourself acting as a registered representative or in some other capacity). However, you should be obtaining is a consent to use the information as you describe.

When I was preparing a course on this and talking with the IRS counsel, it appeared that they wanted taxpayers to be free to engage a preparer without any concern that non-tax-related matters would be brought up (such as retirement planning or college funding for their children). They said we could give advice for the year we are preparing without consent but they specifically changed the wording of the regulations from allowing us to use this information for "any tax return" to allowing us to use it for "a tax return" in order to limit our use of tax information. We apparently have no right to assume we will be doing all of their tax returns since we are engaged for only one at a time.

Personally, I have a real problem with this since I cannot give much advice in terms of fixing what they did last year and can only focus on future years. I explain the ridiculous rules to my clients and tell them that if they don't sign the form, they are telling me to "just shut up and do the tax return." I have never had a client hesitate to sign the consent form.

If you sent out a general mailing telling your clients that they should feel free to ask you questions about the topics you mention and they approach you as Linda mentioned, it would not be a problem.

If you are serious about reading up on §7216, I have some items on the bottom of this page that you are free to use:

http://nytaxexperts.org/Documents.aspx

I regularly put things out there that I have distributed. The one from the Metro chapter of the NYSSEA is probably the best one to use since that presentation did not rely on a PowerPoint presentation to accompany it.

[oceanlovin'ea]

Doug, I tried to open several of the documents and got a message that they were damaged and could not be repaired.

Could you check on this and then put it back up for us please?

Thanks. I am interested in seeing the documents too.

Linda, EA

[dtlee]

Our resident guru (MAJ) may be able to shed more light on this, but I have checked these frequently (and some of them this morning) and they should not be a problem.

The pdf files are set to be compatible back through Acrobat 7. Which pdf viewer are you using?

I have seen some scenarios where due to bandwidth and timeout issues, a large document won't open properly from some websites. I have not experienced that with this one, but you might try downloading and then opening the downloaded item.

If there is a specific document you are trying to open and can't I can have someone else try it or you can private message me and I will be glad to download it and email it to you.

[JohnH]

Speaking of advice, I have a question.

I was having lunch with a client yesterday and he asked me how he could maxmize his chances for obtaining a waiver for his healthcare plan under the new Federal Health Care Laws.

I suggested that he do the following:
1) Open a branch in Northern California, preferably an upscale restaurant, bar, spa, or hotel.
2) Change his registration to Democrat
3) Make a generous donation to Nancy Peolsi's campaign fund
4) Apply for the waiver through DHHS

Since we were in a resaturant, I didn't have time or resources to print a waiver for him to sign.
Nevertheless, is my advice on target, and of course are my actions in compliance with §7216?

[dtlee]

Speaking of advice, I have a question.

I was having lunch with a client yesterday and he asked me how he could maxmize his chances for obtaining a waiver for his healthcare plan under the new Federal Health Care Laws.

I suggested that he do the following:
1) Open a branch in Northern California, preferably an upscale restaurant, bar, spa, or hotel.
2) Change his registration to Democrat
3) Make a generous donation to Nancy Peolsi's campaign fund
4) Apply for the waiver through DHHS

Since we were in a resaturant, I didn't have time or resources to print a waiver for him to sign.
Nevertheless, is my advice on target, and of course are my actions in compliance with §7216?

I know a lot has been written about this and I realize that I disagree with quite a few instructors who say you cannot answer questions or fax client information or help them with their FAFSA forms unless you received that consent prior to completing their return.

A client-initiated request is always something you have the option of accommodating. What the IRS is attempting to regulate is a preparer initiated request to use or disclose information. Clients are allowed to ask you for guidance based on their tax return information or for information from their return or other tax scenarios which rely on your knowledge of the tax law as it relates to their situation. I think it would be quite rare to have a client-initiated discussion where you would want to be covered by some signed consent form or waiver.

When accommodating a client-initiated request, you can use the guidelines within §7216 as a guide, but you must understand that it does not specifically apply. Neither I nor the attorney I worked with at the IRS (to build the courses I gave and the specific FAQ items I distributed) believes that the purpose of the law was to reduce client service. For example, if a client were to ask you to fax something from their return to a bank for them, many believe that this is now disallowed by the law. It is not. You would want to have a signed, written documents describing the nature of the request with clear documentation of the name and number and details of what you should send, but this is not what §7216 is attempting to control. The way this relates to §7216 is that without clearly documenting that this was an unsolicited client request to disclose information, you would have no proof that you were not violating the law and choosing to disclose this information to the bank on your own.

On the other hand, in that same faxing scenario, some preparers use the same Consent to Disclose form that they would have used for preparer-initiated requests. I do not recommend that. A §7216 compliant Consent to Disclose form is only valid if signed prior to the completion and signing of the tax return from which that information is taken. Having this same form completed for a later client-initiated request is wrong since it will document it as a preparer-initiated request with signature dates clearly indicating that it was executed after the return was completed.

[MAJ]

Just to beat the dog to death and submission...

Is this to say that I need to have a signed document on file for my client(s) if I need to fax them a copy of their Tax Return as well..??

Also, are there any finite guidelines on using email as a transport mechnism for delivery of a tax return IF AND ONLY IF it is protected by AES encryption or better?

As for the Adobe document issue: First - He is right - What version are you using? Open Adobe Reader and click HELP / ABOUT. That will define. If earlier than AR7 it is really time to upgrade - I would go to 10.x - Great product.

However if you have 8 or higher -
Right Click on one of the links.
Select SAVE TARGET AS (see image1.jpgattached)
Save the file to your local drive.
Be sure you know WHERE you are saving it.
I recommend created a directory called c:\Data\TaxDocuments (more on next post)
Once complete you will have an option to OPEN
Open the document. Should open quickly. Let me know if you still have an issue.

[dtlee]

Is this to say that I need to have a signed document on file for my client(s) if I need to fax them a copy of their Tax Return as well..??

Also, are there any finite guidelines on using email as a transport mechnism for delivery of a tax return IF AND ONLY IF it is protected by AES encryption or better?

For these scenarios, I am only concerned about the "knowlingly or recklessly" portion of the regulations.

For the first item, (faxing the return to the client), I treat it no differently from them calling and asking you what their AGI is for their FAFSA form. Some preparers believe it is forbidden to use the information this way, I do not. Of course, the key is not to dial "recklessly" when faxing. The same principal could be said of mailing returns. Address carefully.

I have not seen any specific tax preparer guidelines for emailing with AES encryption although I do not email clients pdfs of tax return pages which are not password protected. The question could likewise be applied to mailing of returns. I have not been requesting return receipts or signatures for mailed returns. I have seen various suggestions by preparers that mailing any tax information other than by registered mail could be considered "reckless" but first class mail is also used by the IRS (who is also bound by these rules).