Tax preparer issue

[joanmcq]

I could not agree with you more on that aspect - I refer to it as the "actually having to think" approach."

Many moons ago, I actually taught some (public) courses with Block. Since it was evening work, I soon realized the amount of time (both in and out of class) involved and the compensation received were just not worth it. However, it always helped me to get the residual rust out of my tax brain.

Rest assured I am thankful now to have computers to do the number-crunching and to guide me through some appropriate Q&As whenever the going gets bumpy. But the one part of tax preparation I still stress is a long, careful review of the information/numbers on the forms, not for any math issues, but simply to see if the return passes the logic (or "smell") test.

A useful comparison is having to make change (from summer jobs of days gone by). I had to use the old counting forward approach, and then also handing/counting the change back to the customer. Need some entertainment?: Next time you are in a fast food place, and the bill is something like $9.62, hand the clerk a $10 bill along with 12¢ in change. My guess is you will get the 12¢ handed back to you as "not needed" or (the usual) "how DID you do that??"

Alas. Best to you in 2012!

FE

I recently helped another tax pro through COD & a short sale on a rental & personal use duplex. Since I used to own part of the property, I had the history of the property, basis (at least from the time I had relinquished my share, etc.). The preparer, a CPA (but not long in the tax biz), was trying to do this by plugging numbers into the Proseries worksheets from the tax forms given to him by the client. When I first looked at the return there were:

1. No Forms 982
2. A sale price of zero on the 4797, with a corresponding huge loss
3. No COD income, even though I knew there was a cash-out refi
4. No land basis entered, even though I gave my depreciation reports to the CPA when the client switched
5. No sale of the personal portion on the Sch D, even though there was depreciation recapture.

I tried to work with the Proseries COD worksheets, but finally told him to scrap them and do it by hand. He had no idea how. The thing is, I knew what the return should have looked like, and once given the numbers & new depreciation schedules, could figure out the basis, gain, loss, COD that would be income et cetera working with paper and my adding machine. He also didn't know what else was needed from the client to figure out what COD could or could not be excluded, like the purchase docs for the property. Didn't know how to interview the client.

Tax software is no substitute for tax knowledge either. I recommended a series of COD classes by a well known CA instructor to the pro. I had also recommended the client go to someone who HAD taken a lot of COD classes and had a thorough understanding of the issues, but he was too cheap.

[FEDUKE404]

Lack of cranial exercise

....
Some of the old time tax preparers argue that the new ones cannot learn what is really going on when all the new ones have to learn is to punch numbers more or less mindlessly into the computer. It makes it harder for the new ones to explain the tax return for the client.

I could not agree with you more on that aspect - I refer to it as the "actually having to think" approach."

Many moons ago, I actually taught some (public) courses with Block. Since it was evening work, I soon realized the amount of time (both in and out of class) involved and the compensation received were just not worth it. However, it always helped me to get the residual rust out of my tax brain.

Rest assured I am thankful now to have computers to do the number-crunching and to guide me through some appropriate Q&As whenever the going gets bumpy. But the one part of tax preparation I still stress is a long, careful review of the information/numbers on the forms, not for any math issues, but simply to see if the return passes the logic (or "smell") test.

A useful comparison is having to make change (from summer jobs of days gone by). I had to use the old counting forward approach, and then also handing/counting the change back to the customer. Need some entertainment?: Next time you are in a fast food place, and the bill is something like $9.62, hand the clerk a $10 bill along with 12¢ in change. My guess is you will get the 12¢ handed back to you as "not needed" or (the usual) "how DID you do that??"

Alas. Best to you in 2012!

FE

[OtisMozzetti]

Remember when we use to fill out tax returns by hand, prior to the computer? Then when personal computers became affordable, some of us bought a computer and tried to use tax software to prepare the returns. Others laughed at us and claimed they could do tax returns faster and easier by hand.

You don’t hear anyone making that claim anymore. The computer has long since proven its value over hand prepared returns.
...

In this state, for years you had to complete a study course in income taxation before you can complete the required state tax preparer registration. I have had the opportunity to serve as instructor in many of those study courses, both in the past when tax returns had to be prepared by hand during the class and later when computer software was used for almost everything including the students' exams.

Some of the old time tax preparers argue that the new ones cannot learn what is really going on when all the new ones have to learn is to punch numbers more or less mindlessly into the computer. It makes it harder for the new ones to explain the tax return for the client.

[Burke]

I should have been clearer in my first post. I have had a PTIN for fifteen years, sign my returns as a preparer, and take at least fifteen hours of CPE studies per year to keep up to date. IRS states that if you file taxes for your clients (over 10) you must efile. I do not file my returns. My client base does not want to efile, do they need to sign a 8948?

Many of us have had PTIN's for as long as they have been issued. However, we all had to REAPPLY and pay a fee since last year, in many cases retaining the same number we have always used. We just have to re-register and re-pay every year now to keep it.

[FEDUKE404]

Penny wise and pound foolish

I have not alleged that paying clients should mail in their returns unless there is a reason they must. My point is that insofar as my own tax return, which I doubt that I will ever pay anyone else to prepare, there isn't enough advantage in e-filing to justify me paying any additional money for it to be e-filed.

Interesting approach....

Quite frankly, the ONE return that I absolutely would want to efile would be my own!!

My personal tax return is reasonably complicated, and the last thing I want is some IRS data entry clerk having to re-enter everything.

Even if I did have to pay to efile my tax return, I would consider it funds very well spent.

Of course, that point is moot, as I have my EFIN and buy a "package" for efiling with my professional software. There is no additional cost to me whatsover to send my own tax returns (federal and state) over the wires.

FE

[OtisMozzetti]

TheIRS doesn't worry about the data entry by their employees, but I sure do! It will always come back to the client that you, the preparer screwed up, not theIRS.

I don't explain e-filing to my clients, it's mandatory not their choice, or they can go somewhere else to get the return prepared.

I have not alleged that paying clients should mail in their returns unless there is a reason they must. My point is that insofar as my own tax return, which I doubt that I will ever pay anyone else to prepare, there isn't enough advantage in e-filing to justify me paying any additional money for it to be e-filed.

[Peachie]

It sounds like

Izzy may be the problem and not his clients. It seems they are following the guideliines of his practice. I have been e-filing as long as it's been available and had no poblems from my clients. I think when we offer our clients a simpler and more convenient method of filing and getting the return quickly, they come aboard.

If I misstate what you offer Izzy. I apologize..

Peachie

[joanmcq]

I've been e-filing since setting up shop in 2002. It is so easy, and once even my elderly clients realized "That's all I've got to do?!!!" when presented with the 8879, ALL of them were converts. This year, when none of my same-sex couple clients could efile, I went into screaming meanies trying to find a work-around. Paper filing is a pain in the butt, and my complex returns (including my own) would cost about $20 to mail certified.

E-filing gives you proof of filing, you know your clients filed the darn thing, and this year they are promising refunds in a few days. Love it and so do my clients.

[FEDUKE404]

Cutting to the chase

Unlike in "prior years" -

1) If you prepare income taxes for payment (other than VITA Program and similar, most "professionals" do go that route ) you must sign the tax return. Most noticeable exception is if you are an employee of a firm where you do some of the work but a "higher up" signs the tax returns instead.)

2) If you previously chose to use your Social Security number as a preparer identifier, you now must obtain and use a PTIN. There is an annual fee (currently around $65/year) for obtaining/maintaining such.

3) If you are not an EA/CPA/etc, you now/soon must take/pass/pay for a proficiency exam in order to keep your status and have your PTIN active. You also will be required to take around two days of income tax continuing education training each year.

4) Whether you "like" or do not "like" e-filing, it is here to stay. Merely dodging that bullet by (repeatedly) saying your clients have no desire to do such, or "letting them mail the return," is of little relevance to the IRS. Do not be surprised if an IRS representative contacts you about too many "exceptions."

BOTTOM LINE: Many/most of the Joe Kitchen-Table income tax preparers will eventually be going the way of the rotary telephone. All in all, the general direction to improve overall professionalism among all tax preparers is a positive step.

NOTE: This explanation is not intended to pass muster of a tax attorney, but rather to serve as a reasonably simple "as I understand the rules" explanation.

FE

[oceanlovin'ea]

through software company

It is especially easy through your software company. Just set up for electronic filing when you install your program. Then it is no sweat.

Linda, EA

[Bees Knees]

I should have been clearer in my first post. I have had a PTIN for fifteen years, sign my returns as a preparer, and take at least fifteen hours of CPE studies per year to keep up to date. IRS states that if you file taxes for your clients (over 10) you must efile. I do not file my returns. My client base does not want to efile, do they need to sign a 8948?

Remember when we use to fill out tax returns by hand, prior to the computer? Then when personal computers became affordable, some of us bought a computer and tried to use tax software to prepare the returns. Others laughed at us and claimed they could do tax returns faster and easier by hand.

You don’t hear anyone making that claim anymore. The computer has long since proven its value over hand prepared returns.

The same is true for e-filing. Try it and I guarantee you will like it.

[taxmandan]

...I can mail it in and let the IRS worry about data entry of the information.
EA in Calif.

TheIRS doesn't worry about the data entry by their employees, but I sure do! It will always come back to the client that you, the preparer screwed up, not theIRS.

I don't explain e-filing to my clients, it's mandatory not their choice, or they can go somewhere else to get the return prepared.

[New York Enrolled Agent]

I should have been clearer in my first post. I have had a PTIN for fifteen years, sign my returns as a preparer, and take at least fifteen hours of CPE studies per year to keep up to date. IRS states that if you file taxes for your clients (over 10) you must efile. I do not file my returns. My client base does not want to efile, do they need to sign a 8948?

It's easy - simply tell your clients that you are required to e-file. Then just e-file.

I would caution you on wholesale use of Form 8948. It is designed for the occassional client who might object. §10.51 of C230 now defines willful failure to e-file returns as disreputable conduct. Remember - all paid preparers are now subject to discipline. Ask yourself - which is worse - an irritated client or an irritated OPR?

You might also want to read TD 9518 for a thorough discussion of the e-file mandate and the possible exclusions.

[oceanlovin'ea]

advantage to efiling

When I found out that the people that process the mailed in tax returns are just data entry people with no special training in the tax forms and that they process approximately 50 to 70 returns per hour, I decided I didn't want them messing with my figures. Especially hand written returns, they aren't going to look twice to see what a number is, they are just flying along.
When I efile, I know IRS is getting exactly what I put on the return.

Linda, EA

[OtisMozzetti]

IRS is working toward having all returns electronically filed.
...
Perhaps if the clients understood the advantages of efiling, they might be more receptive to it.
...
Linda, EA

As a paid preparer, I certainly do go with the program in terms of e-filing my clients' returns and in terms of persuading clients that e-filing is better for them.

On the other hand, for my own tax return, I do not perceive much of any benefit to me. If I put the correct numbers onto pieces of paper, I can mail it in and let the IRS worry about data entry of the information. Although I have overpaid this year, I usually plan to have a small balance, but no estimated tax penalty, due. Maybe it's a little better to have the IRS computers check through what I submit a little faster.

EA in Calif.