Classic Turbo Tax Foopah

[Snaggletooth]

...you know, the kind that results from the commercial thinking the only difference between a doofus and a CPA is "TurboTax."

Tennessee does not recognize a subchapter S corp. The Tennessee "Hall Tax" (don't ask) assesses a 6% state income tax on dividends of ANY corporation, subchapter S included.

Stockholder was notified by letter that he received $20,000 in dividends from a Subchapter S corporation. The K-1 does not provide for this, obviously, since the dividends are tax-free for Federal purposes.

Stockholder enters $20,000 in the pigeon-hole provided by TurboTax for dividends, and thus overstates his Federal taxes by $5400. He brought this mess for me to clean up with an amended return. IRS balked at refund because they felt that taxpayer indicated he received dividends. I had to find someone in the Memphis Service Center who, being a Tennesseean, was aware of the Hall Income Tax.

Did TurboTax make an error? No. Did it miscalculate? No. Did it create a situation whereby a layman thought he knew everything he needed to do his own taxes?

[TMI Moderator]

It's the same as folks who don't understand double-entry bookkeeping who buy a double-entry accounting program to keep their books. The goal is not to do it right, they don't know what "right" is. The goal is to keep plugging in numbers and punching buttons until the program stops giving them error messages.

I like to take lemons and make lemonade. Don't look at it as commercial tax software programs taking business from tax professionals while doing a disservice to consumers, look at it as presitige enhancement for tax pros. Your client thinks he's smart enough to do his own taxes with the help of the "EASY!" commercial tax program. He screws up his return, gets a letter, then comes to you to clean up the mess. You can bet that client has a whole new appreciation for what you do.

[sea-tax]

I agree Paul, While it can be madening at times to deal with these issues I do think that they create an oppourtunity for us to make some more money and look like a hero in the mean time.

[Snaggletooth]

The Sad Truth

Paul's lemonade has been echoed many times on this board by good preparers: namely we should all be thankful for TurboTax for creating so many opportunities for us to clean up. I don't complain about the opportunities but it gripes me that TurboTax is so successful is creating delusions of grandeur that the layman can become as effective as a CPA in preparing his own taxes. I think their effectiveness lies in the appeal of empowering people and convincing them that only their software lies between them and true genius. When I have the opportunity to go behind TurboTax, I will average some $700-$800 in tax savings -- the savings range from zero on a couple occasions to $5400 in the example just given.

All the focus may be on the opportunities it creates for good preparers, but the sad truth is all the opportunities we SHOULD be having, but are lost because TurboTax has convinced the do-it-yourselfers that they have removed the need for a tax professional. Most of these laymen are convinced that their refund of $1000 is the best possible situation, when if they would give us the chance, that refund could easily be $2000. I would say for every return we get a chance to improve, there are 20 people satisfied with their product that we will never see. And next year they will return and download next year's version of TurboTax.

The sad truth is not just limited to lost opportunities for our industry, the BIG BUCKS are the extra tax dollars being paid in by ordinary citizens using TurboTax.

Paul is right about the lemonade when we have the chance to use the lemons. The rest of our strategy must be our own resourcefulness in convincing the public that we can really do a better job.

[DTS]

Lemons

Paul is absolutely right!

I just got finished straightening out a mess for a man (not my client) who prepared a MFJ w/2106 and Sch C, mileage, etc., on Turbo Tax.

The audit came, he was assessed thousands in additional tax, interest and penalties. Then he called me in the middle of the audit. I looked over the items in question and gave him my opinion and ways to lower this assessment. Long story short, he still owed some extra tax and interest (no penalty), but so much lower than the initial assessment.

He called me last week to book an appointment for March!

Dennis

[veritas]

Just had a client

come in with tax returns and Quickbook file. Negative sales, negatve accounts receivables, positive payables and personal credit cards listed as debt. No basis as near as I can tell and took over 100k in losses from the S-Corp. This is a nightmare and the problems started in 2003. Of couse it's a constuction company on top of everything else.

Then I had another one come in yesterday and hasn't filed since 2003. Told me he's incorporating this week. No books either. And of couse he told me he hasn't made any money in those years.

[dsi]

come in with tax returns and Quickbook file. Negative sales, negatve accounts receivables, positive payables and personal credit cards listed as debt. No basis as near as I can tell and took over 100k in losses from the S-Corp. This is a nightmare and the problems started in 2003. Of couse it's a constuction company on top of everything else.

I had a similar client last year. After a lengthy discussion with the client, I gave him an option...1) Provide me with the bank stmts, check stubs, etc and I will redonstruct the FS; or2) Take your books to another accountant.

Guess what? I earned an additonal $3500 that year.

[veritas]

I am at the point

in my career where I don't want these problems anymore. I don't want to do any bookkeeping whatsoever. I want to prepare tax returns from a descent source. If they get the record keeping cleaned up I will be glad to do the returns.

[sea-tax]

come in with tax returns and Quickbook file. Negative sales, negatve accounts receivables, positive payables and personal credit cards listed as debt. No basis as near as I can tell and took over 100k in losses from the S-Corp. This is a nightmare and the problems started in 2003. Of couse it's a constuction company on top of everything else.

Then I had another one come in yesterday and hasn't filed since 2003. Told me he's incorporating this week. No books either. And of couse he told me he hasn't made any money in those years.

When clients come in with QB a mess like that I give them two choices also. One they stop using Qb and have me do there book work. Or two go some place else. I also take a beg retainer up front. I figure they have proven to themselves that they are unfit to prepare book work and if they can't see it after I tell them then you just can't fix stupid.

[taxea]

Classic Turbo Tax Foopah

I recommend the DOME Monthly Bookkeeping Record book to my sole proprietors. It is easy to follow and gives detailed info on what can be deducted by any business.
If they use QB...I give them a worksheet to enter their income/expenses and equipment on.
It just amazes me how many people start businesses without a clue about record-keeping. I, too, don't want to do the compiling or the bookkeeping and have instructed my clients to call for an appointment after all the worksheets I have provided are completed and the rest of their documents are in one place. I further instruct them not to provide me with invoices, receipts or other documents not specifically requested on the checklist I send to them.
I have found, over the years, that you have to train them and have a very strong and gentle "I prepare taxes, I don't do bookkeeping" handy.
My favorite mantra is: Tax programs are no substitution for tax experts.

[Jiggers]

Ain't it a shame....

Those that use QB or some other bookkeeping program where they use the "GIGO" method of accounting (Garbage In, Garbage Out), generate financial statements that they take to the bank.

And, THE BANK ACCEPTS THEM "AS IS" without questioning them. Probably because the bank officer has no clue either!

And when I express concern and to the quality and content for tax returns, I am made the big bully.

[oceanlovin'ea]

Dome Books

I too recommend Dome books to sole proprietorships. I even have a couple os very small S corps that use it.

They send me the pages quarterly and I make the entries in Quick Books myself. That works better for me and for them. Most of them don't understand QB and don't want to spend the money for that program.

I really like the Dome books.

Linda F

[Black Bart]

Dome

I too recommend Dome books to sole proprietorships. I even have a couple os very small S corps that use it.

They send me the pages quarterly and I make the entries in Quick Books myself. That works better for me and for them. Most of them don't understand QB and don't want to spend the money for that program.

I really like the Dome books.

Linda F

Yeah, I like those books too. I find that most small guys can't/won't/don't want to get into QB and other "heavy-duty" bookkeeping. Besides, those that do seem to feel like they're pretty good "accountants" themselves and "why do I need you?"

They can do the Dome (although half-way sometimes) and you can transfer it to your system or tax return without that much trouble.

[Black Bart]

Gigo

Those that use QB or some other bookkeeping program where they use the "GIGO" method of accounting (Garbage In, Garbage Out), generate financial statements that they take to the bank.

And, THE BANK ACCEPTS THEM "AS IS" without questioning them. Probably because the bank officer has no clue either!

And when I express concern and to the quality and content for tax returns, I am made the big bully.

The "no clue" bank officer is quite common. Years ago I worked for an accountant who had me make monthly financial statements for a client of a local bank. The figures carried forward when I first got the statements were all screwed up, but the boss said "no changes -- work with that and go forward -- that's what they want." We sent them monthly statements for a year or so and one month I got sick of it and adjusted everything like it should be. Next month boss said "the loan officer at First Flub-up 'raised Cain' about last month's statements -- they didn't meet 'specs'. Fix it back like it was." So I did and the client finally went on to bigger and better things; moved account to Ernst or somebody like that -- I don't know happened after that.