Deductions, More Likely...

[geekgirldany]

I don't really have a question but feel the need to vent.

I've been studying for my ethics test on the EA exam. I've learned alot about consequences of positions I may take on deductions. Of course the tax preparer penalties have changed and I have had several customers wanting me to take deductions that I feel could not hold up under audit.

For example: Customer works for her mother and gets a 1099 for what she is paid. This is the only place she works. She wants to claim a home office. She is owing a good bit in taxes. Because I do the mother's return also I know that she is not entitled to this deduction. She said that she was taking the risk, not me.
I feel that the "more likely than not" would not hold up in a situation like this. At the same time I feel pressured by the customer to take the deduction.

Some of my customers say I am too conservative on deductions. I feel I am doing what is correct.

Thanks for reading and I would appreciate any feedback.

[Snaggletooth]

Tax Myths

Geek -

As a preparer you are held to a higher standard than your clients. The client gets to pay extra tax, penalty and interest that are calculated. You can get CLOBBERED.

One of the big problems here is that you actually "know too much" by virtue of doing her mother's return. Even if you didn't, I didn't read a single thing in your post that would even remotely entitle this taxpayer to an OIH deduction.

There are so many Tax Myths. Your client's best friend Pauline goes to Shifty-Eyed Sam out on Canton Highway and she gets to take off OIH every year, so naturally your client is inclined as well and if you don't then SHE will go to Sam too. Or maybe Sam is even reputable and Pauline has a very legitimate reason for deducting a home office.

And finally, I don't think many of us need to be developing a clientele who walk in and tell us how to do our job. They need to just keep walking.

[geekgirldany]

Snag you are so right. I've developed the attitude that they can go somewhere else. I hate to say that to them but when a customer gets that pushy I have to say something.

This past month I've made some decisions that I believe will really help my business. I am changing my pricing. I've narrowed down a good price list for per form charges. I've come up with a good price on bookkeeping and payroll services. I am going to start charging for services that I did not in the past. Representation is a big one. Long phone calls and meetings. Little things that can turn into billable time. I need to get rid of a few customers that are causing problems or go up on them.

I need a change in attitude with customers. I need to be more confident with my knowledge and even more forceful in certain areas. I am going to make my office look more professional. Right now I have my collectibles displayed. Although good for conversation sake I think I need to tone it down.

I just think I need a completely different attitude. You are right I am a professional held at a higher standard and I am going to make sure people know it.

[myerstaxes]

Stand your ground

I too have clients that want to play fast and loose...I should say, I do not have them as clients...I tell them what I am and am not going to do...I tell them they are in the wrong place with respect to wanting to claim things they cannot substantiate or that they are not clearly entitled to. Me being former IRS, many perspective clients know I am conservative...Just think geekgirl, it is your license at stake, your bread and butter, it is not worth "ANY" client to take a risk...

[myerstaxes]

I forgot to add

that I recently represented a client in an audit...The preparer basically declined to represent the client for two returns that "SHE" prepared...This was a Civil servant who traveled extensively...We all know that such an employee gets fully reimbursed for travel, well this preparer claimed "ALL" of the travel (which was not included in income of the client)...It was a large amount of 2106 expense...There were other questionable items on the return...Anyway, the Revenue Agent kept asking me questions about the preparer and how she prepared the return and what documents she used etc...It was obvious to me that she wanted to launch a preparer project on this person (I know the code words since I used to manage Revenue Agents at one time)...The client had given me the binder that he gave to the preparer, she had some notes in it...It was apparent to me that she saw the documents that clearly revealed that the client was reimbursed for the travel except a few job seeking items...Just follow your gut reaction and do the right thing, I believe IRS is gearing up their preparer projects, I have heard of a few cases out here where I am...

[DTS]

Snag you are so right. I've developed the attitude that they can go somewhere else. I hate to say that to them but when a customer gets that pushy I have to say something.

Geekgirldany,

Every year, I go through my client list and give some of the real troublesome clients the boot. It's one or two. Year in, year out they are the ones I dread seeing the following year, for what other reason. It may be the scheming, dishonest ones or the ones that feel it's OK to pay you late once they get what they want out of you, etc. I will speak for myself, but I am much happier not to see them again! Their money is worth nothing to me. Your integrity is worth everything. I believe for every bad client you don't want and cut loose, you'll get two or three more in their place that appreciate you and make you feel good about yourself. I think you'll eventually see your wallet growing nicely when you may have thought the opposite would be true. They will be a nice addition to your office!

I need a change in attitude with customers. I need to be more confident with my knowledge and even more forceful in certain areas. I am going to make my office look more professional. Right now I have my collectibles displayed. Although good for conversation sake I think I need to tone it down.

Sounds to me that you are just going through "the list" and doing what you need to so that you get to the place you want and need to be!

Study hard (one more part to go?? ), stop worrying about these "pains" and just follow your instinct. It is easy to.

Dennis

[DaveO]

Stick to your guns Geekgirldany

It feels good to get those people out of your life. I took on an audit a few years ago and the preparer had taken some outrageous positions. On my first meeting with the auditor he was reviewing his report, looked up at me and said "You didn't prepare this return did you?" Before I could answer he looked at the 1040 and said, "Oh my god, not this person again!" Pretty good bet a preparer case was in the works somewhere.

[BHoffman]

What is our job?

It's our job to correctly prepare income tax returns by applying the current tax laws to information given to us by our clients.

IMHO: Anyone can sit down with some tax software and print out a tax return. Professionals can do that with some assurance that this tax return is correct and complete. The tax is what it is. I'm always a little amused when clients thank me after learning they are receiving a refund. That is not due to any action on my part; I just report the news. By the same token, I am not to blame if the client owes tax. In fact, I get annoyed with the client who owes a bunch of tax - why didn't you use those estimated tax coupons I gave you??? I will consider firing a client who owes bunches every year and refuses to get with the program.

My clients are trained and I've already weeded out the list and gotten rid of the baddies. It's a real relief and good advice.

[geekgirldany]

Thank you guys for taking time to post. Really means alot to me to have reassurance on this matter. I believe what has happened is that this area is growing and I am getting more new customers. People that I have really never had to deal with questioning my judgement on deductions. So it is time to buck up Anyone can be a key puncher with tax software. They are coming to me for my knowledge of taxes.

Myers you are right I have worked hard to get my EA license (I hope after part 3). I am not going to take a chance on anyone regarding it.

[Snaggletooth]

My Turn to Vent

OK, Geek - my turn to vent about your client (or more accurately, clients just like her).

Client comes in after calling for an appointment. Appointment is scheduled after several attempts to find a suitable time that she is not working, or going to her kid's soccer game, trip to Harrah's Casino in Cherokee NC, or typical Friday night out on the town. Certainly she can't take off any more time from work because she already took off a whole day to meet with her attorney (at HIS convenience).

Comes in and during the first few moments says - "I'm going to take OIH, I want EIC, and I'm going to deduct $500 I gave my niece - that's Charity for shore 'cause I know I'll never get it back."

I mentioned a recent appointment she had with her attorney. You were a fly on the wall and remember how her conversation started with him. "Oh, Mr. Philadelphia, I've come to you 'cause I don't know NOTHIN' about how to get this divorce and NOTHIN' 'bout how to get the court to give me my half. I don't know NOTHIN' about how to go to court, or how much taxes I'm gonna haveta pay on getting the house."

Philadelphia Lawyer: "That's OK. Just pay $1000 down and I'll get to work on it. In fact, we have to file this thing in court, and I'll draw up the documents."

Your client: "Sounds good. When do you think you will have it filed?"

Philadelphia Lawyer: "I dunno. I'll put a memo on this pile on my desk and eventually get around to it. I'm a little behind right now."

Your client: "OK. Thanks for taking your valuable time to meet with me."
**************
Compare this with the conversation with the one she had with you. It accomplishes nothing to create the above scenario 'cause all of us know this is so very typical. But I do bring it up because our entire perception as professionals needs to be upgraded.

Nowhere does this become more evident than when dealing with a local businessman. He is used to paying people to do exactly what he wants. This includes subcontractors or service people who decorate his office or lay his carpet in his home. So it is quite natural that he brings his tax work to an accountant whom he thinks will do what he tells to do. But he falls short of this when dealing with his attorney, whom he has retained mostly to keep him out of trouble. In fact, most attorneys create horrible tax situations for us to clean up, yet their word is taken as being superior and more authoritative than ours.

Upgrading our image is a challenge, and we should avail ourselves to NAEA, NATP, and state units to bring this to the forefront in the near future. One of the biggest problems is that as long as clients can find Shifty-Eyed Sam on Canton Highway, we will NEVER clean it up. Legislation has been pending in Congress for a couple years now, and our professional organizations are trying to stay on top of it.

Good thread, GeekGirl

[SueBaby]

Snag you are so right. I've developed the attitude that they can go somewhere else. I hate to say that to them but when a customer gets that pushy I have to say something.

This past month I've made some decisions that I believe will really help my business. I am changing my pricing. I've narrowed down a good price list for per form charges. I've come up with a good price on bookkeeping and payroll services. I am going to start charging for services that I did not in the past. Representation is a big one. Long phone calls and meetings. Little things that can turn into billable time. I need to get rid of a few customers that are causing problems or go up on them.

I need a change in attitude with customers. I need to be more confident with my knowledge and even more forceful in certain areas. I am going to make my office look more professional. Right now I have my collectibles displayed. Although good for conversation sake I think I need to tone it down.

I just think I need a completely different attitude. You are right I am a professional held at a higher standard and I am going to make sure people know it.

Just to get in left field for a minute or two. What are your collectibles? I have a shelf over my chair on the wall nothing but my frog collectibles; it is a nice conversation before getting down to business. My husband did not want it here in my office but so far it has relaxed peoples nerves plus kids too just by talking about them.

[myerstaxes]

I am with you Geekgirl

I too have adjusted my pricing...I was told by a fellow EA that my Representation fees are too low (especially with my 31 years in the IRS), that part of my practice is time consuming...Also, I am in the process of firing clients and revoking POAs for PITA's, I have drug this dead weight around enough, they do not want to cooperate, they are late paying and just a pain...I have always got a retainer for certain work (representation, delinquent returns and complicated amended returns)...But I am asking for more up front then before (since I have a better grasp on the amount of time it will take than I did 4 yrs ago)...

[OtisMozzetti]

New Client; I'm a head of household

New Client Upon Arrival: "I'm a head of household."

Tax Professional: "We can check and make sure that you qualify as a head of household." "I do EVERYTHING THE LAW ALLOWS to get you every possible tax advantage. At the same time of course, I try hard to keep you out of trouble with the IRS, which of course you want, right?"

[BHoffman]

The Object of the Game

Preparing a tax return is similar to playing a game. The tax laws are the rules. The client documents are the game pieces. The object of the game is to get the tax liability to its very lowest amount. You have to follow the rules or you forfeit. The rules can be vague and they change, and the game pieces sometimes aren't in the best shape.

[DTS]

The rules can be vague and they change, and the game pieces sometimes aren't in the best shape.

My exact words to my wife when we play gin, which is not often. I have an incredible win record!

Dennis