Redoing TT Returns

[Snaggletooth]

I'll start another thread with this, since another post is seemingly being taken off into a separate discussion. Not to mention, I would like to focus on it separately.

I was really surprised to hear from Joan that most of her TurboTax refilings have cost the taxpayers money. Lion says that is her experience as well. Bart agrees with me, as in the last 10 years I have refiled about 35 returns from TT do-it-yourself people, and I have had only one return where the taxpayer actually owed money. (I think they took my return home with them and trashed it) Out of these I probably had only 3 where the taxes were actually filed accurately by the DIY.

I can't imagine Joan and Lion have all that much different clientele than I do, or Bart. I have seen the same kind of ignorance from documents as Joan describes, but it seems like I'm always able to keep plugging until the taxpayer comes out on top. Average refund is between $800-$1000. One of them was almost $40K because a taxpayer entered a 1099-R for $135,000 instead of a 1099-B and the taxpayer asked me to look at it before coughing up the money. Of course, TT didn't ask him for his $120,000 basis.

I have mostly upper-income people with small businesses, rental property, investments, and other more complicated elements. I think most of us on the board have the same kind of clientele. I do know that Joan and Lion practice in regions which have at least double the income and cost-of-living levels that Bart and I have.

They also might be much more diligent than myself in looking over the source documents. I look at them too, but I quickly gravitate to the ones that result in refunds, and perhaps breeze too quickly through the rest of them.

Would like to hear from others -- please be very reflective and don't bias your answer by thinking that refunds equal tax expertise and payments do not. It might actually be the other way around.

[ED SMITH]

I don't know if 35 returns makes a valid statistical sample. iwould gues at least ten times that many. Your next 10 could just as easily get you the opposite results.

I say this because when I worked for HRB, they claimed an average refund of $400 on amending self-prepared returns. They don't say say how many there were but with 20 million clients, just 1/10th of 1 % would be 20,000.

My recent experience has been with one client who has 3 rental properties. All the interest went on Sch A. When it went onto Sch E it generated passive loss limitation. So his taxes went up considerably.

Another client double dipped his health insurance, putting the same amount on Sch C and as an adj. to income.

[taxea]

Redoing TT Returns

I have always maintained that one needs a basic understanding of tax law (everything in Pub 17) in order to use any tax DIY product. Having used TT myself, it doesn't surprise me that anyone who doesn't understand the basics can easily make mistakes. taxea

[BP.]

I think the clients I get that were TT/DIY can fall into 3 rough groups:

The first is those who got an IRS notice. They often do owe, because they've left off an income item, like a 1099-R, or B. But usually the amount they owe is greatly reduced by finding overlooked deductions, credits or stock basis. So they're happy, or less sad, because they know they left off the income, but don't owe as much tax as they were billed.

The second group did not get any notices, but want professional prep because of some life change. These people very often can be amended for prior years because they overlooked many credits or deductions they are unfamiliar with, for example CTC or the tuition credits. So these people get refunds. I meet at least a few new clients like this every year.

In just one instance, many years ago I amended returns for a new client who was single, but supported her mom, who lived with her, and qualified her for HOH & a dependency exemption, which the client did not realize. She shook and cried when she found out she was getting refunds totalling over $11,000, and she has sent me a Christmas gift every year since.

The third group are those who give up midway through and turn to a pro for help. I get a several of these each year. No matter if the results are up or down for these clients, they are relieved and happy.

They also might be much more diligent than myself in looking over the source documents. I look at them too, but I quickly gravitate to the ones that result in refunds, and perhaps breeze too quickly through the rest of them.

Don't really know what you mean by that statement.

Would like to hear from others -- please be very reflective and don't bias your answer by thinking that refunds equal tax expertise and payments do not.

I agree with your last statement, Ron. That's why I don't really focus on whether the TT/DIY clients as a group end up on the plus or minus side, but focus more on providing exceptional service and value to a new client. No matter what the results are for the client, you can usually find an opportunity to make the TT/DIY's into satisfied, repeat customers.

Cheers!
Barbara

[Snaggletooth]

Thanks for responding

That's why I don't really focus on whether the TT/DIY clients as a group end up on the plus or minus side, but focus more on providing exceptional service and value to a new client. No matter what the results are for the client, you can usually find an opportunity to make the TT/DIY's into satisfied, repeat customers.

Barbara, thank you so much for your concurrence. As far as your above statement goes, I am very much in synch and on your wavelength.

However, the public is not. For all but a precious few, the best preparer in town is the one who gets them back the most money. Even honest taxpayers buy into this because they don't know tax principles and don't really want to learn.

I make no bones about my track record of "plus side" recoveries from the TurboTax DIY crowd, and I want to be honest when I tell them this. The truly unbiased mindset takes a back seat to public perception. I don't necessarily like this but all persons in service industries must factor this into their expectations if they wish to avoid disappointment.

The reward for truth comes with those clients for whom truth is important. And over the course of many years most of them will ultimately appreciate an advisor who is straight with them.

Barbara, thanks for your post..

[David1980]

I think it depends on the person. Some will just follow the interview and potentially miss things they don't know to look for. Got a lot on the sales tax deduction for Schedule A and naturally the returns filed last year without the phone credit.

Then there's the "tax expert" who knows they can deduct that $20,000 they spent remodeling the bathroom and gosh darnit they're going to find somewhere to stick it in the program. And then they drive to work 20 miles each way every day, so they put in their business miles. (Actually I know paid prepares like this too...) Those ones upon review usually are going to owe because they were a little "enthusiastic" with their deductions.

As far as the accuracy of self prepared returns, I'd love to know the statistics on HRB or other chain prepared returns. I imagine a lot gets through but unless specifically asked or going to a different chain they aren't going to just review a prior year return. If all those HRB returns were reviewed in the same way self prepared returns are reviewed what percentage of errors would be found? The thought scares me.

[Chief]

An earlier IRS Forum

had this caption:
Tax Software Is No Substitute for Tax Knowledge.

This statement speaks reams of why tax professionals are in the business.

[Black Bart]

H & R Block

...As far as the accuracy of self prepared returns, I'd love to know the statistics on HRB or other chain prepared returns. I imagine a lot gets through but unless specifically asked or going to a different chain they aren't going to just review a prior year return. If all those HRB returns were reviewed in the same way self prepared returns are reviewed what percentage of errors would be found? The thought scares me.

Speaking for myself, I have a pretty good opinion of HRB. Our local store was formerly run by an independent (no credentials--lots of practical experience). A CPA has it now. I've checked clients' prior years from both operators -- no errors.

On the other hand, lots of customers complain "They made me pay lots of $$$" and they've lost a lot of business here to Jackson-Hewitt. I don't know if the company or the franchisee sets standards, but I don't think reviews would hurt our Block -- can't speak for JH.

[Burke]

If you are looking for anecdotal evidence or statistics, I would say my TT redo's are about 75/25% on the refund/owe situations. I am going to redo three years for a new client right now because of omission of a big deduction on the state return. States are often more complicated than federal. The fact is, these DIY's simply are not tax experts or even moderately educated about tax laws. They look at the forms and say, "How hard can it be?" It used to be a lot simpler, but today......