>The Health Care Credit Explained!

>This one may be a little too insider-baseball and funny only to tax return preparers.

Bob Jennings, whose seminars I attend for CPE, does a bit on the business credit authorized by Obamacare to help offset the cost of providing health insurance to employees. Simple, right? Not so fast:

Sadly, Jennings isn’t exaggerating. I’ve tried to run this calculation for my business clients that might qualify and after the torturous calculation it turns out the credit either doesn’t apply or is so minuscule as to be useless.

Well, that’s tax policy for you. Nothing but the hidden land mines of unintended consequences.

>Turbo Tax vs. Tax Professional – Revisited

>Althouse thinks you should purchase TurboTax to do your taxes; I say otherwise. (Hmmm. Both of us seem to have a profit motive for our positions in the debate. Well, consider the merits of my argument while discounting my motive and do the same for Althouse. I still win.)

Price seems to be the biggest factor for those who favor TurboTax. (Which is a pretty good program, don’t get me wrong. Just ask Tim Geithner, Treasury Secretary, who able to manipulate it into preparing a false return for him.) If that’s the case for you, here’s my number 2 reason in my Top 10 list of reasons to hire me:

Price isn’t everything is it? Cost is. What will it cost you to use TurboTax to do your tax return rather than me? Let’s see, there’s the cost of the software, the computer to run the software, the time you spent learning the software and inputting the information, and the potential cost you’ll have if the IRS has a question about your return. And make no mistake, the IRS is questioning more and more returns. You’ll have to take time to respond to any IRS inquiries and should the IRS take a hard line – something they seem to be doing more and more nowadays – you’ll have to take time to research and respond to that. That’s all included with my fee. I call that a pretty low cost for a some peace of mind.

Bottom line: forget about the cost of my time; what’s the cost of yours? What’s your time worth? I’d say your time is worth far more to you than mine.

>IRS Aims at Non-Filing Businesses

>Finally, the IRS gets off its collective duff and go after non-filers:

The IRS plans to take a closer look at businesses that fail to file tax returns, and identify more of themhe agency cannot develop a comprehensive estimate of the number of businesses that do not file returns because it lacks data about the population of all businesses, but it could use the inventory of business non-filers it already has on hand to determine noncompliance, according to a new report by the Government Accountability Office, which noted that the IRS identifies several million potential business non-filers each year, more than it can thoroughly investigate.

Why is this news? Because the IRS would rather spend its budget on terrorizing the compliant – the fish in this barrel over here who are easy to shoot – than going after the non-compliant – the fish in that other barrel way over there, who are too hard to shoot and aren’t much fun to shoot at anyway.

The IRS thinks it spends too much time and effort hunting down the non-compliant and the potential payback is negligble, dollar-wise – most non-compliant taxpayers are non-compliant for a reason: they’re off the grid because they don’t earn that much money anyway; you won’t see a company like GM not filing a tax return but the handy-person down the street who works for cash has more incentive to underreport his income or not file at all. After the chase, these kinds of cases rarely give up a lot of tax dollars and when they do, the taxpayer is rarely in a position to pay. That kind of budget expenditure requires the IRS to do a lot of ‘splainin’ to Congress and there’s one thing the IRS doesn’t like to do and that’s ‘splain itself.

No, rounding up non-filers won’t make a significant dent in the deficit but the sense of fairness – you’re filing your returns and paying your taxes, why isn’t the IRS going after that guy who isnt? – will go a lot farther in promoting voluntary compliance with the tax laws than disallowing reasonable deductions. Taxpayers may grumble about paying taxes but what they grumble about most, and tempts them to cheat even more, is perceived unfairness in the system. It’s not fair you should try to play by the rules of the game when others don’t even show up to play.

So if you haven’t been filing, the IRS will be looking for you. Finally. Get caught up. I happen to know a pretty good CPA who can help you out.

>The IRS and the Latest Licensing Outrage

>Most people care not one farthing about the IRS’ new licensing procedures, and rightly so, but in the tax preparation industry, it’s a big thing. Dan Alban does some heavy olifting in making the point for those few of us who are opposed to what amounts to be a tax increase aimed solely at tax preparers:

Who would you rather prepare your taxes? A professional tax return preparer with over a dozen years experience in preparing tax returns for taxpayers without incident. Or me, an attorney who has never so much as taken a law school class or continuing legal education course in tax law, and gave up on doing his own taxes last year once he started needing to itemize his deductions. You probably think you’d prefer the first option, but the IRS says you’re wrong.

The IRS already has procedures in place to pursue those incompetent or dishonest tax preparers – get called in for a questionable deduction or credit and you’ll roll over pretty quick on your tax preparer, won’t you? – so there’s no need for more licensing. And it already maintains a database of registered attorney, CPAs, and Enrolled Agents that nothing for those preparers required to be registered. No, the new rules not only take in these professionals but others, like those Alban refers to, as well as every single staff member in a firm who decides which information is entered onto a return. Oh, and at $65 a licensing pop. And they’ll have to take a test, too. And Continuing Education to maintain their registration.

Now, will my staff be responsible for any errors on a return they prepare for my signature? Heck, no! And well they shouldn’t. I’m the one who signs off on the return so I’m responsible for making sure the information is accurate and takes reasonable advantage of the tax laws.

The IRS needs this, it says, because it’s receiving a lot of fraudulent tax returns prepared by unscrupulous preparers. How does the IRS know this? Because they already track this information! They already know who these preparers are! They don’t need additional licensing to nab these no-gooders. This is a naked power grab, pure and simple, signed off by major firms like H&R Block to keep the mom-and-pop tax return preparation shops – places where many taxpayers go to have their returns prepared for a cheaper fee than I can prepare them. And let’s not talk about the ethics of giving an agency the power to decide who can represent taxpayers in their convoluted administrative processes.

And it’s clear the IRS hasn’t thought all of this through. The IRS has disclosed its current staff of 19 which processes licensing requests under the old laws is already overwhelmed. The $65 licensing fee is necessary to pay for additional staff and resources to process of what has been estimated to be millions of requests for licensing under the new rules, as well as the renewal requests and administration of tests and continuing education each year.

Wait a minute. Maybe the IRS has thought all of this through. It’s a whole new bureaucratic nightmare it can preside over, full of managers and district and regional managers who must be supervised by even higher management and, well, you get the idea. Oh, and managing the new Health Care law is on the way, too. So it looks like things are looking up for the IRS.

And, as usual, it’s the taxpayer who’ll come up short.

>Me on TV

>Amy Welch, the Communications Director of the OSCPA had tweeted about a local television news story of a tax preparer who’d disappeared and left his clients caught short with the looming October 15th deadline. I’d had clients come my way when their preparer had fallen ill or died and working for the IRS I’d seen this happen, too, so I felt for these people and asked Amy how I could help. She said she’d send my contact information to the reporter and we could take it from there. The reporter contacted me, I helped her run down a lead or two, and then offered some advice – the clients shouldn’t panic, the IRS could waive penalties in situations like this, and they should start trying to recreate their records the best they can. Would I say this on camera?

Gulp.

Well, I’ve turned Amy down enough times in the past that it was about time I said yes and so I did and the next thing you know, well, here it is. I’m at around the 1:05 mark:

http://kfor.vid.trb.com/player/PaperVideoTest.swf

Hey, at least I didn’t stammer and stutter and sweat too much so I’ll call this a success.

Thanks to Amy for setting this up. She was right. It wasn’t so bad.

>Health Care’s Hidden Burden

>Whatever you think of the Patient Protection and Affordable Care Act (PPACA), it’s likely you’re unaware of the provision expanding the 1099 reporting requirements:

The new information reporting requirement is an expansion of a law already in place. Businesses currently have to report to the IRS all payments of $600 or more to individuals for the performance of services on 1099 forms. This makes it harder for individuals to avoid paying taxes on income they earned from businesses that did not employ them full-time. The PPACA expanded this requirement to include all transactions with other businesses of more than $600, including those involving tangible goods.

This provision takes effect in 2012, and Congress estimates it will raise $17 billion over 10 years. It was one of 18 separate tax hikes that are part of the law that, combined, will increase taxes more than $500 billion over 10 years.

Few observers recognized the trouble the 1099 reporting requirement would cause businesses at the time Congress passed the PPACA. Other taxes hikes in the PPACA—such as the new excise tax on high cost “Cadillac” health insurance plans, higher payroll taxes, and a new tax on investment—garnered more attention in the debate leading up to congressional passage because they will raise considerably more revenue.[1] But the bureaucratic burden the 1099 reporting requirement will put on businesses will be immense.

This part of the legislation was up for repeal earlier this week – heck, now that President Obama is aware of it, he’s against it, too – but it the move to do so was voted down in the Senate because neither the Democrats nor the Republicans liked the other side’s proposal.

So it’s still in place. A ticking time bomb of government over-reach. Think it won’t affect you? Think again when your employer weighs the cost of complying with this provision, as well as upgrading your health care, against giving you a raise or even keeping you on as a loyal, productive employee.

>Deadlines? We’re Not Afraid of No Deadlines!

>September 15th was the last chance deadline filing for business tax returns and we were churning away right up until noon. Everyone who had their information to us was taken care of – and some who didn’t have their information to us were taken care of, too, we’re just that good. So the last few weeks were pretty hectic but my great staff managed to make me look good in the eyes of our clients. Miracles? Why, we perform them everyday.

Time to regroup. pick up some pieces, sharpen some tools, gird ourselves for the next filing deadline of October 15th.

Emily Goes to Work

Summer’s not all just laying around and watching TV and texting friends and rattling around on Facebook and MySpace. No, Summer also means a Summer job and Emily’s is, like last year, a once-a-week adventure with her cool Dad at the office. We’ve got plenty she can do and she’s just the person to do it.

Yesterday was her first day and I was glad to have her. Sure, I needed her to do the things she did – cleaning out our filing cabinets and making space for the upcoming filing season and generally getting the place looking more like a professional work space – but what I enjoyed most was her company. She’s a tireless worker, doesn’t complain, and always ready with a quip or two that’ll bring a smile to your face. Disarmingly honest, too: when asked if she wants to be an Accountant, she just smiled and said, no.

We took a long lunch with Mom downtown and then she went right back to work. A nice break in the afternoon for birthday cake for Erin; Emily politely declined and stoically endured the talk around the conference table before getting back to it for the final stretch to quitting time.

I remember last year when the summer was over and she no longer came to the office, the day seemed a longer, less bright thing to get through. This year I’m glad she’s back.

Tax Season . . . Finished!

We crossed the finish line at around 3:00 yesterday afternoon and called it a season. The day had actually ended in the morning – we had our extensions ready to go and one last tax return to prepare but that client called and said he’d be too busy to deal with it and that we could stand down. So we did.

Oh, sure, there were some last minute things to take care of: clients with questions as they picked up their returns, a last minute tweak here and there, even a brand new client calling at the last minute, but for the most part we were through and we had another successful filing season behind us. If we’d had champagne in the refrigerator we would’ve broken it out but we don’t so we didn’t. (Hmmm. Maybe next year?)

I’ve given my fantastic staff the day off but anyone whose name is on the door has to show up. Which means, um, me. And that’s fine. I’ve got much debris to sift through and no time like the present to get started on it. All sorts of projects lined up, too, and they need to get started. And those extensions? Those returns still have to be done. October 15th is only six months away. What are we waiting for?

Anyway, I’m quite pleased with how things went. Could we do better? No firm is perfect so we’ve got much to do. But, overall, I’d say we’re among the best in town. And you know it ain’t braggin‘ if it’s true.

Happy Tax Day!

What, you’re not celebrating? Well, that’s probably because you’re not a CPA. We won’t exactly be celebrating either, really – we’ve accomplished quite a bit this filing season, even managed to pull off a minor miracle or three – have I told you lately about the crack staff I have cranking out the excellent work? – but the stack of extensions we’ve filed and the tasks we’ve had to put on the back burner mean we’ll still be quite busy in the months ahead. Not that we won’t be enjoying our victory over the government’s deadline. It’s just that we’ll be keeping it pretty low key. We’re accountants, after all.

And, hey, look who’s number one when it comes to Googling articles about the epic battle between using turbo tax versus a tax professional. Yep.

Hollywood Stars In Need of a Good Accountant

Being a Hollywood Star means you’re too busy to take care of mundane things like paying taxes:

Take heart, America. Even celebrities pay taxes on April 15.

Well, sometimes.

Nicolas Cage’s bookkeeping got a bit muddled, and now he has to shell out $13.3 million to the federal government.

Joe Francis, founder of “Girls Gone Wild,” forgot, too. His tab? $29.4 million — or roughly 5 million margaritas.

Sinbad the Comedian? A very unfunny $8.15 million, which doesn’t even include interest and legal fees.

Other celebs who owe the taxman big bucks are Pamela Anderson ($1.7 million), the rapper Nas ($3.4 million), singer Dionne Warwick ($2.2 million) and actor Terrence Howard ($1.1 million).

They need look no further than here but I’d want my money up front.

Daylight Ahead

I’m slowly making my way towards daylight and finding time to catch up on a few posts. Clearing out my cache of stuff I’ve come across the last few weeks. Hope you find ‘em interesting.

Final Week

The tax filing deadline is only days away and we ought to be able to take care of everyone who’ve brought their records to us as late as this past Friday. It’ll make for a thrilling finish. So radio silence around here for a few more days. Though I manage a post or two in the meantime. Stick around and see what happens. The suspense’ll kill you.

Light Blogging

Well, lighter than usual. Filing season, you know? Back to the usual sporadic posting when things calm down a bit.

Theft at Koss Blamed on Relaxed Attitude, Lax Oversight

My online buddy, Michael Hasenstab, updates me with the latest on the latest on the Koss Corporation saga:

It was a family operation, where top bosses mingled with workers on the assembly floor, where the chief executive juggled five major titles at once, where the board of directors barely changed in 20-plus years.

And where the company’s vice president of finance could move around millions of dollars without approval from above.

In this unquestioning environment, authorities say, then-Koss Corp. executive Sujata “Sue” Sachdeva was able to spend more than $31 million in Koss funds on a lavish lifestyle and extravagant shopping sprees.

Grant Thornton, the company’s auditors, accept no blame; audits aren’t perfect and if the financial controls of a company appear to be appropriate and in place, an audit won’t necessarily catch fraud. Though you’d think Grant Thornton would have tripped across an embezzlement of $31 million in a company with assets of $28.5 million and gross sales of $38.2 million. Still, it’s a textbook example of the shortcomings of the accounting profession. We can only do so much. The rest is up to the company.

IRS Warns Oklahoma Residents of Tax Refund Scam

I already tweeted about this so you have my permission to not click the link and see my powerful quote in this story. Oh, heck, why click through and scroll down? Here’s the money quote right here:

The IRS impersonation e-mail is a half-step up in sophistication from the common e-mails purportedly from an old Nigerian dictator who has chosen to bequeath the reader with his millions, said Peter Terranova, a certified public accountant based in Oklahoma City.

Some of Terranova’s clients have received the fake IRS refund e-mail. One client clicked on it and landed on a page that looks just like an IRS page, he said.

“It was utterly convincing,” he said. “These guys are that good.”

Brilliant. Incisive. Brief. You were expecting something else?

It talked to this reporter a few weeks ago and had almost forgotten about it. News stories come and go and I’d thought this one had came and went but it popped up over the last weekend. Glad to lend a small, but unforgettable, hand.

When the Going Gets Tough, the Hapless Sue Someone Else

Once again, thanks to my friend Michael Hasenstab, an update on the Koss embezzlement:

Koss Corp. has sued American Express alleging that the credit card company knew that Koss money was being used to pay for shopping sprees by a Koss executive since 2008, but did nothing to stop the fraud.

Koss has said it lost $31 million since 2004 to embezzlement by its former vice president of finance, Sue Sachdeva.

Sachdeva has been indicted in federal court on six counts of wire fraud in connection with the allegations.

So forget the CEO and CFO of Koss, forget the company’s accountants and auditors. $31 million goes missing because American Express didn’t tell the company about what are now clearly unauthorized purchases. Because, you know, when Koss authorized payment of the American Express bills for clothing and furs, how could they have possibly known those purchases weren’t for company business? Employees always wear furs when manufacturing/selling Koss speakers. It reduces static shocks or something. American Express, that’s who should’ve known and put a stop to it. Yes. That’s right. American Express. Time to file a lawsuit.

There. Problem solved, stockholders. Have faith in our company once again.

Tax Season = Light Blogging

The Good Lord created Time so everything wouldn’t happen at once. Clearly He never owned and operated a tax and accounting practice because, well, everything is happening at once. Not that we’re surprised or complaining; to quote Hyman Roth in The Godfather Part 2, This is the life we chose.

Happy to be busy and we’ll get everything done. Count on it. But tax season does make for some scant blogging so sorry for the lack of posts. I’ll work on correcting that soon.

Former Koss Executive to Reveal Storage Locations

Once again, from the mighty Michael Hasentab, an update to this story:

Former Koss Corp. finance executive Sujata Sachdeva has until Wednesday to tell federal prosecutors where all of the items she is accused of buying with Koss money are stored, under an agreement filed in federal court Monday.

Smart move. The time to start atoning for your trespasses is now.

But why do I get the feeling that the storage space that houses $31 million of ill-gotten gains is gonna look a little like the final scene from Raiders of the Lost Ark?

That’s a lot of shoes.

Rural Client

I had a business client call me around lunch time this past Wednesday wanting to schedule a time to review her QuickBooks accounting; what I had to say was more than what I could do over the phone and with the direly predicted ice and snow storm approaching, it might be a week or more before I could get out their way. So I dropped what I was doing – I was approaching a stopping point in what I was doing anyway – hopped in my Sequoia, and headed out. My firm’s not too big just yet where the principal can just come out on a moment’s notice; I like being able to do that and I hope my client’s notice the difference.

The client wasn’t far – about 25 minutes from my office, via Interstate – and I took care of business quickly and she was happy when I was through. I headed back to the office and I was struck as I often am about how easily you can find yourself in a rural setting here in Oklahoma City without having to travel far at all. The business location is just a couple miles south of the airport but looking around you’d think you were out in far west Oklahoma:

(Those clouds are the ragged shreds of the winter storm coming our way.)
Lonely gravel roads. Grain silos. Farm country.

Minutes later, I’m back in suburban Oklahoma City and then running down the Interstate back to the office. Twenty-five minutes later, I’m back in my chair in front of a computer monitor. The swift change of settings is a little disorienting.

I haven’t been to a lot of cities but I imagine that Oklahoma City is one of the places where this kind of thing is becoming quite rare. Soon we’ll be like all of the other big cities – we’ve been saying that for years and years and some day it’ll be true – but for now, we’re not. There are still some things that make us unique. Let’s count our blessings before we become just like every other place.

IRS ’10,000 Letters’ Program Angers CPAs

No kidding:

CPAs are complaining about an intrusive and intimidating Internal Revenue Service (IRS) initiative that began in early January when the IRS started sending “over 10,000” letters to tax return preparers (commercial and professional), with follow-up visits to “thousands” of letter recipients. This is part of an IRS program to be sure that preparers are “assisting clients appropriately” and part of Commissioner Shulman’s overall effort to increase oversight of return preparers. The IRS may intend this as an encouragement to do a better job, but CPA practitioners see this as poorly timed and intimidating during the busy tax season as they seek to apply the tax law correctly to client situations.

No, the IRS doesn’t see this as encouragement; that’s only the lipstick they put on this pig, the thing they tell themselves as they pat themselves on the back and give each other performance awards for coming up with such a brilliant scheme of harassment and intimidation. As always, the IRS’ focus is on the those who are in compliance, and why not? The IRS already has the compliant right where they want them: filing tax returns, paying taxes, duly reporting the returns for which they were paid to prepare. It’s too much trouble, and too expensive, to put together a task force to root out and discipline those who aren’t in compliance. Better to send out letters and visit offices – in the middle of filing season! – and talk in general terms about “errors” – codespeak for intentional fraud and said with a smile – found on the returns of other preparers. They’re like the mob, visiting a business: nice little tax practice you’ve got here. It’d be a shame if anything should happen to it.

CPAs go through a rigorous training program and examination to be licensed, as well as an extensive continuing education program. Further, they’re subject to stringent ethical requirements to maintain their license. Sure, there are lots of bad CPAs, just like there are lots of bad attorneys and bad doctors; the certification process isn’t perfect. But the greatest number of tax returns that are being prepared erroneously – whether intentionally or not – aren’t being prepared by CPAs. (And what’s a correctly prepared tax return anyway? Look for the inevitable stories this filing season of the accuracy rate of the IRS’ own help hotline; they’ll seldom give you the same answer twice. The Internal Revenue Code is a vast and complicated piece of legislation, open to a great number of interpretations. Even the IRS doesn’t know what it means. They don’t win every case in Tax Court.)

If the IRS knows enough about CPAs to send out letters and make office visits, I say formalize your charges and bring ‘em forward. Otherwise, stop this nonsense. You don’t see the Department of Justice sending letters or making visits to attorney offices “encouraging” attorneys to argue more “accurate” cases. The IRS has no business doing the same with CPAs.

Koss Embezzlement May Exceed $20 Million

From my friend Michael Hasenstab comes this:

The alleged embezzlement from Koss Corp. may be far greater than was first apparent, with the company saying late Thursday that “unauthorized transactions” over the last four years could exceed $20 million.

The firm’s longtime vice president of finance already stands accused of stealing $4.5 million from the small, publicly traded maker of stereo headphones over three months this fall and covering her tracks by falsifying balances in Koss’ bank account.

Now, the company’s continuing internal investigation indicates that the unauthorized transactions may extend as far back as fiscal 2006 and amount to more than $20 million. . .

. . . Koss said Thursday that its last four annual financial statements should no longer be relied upon, nor should its latest quarterly report. The firm said it would file restatements as its investigation warrants. . .

. . . The unauthorized transactions the firm now has discovered apparently went unnoticed in annual audits of the company’s books. The Grant Thornton accounting firm conducted the last four annual audits and each time concluded that Koss Corp.’s financial statements fairly represented the firm’s financial position. . .

Audits aren’t infallible but you’d think a little thing like the embezzlement of $20 million would have been caught by a high and mighty firm like Grant Thornton. Alas, no. But I like to think a teeny tiny little firm like mine would have noticed something was afoot. That’s a lot of personal credit card debt that’s being paid off.

Looks like Koss’ll be looking for a new auditing firm. Wonder if they’d like to hear from a teeny tiny little firm in Oklahoma?

Oklahoma City Ranks in "100 Best Places to Work” with three high-ranking businesses | NewsOK.com

You don’t need me to tell you what a great place Oklahoma city is to work. Fortune magazine will tell you:

Fortune magazine’s latest “100 Best Places to Work” list provides more evidence that Oklahoma City has joined the ranks of big-league cities.

Fortune magazine’s latest “100 Best Places to Work” list provides more evidence that Oklahoma City has joined the ranks of big-league cities.

A glaring omission from the list of best places to work: Peter Terranova CPA.

Looks like I’m gonna have to have a little talk with the staff about this. That special, quiet time we share in the morning when I’m chaining them to their desks would be perfect.

Ten Reasons Why I Should Be Preparing Your Tax Return and Not Turbo-Tax

1.) There are no free lunches. I’ve had a chance to look further into Turbo Tax’s free edition of their software and it’s not, you know, free if you have to file a state tax return or you call them with a question. Their other packages? Sure, somewhat cheaper than what I’ll charge you but my price includes the state return and, of course, e-filing’s free. So while TurboTax can beat my price, they can’t beat it by too terribly much.

2.) Price isn’t everything is it? Cost is. What will it cost you to use TurboTax to do your tax return rather than me? Let’s see, there’s the cost of the software, the computer to run the software, the time you spent learning the software and inputting the information, and the potential cost you’ll have if the IRS has a question about your return. And make no mistake, the IRS is questioning more and more returns. You’ll have to take time to respond to any IRS inquiries and should the IRS take a hard line – something they seem to be doing more and more nowadays – you’ll have to take time to research and respond to that. That’s all included with my fee. I call that a pretty low cost for a some peace of mind.

3.) Customer support. I’ll grant TurboTax has pretty good customer support. Not as good as you’ll get from me – I’m a phone call or e-mail away. And depending on the circumstances, I’ll even come to you. I don’t think anyone from TurboTax will do that, do you?

4.) Coffee. Drop your information off and stay for a chat, get coffee. It’s Colombian. It’s free.

5.) Change is the tax code throughout the year? Changes in your personal status? You won’t call TurboTax will you? Didn’t think so.

6.) Record keeping. I maintain files of all the tax returns I prepare for you. Think of all the attic space you’ll save. And I’m ready to provide copies to whomever you authorize me.

7.) A reliable referral source. Anyone you send to me, I guarantee will get the same great service you got.

8.) Networking. I have an incredible span of clients. Chances are, if you have a professional need, I can refer you to someone I know who’ll take care of it. We’re all in this together, you know.

9.) Tax organizers. At the beginning of each year, you get an organizer from me to help you get your records in order for tax preparation. That and a client letter with the latest tax information that might affect you.

10.) If you have a business, I can do more than just your tax returns. I can do your accounting, payroll, consult about QuickBooks, your business, perform financial statement reviews and audits. Name it. I’ll help you find a solution for your business.

Interested? I’ve added my contact information on the sidebar. Give me a shout. Let’s see what I can do for you.

Taxpayers Win 14% of Tax Cases

The odds of winning against the IRS in Tax Court appear dismal:

Your chances of winning a fight with the IRS are about as great as your chances when fighting City Hall. National Taxpayer Advocate Nina Olson, in her recently-released annual report to Congress, listed the 10 tax issues most litigated in the federal courts. Of the 923 cases involving those issues, taxpayers prevailed in whole, or in part, in 132, or roughly 14%. Taxpayers who were represented by counsel did somewhat better when the numbers were broken down—they won 20%, or 54 of 265 cases; pro se taxpayers prevailed in 12%, or 78 of 658 cases. …

But it’s important to remember, these are the cases that actually make it to court. Some are frivolous – sorry, tax protesters, but taxes are legal and you have to pay ‘em – while others may have had no hope of winning in the first place. These statistics don’t show how many disputes were actually resolved in the administrative stage or just prior to going to court. You can be sure the IRS doesn’t litigate every matter, just those they think they can win. So, assuming the IRS thinks they’ll win 100% of the cases they litigate, a 14% success rate on behalf of the taxpayers isn’t bad.

Nurse Outduels IRS Over MBA Tuition

Good for Lori Singleton-Clarke:

A Maryland nurse accomplished two rare feats in her battle with the Internal Revenue Service: She defended herself against the agency’s lawyers and won, and she got a ruling that could help tens of thousands of students deduct the cost of an M.B.A. degree on their taxes.

The U.S. Tax Court handed Lori Singleton-Clarke her victory last month, saying the 47-year-old Bryantown, Md., woman had properly deducted nearly $15,000 in business school tuition. The Tax Court ruling should make it easier for many other professionals to deduct the expense of a Master in Business Administration degree.

Ms. Singleton-Clarke had a tax-return preparer but it’s not clear from the article why that preparer didn’t represent her through all of this. Probably a good thing, since she won; a lot of prepareres – not this one! – roll over and play dead once an audit reaches the litigation stage. But her stubborness, and careful record-keeping, saved the day.

The article portrays the IRS as the overbearing enforcement agency it is; Ms. Singleton-Clarke goes mano-a-mano against a tableful of tax attorneys and para-legals but, with my experience at the IRS, this is just business as usual. Tax Court isn’t just about one case before it but a whole slew of cases on the docket for that day and likely the week ahead. Tax Court judges are similar to the old West circuit judges in that they ride into a central location and here a calendarful of cases and then move on. That’s likely the reason for the nearly one year delay in its ruling. Yes, the IRS usually wins litigation but that’s because the IRS picks and chooses its cases wisely. They’ll always go up against those kooky tax protesters because there’s so much at stake. Also, it’s an easy win. But most cases are settled before they reach the Tax Court, thus making the IRS’ win rate a lot higher than it seems.

Ms. Singleon-Clarke’s efforts notwithstanding, the IRS fumbled the ball badly in this case. They could have easily resolved the matter far earlier in the process, a resolution not necessarily in their favor, but causing far less harm to them than having this Tax Court ruling go against them.

Now, to review this case and then my own client’s circumstances to see if I can save them some money on their taxes.

The IRS’ Heavy Hand of Tax Return Preparer Regulation

Don’t get me started about the IRS’ plan to register all tax preparers. Instead, I’ll let The Wall Street Journal editorial board get started because they echo my sentiments exactly:

We’re guessing that when Americans think of outlaw industries, tax preparers aren’t the first rogues that come to mind. But lo, the nation’s green eyeshades are now destined to come under the regulatory rule of the Internal Revenue Service as part of the Obama Administration’s latest revenue grab.

Under the plan, which would begin with the 2011 tax season, anyone who takes money to help people with their taxes will have to register with the IRS, and eventually pass competency tests and sign up for continuing education. So having made tax filing so complicated that most Americans need help with their forms, Washington now wants to raise the price of such counsel by regulating advisers in a way that may reduce their supply. . .

. . . America’s tax preparers are far from a band of desperados: CPAs and lawyers already make up a large percentage of those who assist taxpayers for a fee, and all paid preparers already have to put their name or ID numbers on client returns. The IRS can thus already see if the clients of certain preparers are on the edgy side in taking deductions or declaring income. The tax men can make auditing decisions accordingly. These new rules look like a redundant exercise to intimidate tax preparers to be less aggressive in urging clients to take tax deductions.

(Emphasis mine.)

The Department of Justice (DOJ) has nothing to do with the registering and continuing education of attorneys. The DOJ doesn’t penalize attorneys for zealous representation of their clients. (Though sanctions can ordered by judges during trials at the judge’s discretion, not as a policy of the DOJ.) The DOJ doesn’t gather data on attorneys about the kinds of cases they take on, like the IRS has with this program. In short, the IRS seems to be the only government agency that has such a heavy hand in the regulation of the professionals that represent the taxpayers that come before them.

Outrageous.

More About TurboTax vs. Tax Professionals

I haven’t changed my opinions I expressed here and here, two of my most visited posts, especially during filings season. To sum up: Yeah, I’m a professional but I think hiring a professional to prepare your tax return is better than using TurboTax. I’ll cost more but in the long run you’ll want me to make sure it’s done right and run interference with the IRS, especially now that the IRS is firing up its audit machine.

But, man, I can’t compete with the free edition of TurboTax. I don’t have a lot of clients that meet the criteria for TurboTax’ free filing program and those that I do have there’s no way I can do their returns for free. For these clients, I try to be competitive but how do you compete against free? You can’t. So, TurboTax, you win this one.

On all other levels though, well, that’s a different story.

Back to The Office

After two days at another CPE, it’s back to the office this morning. This round of CPE wasn’t sponsored by the Oklahoma Society of CPAs; this is the first of two that our Thursday tax luncheon group puts on and it attracts maybe 30 other professionals throughout the city. No, it’s not as classy as the OSCPA – you’re on your own for lunch and the people who put it on are nebbish CPA types, not cool professionals – but the facilities are nice at Oklahoma City Community College and if you’re looking for a no-frills, down-and-dirty, just-give-it-to-me-straight kinda thing, this is the place to be.

This CPE was an intense, two-day business tax review and dealt with new business tax issues as well. The consensus:

1.) Taxes will likely go up.

2.) The number of IRS audits have already gone up and will continue to grow.

3.) These audits will likely be performed by new hires which means:

a.) An unusual amount of havoc may result since these new hires are just learning. This could be a terrible to time to be audited, but

b.) An unusual amount of no-changes may occur as these trainees get their feet under them. So it may be a great time to be audited.

Bottom line: Yeah, I’m tootin’ my own horn but if you haven’t looked at having a professional do your tax return, now would be a good time to start looking. I happen to know of a great firm. Ask me and I’ll tell you all about ‘em.

Ten Ways To Audit Proof Your Tax Return

I tweeted about this already but this one goes out to everyone who’s not following me on Twitter. (And why aren’t you following me on Twitter? Huh? Why?) My favorite tip:

2. Use a pro, or use software.

Some argue a return prepared by a professional is less likely to be audited, but there’s little reliable data to support it. Nevertheless, having a professional prepare your return–or at least advise on anything quirky–is a good idea.

If you do your own return, using a commercially available software package, such as Intuit’s ( INTU – news – people ) Turbotax or H&R Block’s ( HRB – news – people ) Taxcut will make it easier and more reliable. If the software produces some result you consider wrong, don’t simply override it. (Or, at least investigate before you do.) Example: You’re not rich and can’t understand why the software has spit out a Form 6251 showing you owe the alternative minimum tax. Sad to say, you probably do, particularly if you live in a high tax state or have a large family.

Post-Tax Season

We’re approaching an odd time for a tax and accounting practice. We’re in a sort of a twilight world, caught between the tidying up the loose ends of the just-ended season and making preparations for the new one which begins in only a couple of months. Then there are the clients who are fiscal-year enders – a precursor of things to come – and the clients with tax matters before the IRS that need resolution which knows no season. Humming along nicely in the background are the accounting clients that need their reports monthly.

There are staff matters to look after, too. Terra returns to her quest for her CPA and sits for a part of the exam next week. Kyle the intern continues to juggle a full course load with the duties both I and my office partner assign him. They’ve got big things ahead of them and I’ve got to make plans to accommodate if I want to keep them. And I do.

There’s new software to consider. New software to install. There are office procedures we need to evaluate for their effectiveness in serving our clients. What worked this past year? What didn’t? What can we do to help our clients more? What can we do to attract new, high-quality clients?

In many ways, this “down” time is busier than the regular tax season and I’m grateful for it.