Tag: e-file

Posted on by Jan Roberg

Is Your Tax Preparer a Dinosaur?

Perry the guinea pig in his stegosaurus costume. Photo by Kelsey Witzling.

 

A big part of my business is helping people who are getting audited by the IRS.  What you might find surprising is how many people I wind up helping  that paid a “professional” to prepare their tax returns.  I use the term professional loosely here because right now, basically anybody with a computer can hang out a sign and say they are a tax professional.

 

Now the IRS tried to put a stop to that, they set up rules requiring testing and training for anyone getting paid to prepare tax returns.  But they lost a court case so now you’re stuck trying to guess if your preparer has even minimal competency.

 

One of the questions I ask when reviewing an audit return is, “How old is your tax person?”  Full disclosure here, I’m also “over a certain age”—let’s just leave it at that.    Lots of tax professionals are older.  (At the IRS convention in Chicago this summer, we made a game of looking for people who were under 40—not many to be found.)  But the dinosaurs are the ones who don’t keep up with the new tax laws.

 

True story:  a woman came into my office because she was being audited and the IRS wanted a few thousand dollars from her.  She had had her return done by a “professional” but he didn’t do audits so she found me on the internet.  Red Flag 1:  if your “professional” won’t represent you on a tax return that he’s prepared then he’s probably not credentialed.

 

Anyway, I took a look at the return and asked her a few questions.  By the time I got to, “How old is your tax preparer?”  I already knew the answer.  He was a retired CPA.  He just did tax returns during the season to keep busy.

 

I handed back the tax return and told her to pay the money.  The tax return had been prepared using 2004 tax rules.  Had the return been done in 2004—fine, but since it was her 2010 taxes, everything was different.  Here’s the real kicker—had she done her own taxes using Turbo Tax or some other home style software—she wouldn’t have made that mistake.  The software questions would have guided her to the right answers and she never would have claimed a deduction that she wasn’t allowed.

 

There are lots of mature tax preparers (I’m one of them) who keep up their licenses, take update classes and keep up with what’s new in tax law.  The tax dinosaurs, on the other hand, are living in the past and can cause more harm than good for their clients.  Here are some warning signs that you’ve got a dinosaur:

 

1.  Your preparer won’t e-file your tax return.  Any professional tax preparer that prepares over 10 tax returns a year is required to e-file the returns.  If you have a “normal” tax return and you still have to mail it—that’s a warning sign that your person is behind the times.

2.  Your preparer doesn’t use tax software.  I don’t care how brilliant the person is—software is necessary for today’s tax returns.  Software isn’t perfect, but it eliminates many mistakes.

 

You should also beware of preparers who won’t sign your return and don’t have PTIN numbers.  That’s not necessarily a dinosaur, that’s more likely fraud—you should run from those guys.

 

Dinosaurs are extinct.   The one time the IRS tried to do the right thing and protect people from the tax dinosaurs, they lost the court case.  So you have to protect yourself.   Tax dinosaurs should be extinct too.

Posted on by Jan Roberg

2012 Refunds: What You Need to Know

Sloth

Photo by Thowra_uk at Flickr.com

So what’s with the sloth?  Refunds are going to be late this year.  If you’re charging up a storm for Christmas and expecting to pay off your credit cards with your tax refund in January, you may be in for a rough go of it.  Here’s what you need to know for this coming tax season:

 

  1. The first date that e-file will be open is January 22nd, that’s already a little later than usual.  Couple that with the fact that Congress is still messing around with 2012 tax issues and that could hold up the filing season even more.
  2. The IRS is no longer providing a refund schedule.  Instead, they are saying that most people can expect their refund within 21 days if they e-file, and longer if they mail in their return.  While there’s a possibility that some refunds will be faster, you can’t count on receiving any faster than 21 days.
  3. Most refunds are expected to arrive within 21 days, but some refunds can be expected to take 75 days.  That’s not a typo, I said seventy-five days.

 

How will I know if I should expect a 21 day or a 75 day refund? Basically, if you’ve ever had an issue with claiming a dependent, or if you’ve had an identity theft problem, you’re going to fall into the 75 day category.  Let’s say your ex claimed your daughter on his return last year and he shouldn’t have.  You fought it and won.  This year, he tries it again.  The IRS snags his return and it’s held up for 75 days.  And that’s a good thing, he’s cheating on his taxes and this time it won’t work.

 

Here’s the down side.  You go to file your taxes the right way, but the sneaky ex’s return is already in the system.  Now you’re automatically flagged and your return is also getting held for 75 days also.  So even though you’re the good person doing the right thing, your tax return can be delayed for up to 75 days because someone else illegally tries to claim your child.

 

So, be prepared for a late refund and plan accordingly.

Posted on by Jan Roberg

5 Most Common Mistakes on E-filed Tax Returns

Work

Photo by Falk Lademann on flickr.com

I’m a big fan of using computer software to file your tax return. By using tax software, you eliminate many of the problems that are associated with paper filing. You can even access an online program right from my website, here’s a link: http://robergtaxsolutions.com/do-your-own-2011-taxes/. Yes, that was a blatant commercial plug, sorry.

But tax software is only as good as the information you put into it. If you know what you’re looking for, you’re less likely to make mistakes. Here’s a list of 5 of the most common problems that I’ve seen:

  1. Using decimal points. The IRS doesn’t want you to include the pennies when you do your tax return, they just want round numbers. Some software programs let you use pennies anyway, but most don’t. If you’re an anal retentive bean counter like me, you just can’t help yourself and you automatically type in the pennies anyway. So instead of rounding $99.78 to 100 like you should, you type in 99.78. Some software programs convert that to $9,978 and that messes up your tax return.
  2. Not proofreading before you hit send. Problems like the decimal point issue can be easily fixed if you proofread your return before you hit “Send.” One time I helped a woman who had gotten an IRS letter about her tax return – they wanted her to document the million dollars of mortgage interest she had claimed on her Schedule A. Well, of course she didn’t pay a million dollars; it was a case of the decimal point not working. She never bothered to look at the return before she sent it. She saw that she was getting a huge refund (million dollar deductions can do that for you) and was happy so she sent her return in. Here’s a good tax tip: if you’re getting an unusually large refund, or owe a whole lot more than you’ve ever paid before, there’s a good possibility that there’s a mistake that needs fixing.
  3. Missing a Schedule D – the form for sale of stock. “But I didn’t sell any stock,” you say. Think again. If you work for a company that issues stock options, and you benefited from those stock options, you need to do a Schedule D. Yes, the tax was paid through your withholding, but you’ve got to do the paperwork on your tax return to go with it. One local company here in St. Louis, famous for hiring smart people, issued stock options to almost all of their employees one year. I spent a good part of a summer amending returns for people who didn’t file their Schedule D. (They really were smart people, so they won’t make that same mistake again.)
  4. Missing a Schedule D – same form. This category is made up of senior citizens who take money out of their mutual funds as part of their retirement income. When you take money out of your mutual fund, you have to sell the shares to take the cash. It’s not like a regular savings account, it’s a stock investment and those sales must go on a schedule D.
  5. Leaving out required information about taxable income. I can’t stress this enough, if you get something in the mail that says, “Important Tax Information Enclosed”, then there’s probably a number in that envelope that needs to go on your tax return. Here’s some common misconceptions:
    • Just because you paid tax when you took money out of your 401(k) account, doesn’t mean you don’t have to report it on your tax return. It must be reported.
    • Most retirement income is taxable on your federal return. Even if your retirement money isn’t taxable, it still gets reported on your tax return.
    • The same holds true for tax exempt interest: you report it even if you don’t pay tax on it. And, a lot of federally tax exempt interest is taxable to your state. Don’t just leave that stuff off.
    • Social security: for many people, social security isn’t taxable so a lot of folks just leave their social security off of their returns altogether. But for many folks, part of their social security is taxable. If you don’t include it in the calculations, you won’t know you missed it. Trust me, the IRS won’t miss the calculation if you owe tax on your Social Security.
    • Along with reporting your social security, don’t forget to fill out all the boxes. In my state of Missouri, your medicare part B payment can actually reduce your taxes or qualify you for a larger property tax credit. Software programs are pretty good about making those things flow through to the pages they belong to. The key is that you have to input everything they ask you to.

Despite this list of common mistakes, you’re still much better off e-filing your return than preparing your taxes by hand. I did a separate post on common mistakes on paper filed tax returns: http://robergtaxsolutions.com/2012/02/four-most-common-mistakes-in-a-paper-tax-return/ – those mistakes are impossible to make when e-filing so you’re already ahead of the game. Besides, you now know what these common mistakes are so you’re not going to make them.

Posted on by Jan Roberg

Four Most Common Mistakes in a Paper Tax Return

F***in' taxes

Photo by Beatrice Murch on flickr.com

First, let me mention that you’re reading this on the internet. That means that you have access to a computer and can probably navigate your way around some computer software. Because you can, I highly recommend preparing your taxes on the computer and e-filing the return. But if you really want to do it “by hand”, be aware of these mistakes.

  1. Not putting your name on the return. This sounds totally idiotic but it actually happens quite a lot. Back in the stone age when I was learning how to prepare returns professionally, the instructor made a big stink about putting the name, address, and social security number on every practice return we ever did. If you missed those items, you got a zero on the test. How can anyone miss that? It’s easy. You worry about doing your numbers right, you do a draft copy first and then write it neatly on a new form later. Nobody puts their name on the draft copy, but then they forget to put the name on the clean one too. This can’t happen with a computerized return because you can’t e-file without a name. I usually handle about one call a year because someone didn’t put his name on the tax return.
  2. Not sending all the pages that need to be attached. In my experience, the most common missing form seems to be the Schedule EIC. That’s the page that says your child’s name, birth date, social security number and relationship to you. It doesn’t really look like a real tax form so I think it’s easy to miss. http://www.irs.gov/pub/irs-pdf/f1040sei.pdf Once again, if you e-file a return with EIC on it, the Schedule EIC is automatically submitted for you.
  3. Math errors. Ever have one of those days when you add 2 plus 2 and then you write down 5 even though you know its 4? The IRS will just correct those for you and they do understand that it’s just an adding mistake, not tax fraud – you’re not going to jail for that. It’s really just an embarrassment factor and that official looking letter on the IRS letterhead can give you the willies. Once again, computer software will take care of the math for you.
  4. Getting the income tax or EIC figure out of the wrong column or row. Lots of numbers and small print – it’s easy to make a mistake. Once again, if you make a mistake here, the IRS will correct it for you. And also, a computer tax program won’t have that problem.

If you’re paper filing your tax return, here’s a really important piece of information you need to know: The number of e-filed returns that get audited is ½ of 1%. The number of paper returns that get audited is 25%. Which category do you want to be in? If you want to try out some tax software, you can go to my site and do it online. You don’t pay unless you actually file and it’s pretty inexpensive. Here’s a link: http://robergtaxsolutions.com/do-your-own-2011-taxes/

Posted on by Jan Roberg

IRS E-File Starts January 14th

The IRS will begin accepting e-filed individual income tax returns on January 14th.  Many people are anxious to file their returns, especially if they have big refunds coming to them.  But I’d like to issue a caution to those eager filers: don’t rush.  Here’s some common sense tips to help you hold out just a little.

1.  Do not try to file your tax return until you have all of your necessary paperwork–that means your W2s and 1099s.  It’s against the law for a professional preparer to file a return just using your check stub.  (Some companies will do a “loan” against your tax refund, that’s different, but you’ll pay a hefty fee for that.) 

2.  If you file your return without reporting all of your income, you will receive a letter from the IRS later.  It won’t be friendly either.  The headache of correcting a mistake like that is much worse than waiting a few weeks to have everything together and doing it right the first time.

3.  Your employer is required by law to send out your W2’s by January 31st.  You should have everything in your hands by February 5th.

4.  Even if you have all of your paperwork, some returns won’t be able to be filed until mid to late February because of delays.  When Congress changed the tax laws in December, it messed up the IRS’ ability to process some people’s returns.  If you itemize your deductions on a Schedule A frm, if you claim the teacher deduction, or if you claim the tuition and fees deduction; then you can’t file your return yet anyway.  (Other education credits weren’t affected.)

5.  If you’re doing direct deposit, there is no difference between whether you file on January 14th or filing on January 19th as far as how fast you get your refund.  It’s all related to the IRS cut off dates for issuing checks and direct deposits.  No difference.  It might make sense to hold off a day or two to make sure you’ve got everything you need.

For you FAFSA filers.  You want you tax return done as soon as possible so that you can include the information on your FAFSA application.  If you’re one of the many people whose return will be delayed because of itemizing, it’s okay to go ahead an prepare your return now and use the tax return information in your FAFSA and then file the actual return later once the IRS starts accepting them.