Clients seem to never run out of ways to complicate the preparation of their own taxes, according to many practitioners. Worst of all: Many clients can head off their own problems.
Click here to sign up for Tax Pro Today's eNewsletter to get the latest news and behind the scenes commentary you won't find anywhere else.
“Many clients that tried to prepare returns on their own before coming to me try to take deductions that are not legitimate deductions, such as home office and car expenses,” said Jeffrey Schneider, an EA in Royal Palm Beach, Fla. “Many try to deduct the HO even if they are employees, claiming that they have to work at home to complete their job though they go to an employer’s office nine to five.”
In her Forbes TaxGirl blog, writer Kelly Erb listed the worst things clients say to preparers near the deadline: “I’ll stop by on (tax day) to do my taxes.”
Alan Pinck, EA, of A Pinck & Associates in San Jose, Calif., cites clients’ “procrastination -- they have an extension to file and they still wait until the 11th hour to get around to getting the last piece of the puzzle to us. We prepare 98 percent of the return prior to April 15 and have to follow up with them the week before the Oct. 15 deadline to get a response.”
- “I owe more than I did last year. What did you do wrong?”
- “I took my girlfriend to Vegas when I was on business, so can we say she was working and claim her, too?”
NATP member Gary Lundgren, EA, of Tax Debt Solutions in Johnstown Pa., said that clients often forget to include relevant income or deduction items “They often forget that unemployment income is reportable,” he said. “They miss education credits and student loan interest.”
Clients’ mistakes also range from “trying to do their return on their own on TurboTax,” according to Marvin Nasses, RTRP, in Phoenix, to “not bringing all their tax documents,” added Jack Alsen of Alsen Tax Service in St. Paul, Minn.
- “I can’t find my receipts but I can give you a pretty good guess.”
- “I forgot my Schedule K/Form 1099-DIV/fill-in-the-blank. Can I fax or e-mail it over later?”
Not only do clients misunderstand rules for mileage deductions, “their record-keeping leaves much to be desired,” Schneider added, “especially if they start from home, go to a client, go to their office, to a client … They say the record is ‘just too hard.’ My response: ‘Then it’s just too hard to take the deduction.’”
The mistakes’ list for clients tends to begin with “not.”
“Not properly categorizing their expenses, bringing in their information to me in shoe boxes where half of the receipts are illegible (faded, or where they got wet and are not readable),” said Kenneth Reid of Chicago-based MasterType Accounting & Business Services. “Also, individual clients that refuse to fill out basic information on income tax organizers each year.”
“Not keeping good records during the year of deductible personal or business expenses,” noted Wandering TaxPro blogger Robert Flach. “They often give me estimates … And since the inception of the 1986 Act, no client has ever actually kept track of acquisition and home equity debt through multiple refinances the way the Tax Code requires, so I make ball park estimates if things appear to be close to the edge regarding acquisition versus equity regular and AMT limitations.”
- “I had surgery in December but didn’t pay for it until January. But I could really use the deduction now. Can we just say I paid it in December?”
- “My ex and I have a divorce agreement about who gets to claim the kids but a lawyer wrote it and I can’t understand it. Can you figure it out?”
Erica Barber, EA, of CD Tax & Financial in Mesa, Ariz., said that clients often take advice from ill-informed sources: “More times when I’m correcting returns or educating clients on their tax situation they tell me that so-and-so told them otherwise. I have to undo the bad and reseed the truth for them.”
Clients also fail to ask for help. “More and more clients are coming in during tax season and I tell them all these things they could have done. I tell them all the time, ‘Call me, I am open year-round!’” she added. “Taxpayers need to be more proactive in getting tax advice from a professional prior to doing something that causes a taxable event and to stop listening to people who are not tax professionals.”
Also on Erbs’s list: “Wow, my taxes are so steep, I can’t afford to pay you now.”
Note: The original headline of this story was "Their Bad" -- a play on the phrase "My bad," as in, "That's my fault" or "That's my mistake." As many readers thought "Their Bad" was a grammatically mistaken form of "They're Bad," however, we decided to change it. Kudos to our readers for being keen proofreaders!