Free Site Registration


Bad Clients!

The Biggest Mistakes Tax Prep Clients Make

Print
Email
Reprints

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.

“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!

18 Comments

... hint hint...actual sales tax paid is usually higher than the general sales tax allowance that is calculated. ...

That maybe true, but it's the taxpayers responsibility to have all their receipts to claim it. I've challenged a few of them to keep track of all their receipts, tallying them weekly or monthly, and we'll see next year if they exceed the allowance.

Most give up keeping track as you have to work too much for that deduction.

The "actual receipts" I've seen typically don't add up, knowing full well the client didn't keep every receipt.

Posted by: joej | October 21, 2013 1:39 AM

Report this Comment


The IRS does a fair amount of field checking to make sure returns are being performed correctly. My office used to be right across the street from the local IRS office. I have had three that I am aware of. One was a travelling nurse, one was a royalty (oil rights) and a third was home office deduction. The home office deduction got thrown out because the numbers were... "around $500" and "about 50 miles". I finally said, that I had no confidence in the client and they needed to go elsewhere.

Posted by: OnQue | October 18, 2013 1:33 PM

Report this Comment


Sometimes the incidents are unintentionally humorous or of small significance, but I will submit that, as tax professionals, it is our responsibility to both educate and understand our clients without ill will, anger or dissatisfaction towards them. I know that every single client we instruct on how to properly get their tax papers in order is very appreciative of this.

Questions we think odd about deductions are normal for our clients. What else can you expect when they read such peculiar news reports about tax deductions and credits allowed that are strange but true? Not to mention the fact that every friend they have is a "tax expert" and told them "such and such" was allowed.

For example, very few understand the option of a standard deduction vs itemizing. A very simple matter on the tax return that can be explained in a few minutes, but rarely is. We have, as a matter of proper professionalism, a system where each tax client must be shown their 1040 upon a screen or on paper with a full explanation of each line item. Sure, it creates more time per return, but it is well worth it in referrals that come later from satisfied clients.

Posted by: rixrex | October 18, 2013 8:59 AM

Report this Comment


My favorite memory was the client(minister) who did not want to sign the return because his church contribution was listed as a charitable deduction. He said it was "God's money."

I explained to him that "God's money" was being taxed if he didn't use the deduction. He finally relented after some discussion.

Posted by: rmccanless | October 17, 2013 11:20 AM

Report this Comment


I have had clients ask me if the Christmas presents they gave their children are tax deductible. I have also had them ask me if they can deduct the cost of their lottery tickets as charitable contributions (since they call it the education lottery.)

I have clients who call my office and when my assistant tries to take a message, they refuse to give one and then immediately call my cell phone --AS IF!! I have started handing my cell phone to my assistant at the start of the day. You can imagine their surprise when my assistant answers it too. :)

Posted by: imbusymom1 | October 17, 2013 10:41 AM

Report this Comment


This last tax was a complete disaster for me. On top of everything else I have had to listen to a lot of abuse because I could not make all of the problems go away. I have been preparing returns for a long time. I am 69 soon to be 70; and, I have had enough! I have already started firing clients; and, I am going to continue doing so. If they do not treat me with the respect they give their lawyer and/or their doctor, they are gone. The worst ones and the first ones that are going are the ones that think it is alright to call or come by my home. I may end up eating a lot of beans; but, as I mentioned before I have had enough!

Posted by: lh626 | October 17, 2013 4:23 AM

Report this Comment


Over and over, I tell my clients that poor organization (even the simplest), feet dragging and deadline shopping increase my fee - a consequence that often generates moans, but doesn't stop the behavior.

As one comment put it: Clients - gotta love 'em.

Posted by: burientaxman | October 16, 2013 7:55 PM

Report this Comment


Mary...hint hint...actual sales tax paid is usually higher than the the general sales tax allowance that is calculated. Congratulations, you now know something they don't!

Posted by: PortalBookkeeping | October 16, 2013 4:46 PM

Report this Comment


I had to turn away the tax preparation project for a self-employed person with the following expenses: $1,500 (exactly) for supplies $9,500 (exactly) for travel $500 (exactly) for advertising $700 (exactly) for business meals $2,000 (exactly) for "miscellaneous" Precisely 10,000 miles driven for business purposes.

Posted by: TheFinanceWriter | October 16, 2013 4:18 PM

Report this Comment


I finally decided I'm putting my foot down about the kind of crap (or should I say crappy clients) I'm willing to put up with...the last minute shoe-boxers, the refuse-to-address-organizers, the gimme-the-numbers-from-guesswork and the just plain old neurotics. DONE! A retired acquaintance of mine has my name on a list of preparers she gave her old clients to call. So far FIVE of them have called me and they've ALL been neurotics or a pain-in-the-ass for whatever reason. OBVIOUSLY she's tolerated a lot of garbage over the years. No one else from her "guest list" will receive a return call from now on and the two I agreed to take on will be shown the door after this year.

If they refuse to e-file when they CAN....gone! If they show up with shoeboxes...they pay through the nose. If they think a return is going to be done for $200...get lost!

OVER IT!

Posted by: andystaxes | October 16, 2013 1:14 PM

Report this Comment


AND ... some go on-and-on about the RTRP certification...like it will fix the real problems we have out there - such as with Jane-and-John taxpayer, who can still prepare their own return without any kind of certification, designation, or up-to-date tax knowledge. As long as the IRS allows folks to do their own returns, there should be NO argument...from them nor us...as to what 'competent' really needs to look like! For paid preparers - CPA,EA,JD,RTRP, or Tax Preparer Pro: do your best work - which will always include education! When there is more regulation on self-prepared returns, then we can determine the next level of credential for those who get paid. So, I wish the preparer community would just put to bed the recent issue of RTRP...the IRS shouldn't have the authority to regulate - there is other issues (mentioned above) that they need to address first....and that is that! C....

Posted by: cwlovestax | October 16, 2013 1:01 PM

Report this Comment


Add to the list of pet peeves, bringing the boxes on the 14th of October that, you guessed it, aren't sorted or detailed and expect you to be able to handle it. And the other one, the client who already did the return at home and want you to explain the differences on each line item, not just this year but every year. I say charge them more. But bottom line we cannot cure their bad habits.

Posted by: sherrywhah | October 16, 2013 12:36 PM

Report this Comment


I agree with all of the above; but, I want to add three of my own for your consideration.

1) The client who expects you to tell them the results of the return by just looking at the documents.

2) The client who expects you to tell them exactly when the return will be ready when every file is like opening Pandora's box. You cannot put an exact on something like that!

3) The client who comes to pick up his return and says "I forgot ...." which usually means you are going to have to redo the return which adds to your inability to answer #2.

Now, last but not least, the client that says it is absolutely imperative that you prepare their return before anyone then does not bother to come pick it up. You can bet that when that happens their name goes on a list.

Clients "got to love 'em" because we would be out of business without them!

Posted by: lh626 | October 16, 2013 12:21 PM

Report this Comment


i agree with your article as i have heard many of th same excuses. i think the title should be "They're Bad" instead of the incorrect "Their Bad".

Posted by: gambarota | October 16, 2013 12:11 PM

Report this Comment


i agree with your comments but the i think the title is wrong. i think it should be "They're Bad" not "Their Bad".

Posted by: gambarota | October 16, 2013 11:10 AM

Report this Comment


This is the same complaint I've been hearing for decades. Nothing has changed, people are still the same, some procrastinate and some do not. Some are so exacting that they create excessive and unnecessary work for everyone. It's nothing new. It's a part of any service-oriented business that relies upon the client to provide documentation and information.

The advent of electronic devices does not mean that people will make use of them for record keeping. You can't expect everyone to behave as you might, so you have to be ready for the problems that arise. Another cause of such behavior is the complicated tax code and tax regulations. Every single time so-called "tax simplification" was enacted by Congress, the end result were more complicated tax regulations. The average person could never be expected to know everything there is to know about personal income taxes, it's a full time job. Those who actually can prepare their own taxes properly without assistance are not average.

Posted by: rixrex | October 16, 2013 10:41 AM

Report this Comment


With the advent of smart phone apps for mileage tracking there is no longer any acceptable excuse for not having auto expense records. If they won't do at least that, the only way to get their attention is to refuse to prepare the return with the box checked for 'written evidence' unless they are willing to pay the $10K preparers penalty.

Posted by: JerryN | October 16, 2013 10:26 AM

Report this Comment


One of my biggest pet peeves. The client who brings in every single receipt that they've accumulated during the year. Every single one. Apparently they're hoping I know something they don't know, one of those secrets of the rich and famous, and I'll find the magic deduction that will take all the pain away. Yikes.

Posted by: MaryKelly | October 16, 2013 10:00 AM

Report this Comment

Add Your Comments...

Already Registered?

If you have already registered to Accounting Today, please use the form below to login. When completed you will immeditely be directed to post a comment.

 

Subscribe to the Tax Pro Today newsletter
Advertisement

Advertisement

Our Favorite Tax Tweeters

April 27, 2014

A list of tax-focused handles worth following

More Taxpayer Misconceptions

April 21, 2014

Apparently, there’s no end to the ridiculous things taxpayers believe

Common Taxpayer Misconceptions

March 19, 2014

The NAEA’s collection of ridiculous things tax clients believe

Most Unusual Sales Tax Changes Last Year

February 7, 2014

The Tax & Accounting business of Thomson Reuters has compiled its annual sampling of quirky sales tax changes passed or implemented in 2013.

Strangest Tax Deductions

January 31, 2014

The Minnesota Society of CPAs recently conducted its annual CPA member survey about the most strange and unusual tax deductions proposed by clients. The responses included everything from pets and wedding rings to gifts not given.

A Taxpayer Bill of Rights?

January 24, 2014

The Taxpayer Advocate proposes a list of rights — and responsibilities

Top 10 Tax Mistakes Investors Make

September 30, 2013

Are you helping your clients avoid these common blunders?

Advertisement
Advertisement