Garbage in? How preparers handle DIY prep clients

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Even as preparers anticipate a deluge of work after the passing of the Tax Cuts and Jobs Act and its many changes, some clients still walk in wondering why they should pay for tax prep when they can use software to do it themselves.

“Because you may know how to use a computer doesn’t mean you know tax law. I’ve amended numerous DYI returns because a client didn’t know about a deduction, or listed 100 percent of mortgage interest and real estate taxes on multiple forms,” said Bernadette Antonelli, an Enrolled Agent at Arlington Tax & Bookkeeping Service in Kearny, N.J. “DYI software doesn’t answer questions about tax savings or tax planning or make suggestions about tax-savings strategies.”

“You have to understand where to put the information, which elections to make, know when the calculated results are incorrect and understand carryovers and carrybacks,” said Terri Ryman, an EA at Southwest Tax & Accounting, in Elkhart, Kan. “There are numerous decisions on every return.”

“If you want me to help you plan throughout so we can work to help you pay the minimum tax the law allows on your business and personal returns with expertise, that is what you need me for,” said CPA Brian Stoner in Burbank, Calif.

Said EA Laurie Ziegler at Sass Accounting, in Saukville, Wis. “They can’t ask the software about tax planning and what-if scenarios. The tax software also isn’t going to help them answer that letter from the IRS or give them advice when their child goes to college or their spouse dies suddenly.”
“Doing tax returns DIY is like translating into the foreign language that you don’t speak through a free online translation program. Just because it looks like it’s in the foreign language doesn’t mean it says what you originally wrote,” said Yuliya Harvey, an EA in Lake Havasu City, Arizona.

‘The fallout’

Confidence in DIY prep seems to continue despite cautionary court cases such as Bulakites v. Commissioner, in which the Tax Court determined that an insurance consultant who relied on the consumer edition of a popular tax software made mistakes in his deductions on two years of returns – and could not blame the software, which he claimed lured him into taking the deductions.

Bangor, Maine, EA Jerrod Oltmann regularly sees “the fallout of self-prepared returns,” both from referred clients and as a volunteer at a low-income legal aid society helping people fix their “often self-prepared tax problems when. “Doing your own taxes can turn your financial life to ashes in a hot minute if you don’t know what you’re doing.”

“There’s nothing inherently wrong with off-the-shelf software.” Oltmann said. “I know of several law school and tax-law program professors who use a prominent Internet-based prep service – but they understand the limits of the software and the subtleties of certain code sections that take years to fully appreciate.”

Some preparers have come to grips with some clients insisting on DIY. “If a client feels that they can do it themselves, I’m more than willing to let them,” said Morris Armstrong, an EA and registered investment advisor at Armstrong Financial Strategies in Cheshire, Conn. “I may point out some errors that they have made after a review of prior years and suggest that they correct it. The reality is that our government has emasculated the agency charged with collecting revenues, and if people want to pursue dishonest behavior that’s their personal choice. Someone who believes that it’s okay to lie and cheat on taxes is not someone that I want as a client.”

Foundation of a relationship?

“I first build the relationship and point out that while the DIY software can do a fine job for some people, what they get from my services is time savings and future tax planning,” said Kerry Freeman, an EA at Freeman Income Tax Service in Anthem, Ariz. “Time saving when sitting in front of their computer trying to input W-2s and broker statements and trying to read and reread and understand the question that the program is asking. Planning with up-to-date knowledge and planning that can save money and heartache in the future.”

EA Jeffrey Gentner in Williamsville, N.Y., sends prospects who extol DIY prep software on their way. “If the discussion leads to … DIY software, I simply tell them that anyone can fill in the blanks and complete a return,” he said, “but wouldn’t it be nice to know that it was completed correctly and that every available deduction and credit was researched, analyzed and explained fully?”

“I let them know that my years of experience has proven that taxpayers with more than a basic return are the individuals who receive correspondence from the IRS for erroneous returns,” said Twila Midwood, an EA at Advanced Tax Centre, in Rockledge, Fla. “These are usually as a result of lack of knowledge of tax law and not necessarily data input errors.”

Harvey actually tells DIYers that if their situation is extremely straightforward, “They probably don’t need me – but there are several things DIY software can’t do for you. First, by having a conversation about the small stuff I learn about things that I’ll ask questions about, in the client’s mind unrelated to a tax question,” she said.

Over the past several years, Gentner has had new clients who tried the DIY route “only to be unhappy with the results or have been notified by the IRS about errors or omissions on their self-prepared returns. Those,” he said, “turn out to be the best clients and they certainly understand and appreciate the value of hiring a professional.”

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