“Real World” Personal Strategy Blog
“If we do not change our direction, we are likely to end up where we are headed.”
- Chinese Proverb
Last week was crazy. We had so many last-minute folks come through our doors before the 15th, that we were (briefly) tempted to shut our doors so we could handle the flow!
But we didn’t. We’re glad to say that we worked very hard during the “offseason” so that we would be prepared for the tax season rush. We were able to work with everybody that came in, even folks who walked in on the 14th.
That said…shutting those doors at the end of the day on Thursday (the 15th) was sweet. We could look back on months of hard work, and take real satisfaction in hard work and a bunch of new client relationships which we’re excited to see last for years.
“So…what now?”
That’s a good question–and it takes us back to our offseason preparation. Sure, we’ll be taking some well-deserved vacation around ere from time to time.
If you’re new to us this year…you’ll soon find out that we make big deal around here of keeping in touch, and offering you hope and wisdom about the current state of the economy–and YOUR wallet!
Many tax businesses shut their doors pretty firmly during the summer and fall. Not us.
This week’s Strategy Note, in fact, deals with a topic which most taxpayers have no idea about. This one, actually, is probably one to share with your friends…
Randall M. Hancock, CPA & Martha S. Echols, CPA’s
“Real World” Personal Strategy
Little-Known “Secret”: Amended Returns
As a client of ours, you’ve already got the peace-of-mind that you were able to claim every possible deduction legally allowed in the tax code. We put each return through an extensive review process to ensure that you’re keeping all the income you deserve to keep.
But what about your friends?
Well, since it’s now AFTER April 15th, they might think that the proverbial “fat lady” has sung on their 2009 returns. Not so.
Did you know that according to a 2002 report issued by the General Accounting Office, taxpayers overpay the IRS almost $950 million every year, which equates to an average overpayment of $400 per taxpayer. That’s a somewhat dated report…and the current numbers are certain to be higher.
What’s worse is that folks who prepared their own taxes (with an off the shelf software, or on their own manually) are the most vulnerable. But did you also know that taxpayers who used one of the “big chain” preparers are almost as bad off?
An excerpt from a more RECENT report from the GAO (2006):
In a Limited Study, Chain Preparers Made Serious Errors
In GAO (United States Government Accountability Office) visits to chain preparers, paid preparers often prepared returns that were incorrect, with tax consequences that were sometimes significant. Some of the most serious problems involved these preparers…
1. Not reporting business income in 10 of 19 cases;
2. Failing to take the most advantageous postsecondary education tax benefit in 3 out of the 9 applicable cases; and
3. Failing to itemize deductions at all or failing to claim all available deductions in 7 out of the 9 applicable cases.
More clippings from the report:
* The 19 paid preparers we visited arrived at the correct refund amount only twice. On 5 returns, all for the plumber, they understated our refund amount by a total of $3,465.
* All 19 of our visits to tax return preparers affiliated with chains showed problems. Nearly all of the returns prepared for us were incorrect to some degree, and several of the preparers gave us very bad tax advice, particularly when it came to reporting non-W-2 business income. Only 2 of 19 tax returns showed the correct refund amount, and in both of those visits the paid preparer made mistakes that did not affect the final refund amount.
So what can your friends do about this? Simple: file an “Amended” Return.
Many tax businesses don’t provide this service, but even though we’ve completed our clients’ returns, we WILL review any of your friends’ returns–at no charge.
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“No Charge” Return Review
Special Gift Certificate
As a complimentary service this year, we will provide a Return Review To Any Non-Client.
No charge will be made, unless we have to file an amended return.
[Industry statistics indicate that amended return refunds average about $1500]
Email our office or call (205) 715-0088 to set up this complimentary service!
Deadline May 15th
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“You are never too old to set another goal or to dream a new dream.”
- C. S. Lewis
Well, Thursday is April 15th. You know what this means by now, we hope.
Before we get to that, though–here’s something you may not have realized.
Last Friday was “Tax Freedom Day”. That’s the date pegged by the Tax Foundation as the date when you’ve finally worked to pay off your taxes. The rest of the year is “take home” pay. 
The Tax Foundation is a non-partisan educational organization dedicated to informing US–the taxpayers–about the burdens of our tax liabilities, and according to the Foundation: Americans pay more taxes in 2010 than they will spend on food, clothing and shelter combined.
Well, sorry for that downer, but let’s get back to the biggest news of the week…April 15th.
Don’t get slammed by the deadline! Have you come to see us yet? Have your friends?
And to clear up some confusion, see below…
Randall M. Hancock, CPA & Martha S. Echols, CPA’s
“Real World” Personal Strategy
Let’s clear some things up with some facts about getting an “extension”.
As you know, Thursday, April 15 is the filing deadline for a federal tax return. If you need more time to get your paperwork complete, you need to file (or have us file on your behalf) Form 4868 (Automatic Extension of Time to File) with the IRS by the end of the day on the 15th. This gives you an automatic six-month (until October 15, 2010) extension of time to file.
Here’s the deal: An “Extension of Time to File” is not an “Extension of Time to Pay”, unfortunately. The Extension simply gives you an automatic six months of additional time to get your paperwork together and file that return. But, if you owe more than what you paid with your estimate, you’ll be accumulating penalties and interest on the difference–so PLEASE don’t take the entire six months to do this!
So, when filing your “Extension of Time to File”, you’ll need to estimate what you think you owe to the IRS. This should not be pulling numbers out of thin air (or other various body parts–such as ‘an arm and a leg’…)! You’ll still need to go through your receipts and tax documents and get them “somewhat” organized.
From here, you can estimate both your income and your expenses, and then approximate what you owe Uncle Sam. Keep in mind that this is an ESTIMATE. And, you’ll have to pay what you estimate you owe at the time we file for the extension.
You can do this all electronically through our office, you can mail in the form WITH estimated payment (must be postmarked by the 15th), or you can call a specialized provider and pay by credit card. We can provide you with the appropriate number to call.
But it’s NOT TOO LATE! See below, and come by right away!
To more of your money in your wallet…
What is once well done is done forever.
- Henry David Thoreau
Well, as promised, I’m breaking down the new Health Care legislation in this week’s blog post. Polls show that this legislation isn’t popular–but it’s now the law of the land, so we all should get used to it.
Families WILL be affected by it, and it’s a good thing that you and I are connected–we’ll walk you through how it impacts you, both today and in the future. You’ve got an ace in the hole which other families don’t have.
Oh, and I should also say–less than ten days remaining in tax season. If you haven’t yet touched base with us, please do so ASAP. We want to help you in any way possible, even at this late date.
“Real World” Personal Strategy
Two Years of Health Care Reform In Plain Language
Look, this bill is over 2,000 pages long, so this cannot be an exhaustive breakdown … but this is a start. Let me know if you have any questions!
Because many of the pertinent provisions don’t take effect for a few years, here are the ones which you should know about NOW. As things progress, we’ll keep you updated. Frankly–these things often change, and there’s no telling what the political landscape will look like.
So, I thought it most useful to not clutter your mind with items which won’t take effect beyond the next two years.
Starting this year…
• CREDIT: Small businesses with up to 25 employees earning $40,000/year or less will get a tax credit for 35% of the cost of providing health benefits to their employees.
• NEW TAX: Staring on July 1st, there’s a 10% tax on indoor tanning (of all things).
Insurance changes…
• Children with pre-existing conditions will have to be covered, and those up to age 26 may now stay on parental plans.
• No more lifetime limits on coverage
• Certain Medicare Part D participants will get rebates and discounts on prescription drug coverage.
Next year…
NEW PROCEDURES: Employers will have to report the value of health benefits they provide employees on tax forms — they will face penalties if they don’t provide that information.
A few other pertinent items for you:
Health savings accounts will have increased penalties for non-medical withdrawals (starting in 2011). The current 10% penalty is doubled to 20% for any withdrawal or distribution made for non-medical expenses. Similarly, the penalty for non-qualifying distributions on Archer medical savings accounts raises from 15% to 20%.
Adoption tax credit increases to $13,170 and is extended through the year 2011. Also, the adoption credit is now refundable (which means–it will be issued as a check if adoption expenses don’t match it).
Again, we’ll keep you in the loop as things develop, and with plenty of time to be prepared for future changes and provisions.
