They’re Not from the Government, and They’re Not Here to Help

Sometimes people don’t file their taxes and ignore the tax collector’s notices. To get your attention, the government will create a wildly high estimated tax bill and put a lien on your property.

When we are contacted by clients who have had liens put against them, they are horrified. They were busy, their finances were too complicated that year, or they were worried about the size of what they might owe and they just couldn’t get themselves to deal with the problem.

We — and most reputable accounting firms – can resolve the non-filing complaint, adjust the tax bill, and, if needed, work out a payment plan for the taxes.  The steps to resolution are low-key, routine, and straight forward.

  • First, we help you file your taxes for the year in question.
  • The lien against your assets will be lifted when you pay the new, and probably much lower, tax bill.

Clearing up the problem isn’t painless.  You’ll have to pay for the taxes owed on your actual income, penalties, interest, and for the tax preparation. Ouch! But, the path to fixing the problem is clear and relatively drama free.

Unfortunately, we have discovered a vulture industry that goes after taxpayers who have trouble with the IRS or state tax collectors.  A client shared with us the blizzard of come-ons he received once the tax lien against him was recorded and made part of the public record.

Scam Notice Square Collage

Sample of Notices Received. Click to see more.

These notices mimic official government notices — they’re not!  

They are designed to get scared taxpayers to call a phone number without thinking about who they will be talking to.

The language and style they all use is designed to trick you into believing you’ll be talking directly to the government.

The language each of these companies use is remarkably similar. Everything is URGENT, or FINAL.  Several of the notices give a made-up case or file number… a number that has nothing to do with what the real tax collectors are using.  One company says that they’ll get the $377,548 tax bill reduced to $79,509.60… another suggests if you work with them the final bill will be $18,499.85. The warn, if you don’t respond to their notice, your wages will be garnished and bank accounts seized.  (See a larger photo of the frightening notices this one client received.)

A couple letters say that they are from government-sounding organizations such as “The Taxing Authority” or “Tax Group”.  Others don’t tell you who the letter is from… you’re supposed to assume that it’s from the government. A couple even came in envelopes with the official-sounding warning:

$2,000 Fine or 5 Yrs. imprisonment or both for any person who interferes with or obstructs the delivery of this letter or otherwise violates Sec. 18 United States Code 1702.

Doesn’t this warning apply to all mail tampering?!

Some — but not all — of the letters say that they are NOT from an official government agency.  But, those disclaimers are in small type and designed to be overlooked.

We don’t know how any of the companies who send the breathless, fear-mongering notices plan to help solve the taxpayers problem.  But, we really don’t like the attempt to trick people into thinking that they are dealing with a government agency when they are not.

Our advice to people who receive tax notices or who have tax liens placed against their assets: call us or another professional tax preparer who doesn’t try to get new clients by tricking them or making them crazy frightened!

 

 

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California LLC Payments

California has a confusing number of LLC payment vouchers… Here is a quick guide that  we’re passing around the office.

  • Form 3522 (Prior Year) – to be used to pay last year’s $800 payment if it was not made (regardless of when paid)
  • Form 3522 – to be used for the current year’s $800  due in April
  • Form 3536 – to be used for the estimated gross receipts fee due in June
  • Form 3537 – this is called the payment voucher for automatic extensions but should only be used if LLC is going on extension AND there is nonconsenting nonresident members’ tax owed.  (Extra credit if you need to file this one!)
  • Form 3588 – Payment Voucher for LLC electronically filed returns – This is only used if the LLC is e-filing and has a balance due based on the gross receipts fee.  (This would be when no 3536 payment was made)
Franchise Tax Board Website top screen scrape

Visit the Franchise Tax Board’s site for
More Information on LLCs and Taxes

California LLC extensions are automatic.  There is nothing to file and therefore nothing to be e-filed.  Instead, make the payments on the voucher for the type of payment you are making.

So to recap… for most small LLC’s, you only need to worry about the current and prior year 3522’s at extension time.  It looks to me like the extension transmittal letter is now including reference to both forms appropriately.  (Good news!)

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Tell Me What I Did Wrong on TurboTax!

I filed my taxes at the end of January but later received another W2. I have received my federal refund already and state is scheduled for this week according to the website. In any case, I went into TurboTax to amend my return, and it said I now was going to owe close to $4K. This is very alarming since that’s almost all of what I received, so I wonder if I am doing something wrong. Is this something you can assist me with?

The message above is real and a typical example of an increasing number of requests we are receiving. People want help with part of their tax return.  They see a number that looks funny on a particular line or don’t understand how to complete a particular section.  They want to come in for a consultation on that one item.

Our firm is ready to prepare complete tax returns, but our partners are not comfortable dealing with just a portion of a return or helping with a specific line item.  The tax laws are so complex! One line item effects another, and various deductions and credits phase in and out depending on factors recorded in a different part of the form.  We worry about missing some nuance if we gave advice on a portion of a return or reviewed someone else’s calculations.

Frustrated man trying to do his taxes at homeWe also worry about frustrating people who are confident that they’ve nailed their return, but just cannot figure out why they are getting an odd result when they enter one particular number.  When we look at their work, we are liable to uncover that the reason for the numbers they don’t expect is a mistake they made somewhere else.  Fixing the unexpected numbers could involve substantial work, significantly beyond the hour of consultation the person signed up for.

What are we supposed to do?  Not tell the client of our concern?  Explain that their costs to correct the issue are several times what they expected? Neither are good choices.

Besides, accountants tend to be control freaks.  We want to know everything,  just in case there’s a rarely encountered rule that would apply to your return. We are not good putting blinders on and answering Yes/No questions.

Tax FormWe do think that TurboTax and its competitors are good, credible ways for people with relatively simple returns to prepare their own taxes. Hiring a CPA to do your W2-income tax return would be like going to the emergency room for a scraped knee.  The ER doctors would do a great job, but there are excellent, more cost-effective solutions.

We also believe that most people who have asked for our help are bright, computer savvy people who sincerely believe that they just need a small bit of knowledge to complete their own return.

But, really! Our firm — and other accounting firms and tax preparation services — are not good choices for someone looking for help to prepare their own taxes.

What to Do?

TurboTax’s website says it offers tax advice to people using their software.  Other software vendors probably have similar services.  You can try them out.

On the other hand, if your taxes have grown in complexity to the point that you’re spending time researching and worrying about the forms, maybe you’d like us to prepare your taxes for you!

If we can help, please call us at 415.433.4500 or contact us via the web.

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How Much Will it Cost?

We are very happy when people find us on Yelp! Find Us on Yelp We are grateful for the positive comments people have written about us there, and we receive a good number of calls and emails from Yelpers who are looking for accountant.

But recently, without telling us, Yelp added a “Request a Quote” button on the page with our reviews.  Ugh!

We always want clients to know what the cost of our work is going to be before we start doing it.  That’s not the problem.

Yelp's Request a Quote ButtonThe problem is “Request a Quote” results in people following directions and writing in asking, “How much do you charge to prepare taxes?” or, “What’s your price for doing an audit?”

We — like most accounting firms — don’t have a price list for services like this because there is no such thing as a generic tax return or one-size audit.  Billionaire Warren Buffet submits a tax return just as you do… only his is a bit more complicated and costs more to prepare than yours does!

What we do when you are considering our services is to invite you in for a  free introductory meeting in our office.  You’ll talk with one of our partners, see if you like us, and tell us about your situation.

We ask that you  bring in information that will let the partner know the scope of the work you need.  For tax clients, that would a copy of last year’s tax return and the current year’s financial information.  For a bookkeeping client, it might be a copy of the financial reports you are getting now or a list of the reports that you want to see.  The information we ask you to bring varies according to help you’re looking for.

The partner will explain what services our firm offers and how we can help you.  Usually that’s straight-forward: you come looking for tax preparation help, and the partner will tell you we prepare taxes!  Sometimes, with complex financial situations, the partner’s explanation will be more expansive, unexpected, and show a path that you hadn’t anticipated.

Whatever your situation, at the end of the meeting the partner will have a good idea of how much of what type of work we need to do to meet your needs. This will let the partner give you an estimated cost for the engagement.

I wish it could be quicker to get quote.  Unfortunately, for professional services there are three choices:

Reading fine print with a magnifying glass

  1. Have a price list with services set so high that even convoluted examples of the generic service are profitable. This method gives you a fixed, assured price, but it’s a price higher than almost everyone would pay if they were charged for assistance by the hour.
  2. Have a price list with fine print that basically makes the list useless for our target clients, people with complex financial situations.   For a tax return, the fine print would be something like “* good for tax returns using the standard deduction with only a single state W-2 income“.
  3. Learn exactly what the client wants, customize a response, and provide an estimate for the exact work needed by the client.

We use method #3.  It doesn’t let us give quick answers by phone or email. But, we think it’s more straight-forward, transparent, and cost-effective for the client.

If we can provide you with a no-obligation, customized estimate for your accounting engagement, give us a call!  We are at 415-433-4500.

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Don’t Be [a] Delinquent

Shady businessman

Don’t be a delinquent like this shady guy!

Thursday is the deadline to file 2014 personal income taxes. The almost-automatic extension of the April 15th due date to October 15th is up!

Our firm is still getting calls from people wanting to know if we can do their returns for them. We are happy to talk with potential new clients and see if we can do a quick turn-around… but, really!

We, like most CPA’s, want to be comfortable that we genuinely know the client’s financial situation so that we can prepare an accurate return that results in the lowest legal tax bill.  We want to be able to look over the financial information, think, and ask questions that might uncover a deduction or better approach.  Preparing your taxes is more than just taking the information you have and retyping it into our computer screens.

It’s unlikely during a busy deadline week that any CPA can meet a potential client with a complex financial situation, review the materials, and prepare a return. Still, you have to file a return or you’ll be “delinquent”, and may be assessed significant penalties and interest.

Don’t panic! What you have to do is simple:

  1. File the best possible return you can yourself.  You’ll probably save time and angst if you use a personal computer tax program like TurboTax or a program from H&R Block.  (We don’t have a favorite or recommend an specific program.)  If you have a complex return like most of our clients, you may find yourself making estimates or best guesses at what you’re supposed to do.  Try as best as you can and make notes about the questions you had so you can go over the problem areas with a CPA later.
  2. Pay what you owe!  Niceties aside, the income tax system is meant to deliver money to the government, and that cash is really what the IRS and state care about.  For this last-minute return, don’t make aggressive decisions about deductions or other rule interpretations, You could be penalized and charged interest if the IRS decides that your optimistic assumptions don’t fly.
  3. Make an appointment NOW to see a tax professional next week to file an amended, 100% complete return.  If you made a mistake in filling out the forms and you underpaid, filing an amended return quickly will minimize penalties and interest you’ll owe.  If you overpaid, you’ll get your money back sooner.

Point 4, of course, is swear you won’t wait so long next year!  Pulling together information for your tax return can give you insight into your overall financial situation.  If you bring your financial data to a CPA when it’s not a deadline crunch moment, you can also have a conversation that may lead you to take tax-smart steps for the future.

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How Your CPA Has Fun

Young  Business People

A Team Planning the Business’ Future

Too much of the time business owners and key employees are completely busy getting the day’s work done.  Filling orders, talking to customers, selling, ordering, and going to the bank can be all consuming.

In those situations, the business owners are working IN their business.  To be successful, they need to dedicate some time to work ON their business.

By working on their business, I mean that the owners and key personnel should reserve some hours to think strategically about what they want their company to look like in a year and in five years.  They should analyze what’s working in their business, what isn’t working, and what they know about their competition.

Geoffrey and I recently finished a strategic planning session with a business that included all of the key team members.  It was intense, illuminating, and very fun.

The chemistry in the client’s company was good.  That doesn’t mean that the business is perfect or that every employee loves every other employee. But, the key people were all dedicated to the business’ success. They had ideas.  They were invested.  The business is set to change for the better because of the time we spent together.

When we talk about “strategic planning” or “business development” too often we make the process sound like taking medicine.  It’s good for you, but not very pleasant.

But when they are conducted right, strategic planning sessions are meaningful, rewarding, and enjoyable.  Releasing the ideas that have been rattling around the back of your head feels good. Making decisions, creating action schedules, and sharing your vision with the people you work is real progress toward growing your business.

Geoffrey and I like conducting strategic planning sessions, too.  We get to learn about our clients, their motivations and personal goals.   Not that we don’t love spreadsheets and filling in tax forms, but helping people define their own version of financial success and helping make plans to attain it is simply better!

For more information on Sterck Kulik O’Neill’s Business Consulting and Strategic Plan Services, visit our website, or phone us at 415.433.4500.

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Why the IRS Hack Wasn’t all the IRS’s Fault

Goofy looking man

This taxpayer helped crooks download his tax return

The people that broke into the IRS website last week and downloaded the 100,000 returns had help from their victims.

The IRS had set up questions designed to ensure that only the taxpayer obtained access to the stored tax form. Some of the information the IRS asked for (birth date, street address) can be gathered from other government sites. In addition, the IRS says it asked, “several personal identity verification questions that typically are only known by the taxpayer.” (See the IRS statement)

Posts to social media may have given the hackers some of these answers (such as marital status). Other answers could be guessed or copied from other web sites the bad guys had gotten into.

The IRS has not released the list of additional validation tests it made, but we have two immediate suggestions:

  1. Review the information you’ve posted about yourself on Facebook, Twitter, and other social media sites.  Think like a crook. Have you published enough information for a evil doer to be able to answer the security questions websites typically ask for when you’re asking to reset your password?

    If so, remove some of the information or change who can see all of your information.

  2. When a website asks for your favorite color, food, or first pet’s name, don’t tell the truth!  Make up a nonsense answer like “Swablar”  that you will remember but cannot be guessed or found associated with you anywhere online.

We’ve read articles saying that those validation questions asked by sites are dangerous because so many of the responses (pet’s name, high school, first boy/girlfriend) can be either found on Facebook or on other public sites.

Other answers are so common that thieves can get authenticated by simply typing in the most popular responses. We’ve seen articles that said “pizza” is the favorite food of a majority of Americans, so even if pizza is your favorite food, answer “Swablar”.  I don’t even know if a “Swablar” is edible, but it’s not likely to be guessed by a crook!

In addition, when you participate in a meme on Facebook or another site that says it’s going to tell you what city you should live in, what religion you should be, or what celebrity you are like, be careful!  Are you typing answers to any of your security questions on another site?  Who is running the meme anyway?

Finally, although this week’s IRS hack doesn’t seem to involve weak passwords, please consider switching to a password vault application like Lastpass.  These apps remember your passwords and will generate difficult-to-crack gibberish passwords which will keep you safe(r).  (For more on Lastpass, read a posting made after the 2014 Kickstarter hack.)

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How to Be Smart When You Help Nepal

Nepal Earthquake graphicThe earthquake in Nepal devastated one of world’s poorest nations. The annual per capita income was US$730 in 2013, according to the World Bank.

The people in the country need help surviving the aftermath of the earthquake. The best thing we can do, 7600 miles away from the epicenter, is to donate money for relief efforts.

There are many international aid groups rushing help to Nepal.  It’s easy to land on a web page or click on an email, give your credit card number, and specify how much your want to give to the relief effort.

We think you should give generously! 

However, avoid these two pitfalls:

  1. Fraudsters who set up websites or send email saying that they charities but they are either outright lying or they are legal charities but most of the money collected goes to salaries or payments of the people who run the organization.  Before you give, check out the recipient organization on Charity Navigator.  That impartial site lets you type in the name of the organization you’re thinking of giving money to and find out how it rates in delivering service, transparency of its governance, financial controls, and other indicators of trustworthiness.Three- and four-star charities are good places to give your money, we think.  Avoid “charities” that are not listed or those with lower star ratings.
  2. Gifts to Non-US charities are NOT tax-deductible.  The Federal tax rules require that if you list a charitable deduction, the recipient organization must be a US group recognized by the IRS.  Many international aid groups have a US affiliate that meets the IRS requirement.You can check whether a group you’re considering donating to is tax deductible on the IRS website.

Give Now!

If you have a favorite charity that’s doing work in Nepal, please give them a gift today.  If you are unsure where to give, here’s a suggestion.

Doctors Without Borders LogoPayPal is waiving it’s processing fees when you donate to one of the relief charities they are spotlighting.  You give your money to the PayPal Giving Fund — a 501 (c)3 organization recognized by the IRS — and that fund forwards your money to the international relief organization you’ve selected.  We picked Doctors Without Borders, a group that gets a top-tier four-star rating from Charity Navigator.

If you you want to give as we did, visit PayPal now and click on the Doctors Without Borders icon  as it scrolls by.

(Note to Facebookers… Facebook is making it easy to donate to the International Medical Corps.  That charity is three-star rated by Charity Navigator which makes them a good choice, too.)

The people of Nepal need help, Please give what you can.

Give Wisely!  Give Today!

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Disturbingly Good Phony Email!

It’s tax season, and you expect to receive messages from your accountant about your finances. But, beware!

Scammers trying to get you to click on a link to download evil programs that run on your computer are ready to take advantage of your anxiety over taxes!  Be especially careful of emails that are supposedly from us or other tax preparers.

This weekend we received the first message in a very, very frightening string of emails designed to get us to click on a link to a website where a damaging program awaited us. We did not go to the website. But, if we had, our computer, our online activity, and our contact lists would all have been at the mercy of some sophisticated bad guys.

Here’s what happened to us.

Saturday we received an email from another local CPA.  The message looked like this, except I’ve substituted a pseudonym for the real CPA and used our firm’s email address and contact information instead of hers.

From: Sally Smith [mailto:[email protected]]
Sent: Saturday, March 21, 2015 5:27 PM
Subject: Important document

Please see the attached file for your review.

Thank you,
Sally
Document8229tax.PDF

What we didn’t notice in the email was that the return email address [email protected]cap.com and not [email protected]cpa.com.  But, doesn’t the message look like something your accountant might send you talking about your taxes?

We are suspicious people, so although we knew the CPA who sent us the email, we hadn’t talked to her recently and wondered why she had sent us a link for a document.  We replied to her email and asked her.

Hi Sally,
I wasn’t expecting an email from you. Please let me know if you intended me to get this and what it is.

Thanks,
Galen Workman
Sterck Kulik O’Neill accounting group, inc.

But, remember, the email address had been doctored from [email protected] to [email protected]  So when we replied, our message went to the bad guys.

And, the bad guys responded!

From: Sally Smith [mailto:[email protected]]
Sent: Monday, March 23, 2015 9:26 AM
To: Galen Workman
Subject: Re: FW: Virus?

Not a virus.

Sincerely,
Sally Smith, CPA EA

Enrolled to Practice and Represent Taxpayers Before the IRS
150 Post Street, Suite 350 San Francisco, CA  94108
Phone: (415) 433-4500
Fax: (415) 433-4765
E-mail: [email protected]
WWW.SKOCPA.COM

This time, not only did the bad guys reassure me that their email was “not a virus” they also included Sally’s signature block to make the email look even more legitimate.

The email still smelt bad, so we really looked at it.  This time we noticed that the messages were coming to/from [email protected]cap.com instead of [email protected]

We called Sally, and she said she knew that her email system had been hacked.  The same message we received went to all of her clients, and she was emailing them about the scam.  When we told her about the reply we got to our emailed question and the slightly different domain name (cap vs. cpa), she was horrified.

The bogus domain name is registered at GoDaddy, just as her legitimate domain name and site. When I looked up the IP address for the bogus domain, the crooks’ website appears to be hosted at GoDaddy, too.  So, the crooks are apparently using a well-known American domain name registrar and hosting service.

Wow!  What guts.

Malware Word CollageProtect Yourself!

  • Don’t open attachments or click on links in emails, unless you’re expecting something from the sender.
  • Verify that email that looks like it’s coming from someone you know, really is coming from someone you know!  Do that by carefully reading the return email address.  And hover your cursor above any links in an email to see where the link is really sending you.

    I can create a link that says www.Google.com, but really sends you somewhere else.  Hover the cursor over the link before clicking to see the real destination.  In an email the real destination appears over the link.  On a webpage like this one, the real destination will appear somewhere discreet, usually at the bottom of your screen.)

When in doubt, don’t click!  Pick up the phone and call the sender!

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What Does a Crook Sound Like?

Caller ID of Fraud CallCrooks trying to scare people into paying phony tax bills have been calling my home phone daily this past week.  The calls are robocalls from different phone numbers, all with caller IDs created to make me think the calls are official.

The message is very clipped and threatens arrest on a “no bail” warrant if I don’t call the number.  Today’s caller mentioned a Federal court case against me and something about a grand jury.

Oh, my!

Give a listen to today’s call and a couple more (hit stop to keep the threats from looping)

These calls are designed to scare people into calling the bad guys and paying made-up tax bills with credit card or bank transfers.

The real Internal Revenue Service (IRS) never calls, emails, or posts on social media demands like this.  They also don’t suddenly take you to court or convene grand juries.

The threatening calls I’ve gotten are crass, delivered in heavily accented English,  and easily dismissed as false… especially since I work for a CPA firm and know a bit about the rules.  Plus, I know I am up to date on my taxes!

But, obviously some people fall for these high pressure ruses.

Don’t let it be you.  And, talk to older relatives, newcomers to the country, or other people that may not know the IRS’s processes.  Make sure they know not to give in to these crooks!

For more information tax scams, see what the IRS says. If you get a call yourself, report it to the IRS by email or report the scam via an online form.

And, if you need the help of a real accountant, please contact us at 415.433.4500!

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