How to Pay Less for Tax Preparation

As I work on the “paperwork” sent in by clients, I realize that we need to talk more about what a tax preparer wants — and does not need — to see.

Man uploading a fileOne long-term client really seems to enjoy the safe electronic file exchange portal. He sent me a group of files that include Excel spreadsheets, Word documents, PDF documents, and .jpg images of receipts. Wow!  What a collection!

I appreciate his thoroughness, but… Sending your tax preparer all of your raw information is like bringing in a shoebox of a year’s worth of receipts and dumping them on your accountant’s desk.

In the prehistoric, pre-electronic days, we always had a few clients who would bring a shoebox of some type and have us go through the receipts, statements, and tidbits. They’d ask us to organize their records, and we were happy to do that.

We’d have a junior team member, a bookkeeper or new accountant, create spreadsheets and pick out the data that would be needed on a tax return. This work was straight-forward, and the billing rate for the task was on the low end.

Form to start uploading files
The First Step to Upload Documents to Us

But, today’s electronic data dump is worse than the old shoe box! Because of the different types of documents mixed in the upload, we are finding that the traditional horde of bank statements, 10-99’s, payment records, and detailed detritus also has global instructions/questions that require attention from a stakeholder or other high-level professional in the firm.

Eeek!

This means that I can no longer take the shoe box and give it to a bookkeeper for data entry. Instead, I have to open all of the documents, sort them, and answer the questions or follow the instructions sent in by the client. Sure, I can turn over the receipts and routine things to record, once I’ve identified them. Unfortunately, the time I spend with my sorting hat on can be significant!

Happily, you can keep down the time we spend on the documents you give us (and therefore reduce your eventual cost).

Here are some ideas on how to curate the collection of financial information you send us.

  • Send a master list of what you’re uploading and why. If you have a Word document with questions/directions/comments call it out so that the senior person on your tax preparation team will read it first.
  • If you want us to organize your finances and produce a summary of things like investment profits, business expenses, partnership returns, we are happy to do that. Most clients do the summarizing work themselves because they naturally track their financial positions, but if you rather not spend the time and energy doing that tracking, we are delighted to do it for you.  (We are especially delighted if you send us the raw information well before the tax deadline day!)
  • If you have organized your finances yourself and have a summary of your income and deductible expenses, do NOT send in the receipts and statements. Keep the information you’ve processed and recorded with your tax records in case the IRS has questions in the next few years.  But, if you send raw documents to us, it’s hard for us to simply ignore them. So, we will wonder, worry, spend time, and also possibly double count the numbers you already recorded.
    Files moving into a trash can on a keyboard
  • We do want to see the forms that the IRS gets from people you work for, financial institutions, and invest in. These are form like W2’s, 1099s of all flavors, K1’s, 1098’s, etc.

Technology has made it easy to share documents with your tax preparer. It’s simple to upload a lot and let the accountant sort it out! But, we read everything that is sent to us, so if you’re sending things because you’re thinking you’d rather be safe than sorry, you’re really asking us to spend more time on your return.

So curate your collection of records. Show us only the really good stuff!

Sterck Kulik O’Neill Joins RINA

RINA? Who is RINA?

RINA Logo

“RINA accountancy corporation” is a regional full-service accounting and consulting firm with offices in San Francisco, Oakland and Walnut Creek, California as well as Bellingham, Washington. RINA serves closely-held businesses and their owners, high-net-worth individuals and families, and many not-for-profit organizations and private foundations.

Sterck Kulik O’Neill became a part of the RINA team on January 1st 2018. Our office remains on Post Street in San Francisco and all Sterck Kulik O’Neill team members were asked to join the RINA firm.

Sterck Kulik O’Neill merged with RINA to allow SKO’s partners – Charles and Geoffrey – to spend more time with clients and less time on administration and overhead duties. With the addition of SKO’s team, RINA now has approximately 100 Certified Public accountants and paraprofessionals.

Charles and Geoff have been familiar with RINA for many years and have long admired RINA’s organization. The firms share the same professional focus: businesses and their owners. They also place the same importance on employee well-being and development.

Charles and Geoffrey will be part of the RINA Sterck Kulik O’Neill management team.

CPA's Charles Sterck and Geoffrey Kulik
Charles Sterck and Geoffrey Kulik celebrate the merger with RINA

What will change for our clients?

We believe that our team, especially our senior team members, will have more time to focus on our clients and their needs.  We will also tap into RINA’s team for areas they have more experience than we have.

We hope you’ll see increased responsiveness, proactive suggestions, consulting recommendations, and generally better service from your accountants!

Letterheads, invoices, and other logos will gradually introduce the RINA name.

What we don’t expect to change is our focus on you and your financial success.


Message from Ed Fahey, CPA and President of RINA

Ed Fahey
Ed Fahey, CPA and President of RINA

Effective January 1, 2018, Sterck Kulik O’Neill accounting group joins RINA accountancy corporation’s San Francisco team. Our relationship dates back to 1998 and our years of friendly interaction and mutual respect have led to this combination.

We look forward to offering our clients greater resources; our team new opportunities for professional growth; and our friends and contacts new relationships to help each other.

RINA’s President Ed Fahey believes the combined firms can better serve closely held businesses and not-for-profit organizations.

“Charles Sterck and Geoff Kulik have unique talents that will enable us to expand our service offerings. We look forward to working with them and the SKO staff as well as their clients. We welcome them to the RINA family.”

RINA will maintain two offices in San Francisco into the summer and look to combine forces when one of the leases expires.

I have more questions.  Who can I talk to?

Talk to Charles or Geoffrey, just like you’ve always done. They can be reached at the same number: 415.433.4500 !

Their email addresses still work, too.  Charles’ address is [email protected] and Geoffrey’s email address is [email protected]

Why We Won’t Open Your Attachment or Click on Your Link

Dear Geoffrey,
I am attaching a PDF with my W2 information for my tax return.

Dear Sterck Kulik O’Neill,
Can you tell me how much it would cost for you to do my tax return. I am sending a PDF copy of last year’s return with this email.

Hey, Charles. I have uploaded my tax information to http://bit.ly/my2017taxinformation .

A few times a month we get messages inviting us to open an attachment to an email or to click on a link where we are supposed to get information a client (or prospective client) has sent us.

We don’t click to open or follow! Even when the messages come from an email address of a client we know.

Few of the messages we get out of the blue — from people we know and from people we don’t know — are legitimate! They are Spear Phishing attempts. Spear Phishing attackBad guys stuff malicious software in the PDF they are attaching in the hopes that our anti-virus software is weak or out of date. Or, they set up a web page that tries to download evil code to infect our computers, probably when we think we’re clicking to download the promised information.

They can address us by name by picking off our identities and email addresses off the Internet. They can pretend their clients of ours because they’ve broken into a client’s computer and are accessing their list of contacts.

These guys know their business and are hoping that someone will let their guard down for just a minute! And, the busy tax season time, CPAs are distracted. We are much more likely to CLICK without thinking.

But, so far, no one in our office has succumbed to the temptation to click. We keep telling ourselves that our clients know not to send sensitive information by email —  the data could be read and the ripped off by someone monitoring along the way. Moreover, we provide our clients with a secure portal to upload and download their information.

So, if you send us an email message that suggests we open an attachment or visit a link, we won’t click! (Really, we will try very hard not to click!)

Usually we don’t even respond to emails we think might possibly be from scammers. If the message is from a client, we may call and see if they really sent the message or suggest that their email has been hacked.

Of course, you should not email your social security number, private financial information, or even credit card numbers to anyone as a normal Word document, PDF, or plain text. It’s just too easy for a bad guy to monitor the Internet and help himself to your private info.

But, even if you’re willing to take the risk of identify theft by mailing your tax return to us, to your mortgage broker, or to your attorney, a smart person won’t open the document unless you’ve just talked to them and told them what is coming. (And, when you give your notification, they should tell you to use a secure transfer method!)

So, use our portal to send information or contact for other ways to get delicate data to us!

Don’t Fail to File… Even if it’s Only an Extension

Next appointment April 21st graphicOur team is working seven days a week to prepare taxes and to respond to other accounting emergencies of our existing clients. The partners want to make sure that the team is busy, but not crazed, and are now scheduling meetings for prospective clients after April 20th.

Why April 21st or later? Because the normal deadline, April 15th falls on Saturday, there are holidays in various jurisdictions on Monday, the national tax deadline is April 18th, our office is closed April 19th, and the partners are already booked on April 20th! Whew!

We are happy to schedule an appointment for new clients, but it won’t be before the tax deadline day. If you’re looking for help in preparing your return, give us a call. But, also stay in the good graces of the IRS by submitting an extension request.

Cannot File Your Return — At Least File an Extension

If you haven’t prepared your return and cannot get appropriate help by the April 18th deadline, we strongly suggest that you file an extension with the IRS. The IRS heavily penalizes late filers, but you can get extension to file automatically if you ask for one by April 18th.

Download the Form 4868 from the IRS website, print it, fill it out, and mail it so it gets postmarked April 18th! You can also electronically file an extension request on IRS page in the link.

Filing an extension request will allow you until October 16, 2017 to submit your completed return. You are still required to pay any balance you owe the IRS by April 18th, so if you think you owe taxes make an estimate of what you should pay and send in a check with the extension form.

Whether you plan on getting professional tax help or do it yourself, file the automatic extension request today!

The penalty for not filing is nasty. If you file more than 60 days after the due date, the minimum penalty is $205, or if you owe less than $205, you’ll be penalized 100% of what you do owe.

The penalties for failing to pay by April 18th are not so bad, generally 0.5 percent of your unpaid taxes per month, up to a total of 25%.  That is a relatively small penalty, especially compared to the penalty for not filing!

Remember…
The IRS grants an automatic extension to file your tax forms, but the law requires that you pay what you owe by April 18.  So, if you think you may have to pay the IRS this year, enclose a check to cover your estimated shortfall with the extension form.

2017 Opens a New Portal

One of the services we have updated in preparation for Tax Season is our client Portal.

Portal is a free client service that lets them exchange sensitive information with us over the Internet safely.

Secure safe portal

CCH Axcess Portal is the service we use.  CCH is one of the top makers of software for accountants. Their Portal service provides a way to exchange encrypted information via a secure data center. The clients’ information is stored locked up in a spot where physical access is tightly restricted, and the duplicate remote storage guards against loss from nature disasters like earthquakes and local tragedies like theft and building fires.

Why don’t we just email clients their tax returns?

Email is NOT secure!  Email is typically sent through the Internet without encryption. Someone with a monitor on the Internet could capture the stream of the email and rip off your information. In addition, most people don’t safeguard their email accounts that well. They keep the email program open when they are at lunch, and coworkers wandering by can “accidently” see confidential documents and messages open in email.

Of course we still love doing business face-to-face.  You can bring by your sensitive documents and drop them off in person. If you have the time!

But, if you sometimes need to exchange information instantly, let us set you up on Portal.

How Trump’s Election Changes Your Tax Planning

Donald Trump has promised to drastically lower taxes next year, and with Republicans controlling Congress, he’s likely able to get some or all of the tax changes he wants passed.

Most of the proposals call for individuals and businesses to pay less, maybe much less, in 2017 (or 2018, if Congress is slow to act) than they would under current law.  Independent analysis of many of the proposed changes show that well-off individuals will benefit significantly from the lower rates proposed. NPR reports that, according to Lily Batchelder, a law professor at New York University and a visiting fellow at the Tax Policy Center, people earning a million dollars will get an average tax cut of $317,000.

Tax deduction - word cloud conceptThe plan also lowers the business tax rate to 15% from 35%.  US-based manufacturers may elect full expensing of plant and equipment costs, although selecting this approach means they will give up their ability to deduct interest expense. (See Donald Trump’s campaign website press release.)

President-elect Trump and Republicans in Congress also want fewer people to have to itemize deductions.  They plan on raising the standard deduction rate to $15,000/$30,000 for a single person/married couple (Trump’s plan).  At the same time, they would cap deductions at $100,000-single/$200,000-married (Trump’s plan).  In addition, some Republicans have suggested eliminating the deduction for state and local taxes, and the mortgage interest deduction may be scrutinized.  (Read the Wall Street Journal for more details.)

Of course, unless you have a fully-functional crystal ball, there is no certainty that all/any of the changes will occur. But, IF you believe that significant changes will be made to the tax code, then you should take action based on what you think is likely to change.

We don’t have any fortune-telling ability, but here’s what we think is reasonably likely.  If you agree, consider accepting our recommendations!

Assumptions: The 2017 tax rates will be lower than the 2016 rates for both business and businesses.   Some change to deductions will be implemented that will increase the standard deduction amount and limit itemized deductions.

man wearing a suit pointing the finger to the word taxes written in the foregroundRecommendations:

  • Postpone the recognition of as much income as possible until after December 31st.  If possible push off the closing dates of profitable sales, receipt of bonuses, and all other activities that create income.  You’re likely to be taxed at a higher rate this year than you will next year.
  • If you are a US-based manufacturer, postpone plant and equipment purchases and upgrades into 2017 when you’ll be able to expense them in a single year.
  • Give to charity and pay your property taxes in full in 2016.  Many of our clients will run into the $100k/$200k talked-about limit for itemized deductions.  If you’re close to that amount, give everything you can in 2016 where you’ll get full credit for your gifts and payments.  Even if your itemized deductions are much smaller, give and pay in 2016 when you’ll get credit for each dollar.  In 2017 you may not want to itemize and instead you’ll benefit from the new, higher standard deduction rates.

You have only until December 31st to take action to take action to lower your 2016 tax bill and to plan for 2017.  Do it!

Please contact us if you’d like help.  Maybe all you need is a check-in phone call.  Or, maybe your situation is complicated and you’ll want a full tax projection.  We are happy to find out what you need and work with you so that you pay the lowest amount of taxes legally possible.

And, of course, all of this speculation.  Who knows what President Trump and the new Congress will really do?!!

Upgrading Our Technology to Serve You Better

Bionic Woman of the FutureOur office is moving to a secure, cloud-based server this week.

We have contracted with Xcentric, a service that only works with accounting firms, to host our applications and store our data.

Xcentric uses best practices to safeguard all information.

The American Institute of Certified Public Accountants has given Xcentric a Service Organization Control report that provides independent validation that Xcentric’s security controls are in accordance with the applicable Trust Service Principles and Criteria (SOC2). This means that our data — and your data — will be safe.

Actually, with a cloud-based approach your information will be better defended against crooks or loss than it has been on our local systems. Xcentric has two secure, geographically distant, US-based, data centers that provide top protection against theft, fire, and natural disasters.

Our partners also believe that the move to the cloud will let our professional staff spend more time doing accounting work and less time being ersatz IT managers.

We are excited!

During the switch over, the firm’s IP addresses will be changing and connections will be disrupted.  There will be times when our email and phones won’t work or won’t work correctly.  We ask that you be patient and try us again in a few minutes, if you encounter any problems.

If you have an urgent need to reach us when our systems are in transition, send us a message at [email protected].  We will monitor that address during this week of change!

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!

 

 

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!)

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.