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!

 

 

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.

Get an Automatic Extension to File Your Taxes!

Tax Season is over for us!  The office will be closing at noon today and we’ll be back on Thursday, April 17th.

Our last phone call from a potential new client asking for tax preparation help came yesterday at 10:25 am. At least we hope that was the last call!

We couldn’t help the caller file the taxes by April 15th.  They’d waited too long to pick a tax preparer and get their information to us.

Haven’t Filed — Here’s How to Avoid a Hefty Penalty

Yesterday, and for the past few days, we have been telling prospective clients to submit an extension request form to the IRS.  That will give them until October 15th to formally file. We’ve also set up callers with appointments in our office later this week so they can give us their tax information.

But, whether you plan on getting professional tax help or do it yourself, file the automatic extension request today.

Download the Form 4868 from the IRS website, print it, fill it out, and mail it so it gets postmarked April 15th!

And, if you have a complex return we can help you with, please contact us Thursday after 8:30 am at 415.433.4500.

Remember…
The IRS grants an automatic extension to file your tax forms, but the law requires that you pay what you owe by today.  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.

3 Things to Do By October 17th if You Haven’t Filed Your 2010 Taxes

Time’s up if you asked for an extension to file your taxes back in April.  If you weren’t ready to file April 18th (April 15th was a holiday in some areas, so the deadline shifted to Monday), then this coming Monday is your new deadline.

This time, though, there are no extensions. You MUST file your 2010 taxes by Monday or your return will be delinquent.

(You don’t want the IRS to consider you delinquent. When your tax filing status goes delinquent, the Feds will charge you penalties and interest, and payment deals you’ve made with them in the past may be thrown out. The IRS does not have a sense of humor about tax payers going delinquent.  They will suspect the worst of you, and they’ll act on their suspicions!)

Our firm is getting a flurry of last-minute calls from people panicked because they waited until now to file their return.  Some of the callers are still waiting for information from partnerships or other sources of income, but most of the folks just put filing taxes out of their mind.

If you haven’t filed your 2010 taxes yet, here are our suggestions on what to do to make the deadline:

  1. If you have a simple situation file online, maybe for free.  If your return is simple, there are commerical and government sites that will do your taxes for free.  See the Consumer Reports article from earlier this year… the links in it that I checked today are still working.
     
    Most people who have waited until now to file, have more income and some complex things going on so that free filing is not available to them. The commerical services that offer free services to low-income filers, also have paid programs for people with complex returns.
     
    Check out the commerical sites, and let them walk you through the return.
  2. If you have a more complex situation and need automated resources, find a DVD of commerical 2010 tax software, and prepare the taxes on your computer.We haven’t formally tested any of the major programs, but from what we’ve seen, they do an excellent job in getting the math right, and they also have interview-like Q&A’s that will suggest deductions and other tax-saving measure.
     
    The 2010 programs issued in the spring, still should be good.  Make sure that you check for update to download any fixes they’ve discovered over the months!
  3. If you want to meet with someone face-to-face to go over issues, call a Certified Public Accountant local to you.  At this time, most CPA’s are offering most callers appointments after October 17th.  Fortunately, you can book an appointment with a CPA for later in the month and still avoid being delinquent.
     
    To avoid going delinquent, submit the best Form 1040 that you can by Monday.  If you are missing hard data for a line, make your best estimate.  You may find places to comment that what you’ve written down is your best estimate.
     
    File your best tax estimate with the Federal and state authorities by October 17th.  Then when you meet with the CPA, you will have them refile your completed taxes as an amended return.  Even if you were significantly mistaken in your initial tax filing, you’ll be much better off than if you didn’t file at all.

Whatever you do between now an Monday night, don’t panic!

The IRS isn’t going to come for your retirement fund Tuesday morning because you failed to submit your return on Monday.  You won’t need to run to a defense attorney or to Canada.

But, still… don’t go delinquent.  You don’t have to!