80’s Teenage Movies can Teach us a lot about Tax Returns

The words are still echoing, “Just sign it. You can read what’s in it later.” and they did, 60 – 39 back in December of 2009! This is not another article about the perplexing healthcare law. No, this is about the power of influence. Nancy and Charles Rangel had plenty of influence over their constituency, especially when this bill first started out as home ownership bill to assist people in foreclosures. Influence can be manufactured easily by advertising enough of the same message. Say it loud enough, long enough, pretty soon the message becomes truth. The same thing can be said now that tax season is upon us. As a tax preparation business owner, I wanted to find out what my competition is doing. Now when I say competition, they are my competition I am not theirs. I am like a mosquito on an elephant, they don’t even know I exist. It is kind of like the real dork in high school being in ‘competition’ with the hunk every girl had a crush on to whew the homecoming queen. But I like those types of movies where the wimp gets the “out of my league’ girl. Those movies usually turn in his favor when the hero (wimp) exposes the true colors of the hunk. Normally the hunk is self-absorbed, two-faced and just not very nice to people, especially to the ones that are showing him adulation.
Now, with everything considered, we are the wimp (hero) in this movie. We don’t carry the muscle when it comes to an advertising budget. We especially, don’t have the seasonal part-time, the “Hey mom, I just got my certificate” staff and of course, let us not forget the guy on the corner wearing a sign and torch. No, we’re pretty small, but size doesn’t matter, does it? So, as I am checking out my competition I noticed something peculiar. The huge gorilla, H&R Block (who used Sears as a stepping stone to greatness) won’t give you a price until they’re almost all the way done with your tax return, probably a good 3 hours later. By then, I guess people do what I would do, pay the price. I just wasted 3 hours of my life, I am not doing this again because I hate doing this in the first place. You see, big box companies like H&R charge by the schedule. They will advertise a low price with a Guarantee of Maximizing your refund (which I will talk about in a minute) but when it is all said and done, you will be looking to paying closer to $300 if you have 4 schedules and we are not even considering what they charge for State returns.
After some digging, here are some numbers that a Federal regulator puts out annually depicting average fees tax preparers charge for their services:
H&R Block – $198
Jackson Hewitt – $180
Liberty Tax – $178

Oh, just in case you were wondering if anyone wasn’t happy with their services or fees, here are the number of complaints last year for each operation:
H&R Block – 565
Jackson Hewitt – 639
Liberty Tax – 107

And if you read any of the complaints like I did, they would mirror exactly how the hunk treats his girlfriend in every sappy, teenage movie. There are service complaints, especially after there was a complaint. No resolution, just a run-around. There are complaints about the fees they charged and then costs that were occurred from mistakes done by the preparer. You see, like the hunk, they can treat them badly because there are always more. There is just another one around the corner, watch as they ‘snap their fingers’! Now when you hang out with a wimp (hero) everything relies on how well they treat their homecoming queen. Treat people as if you want them to come back, that you need them to come back. Can’t help but picture the hunk with the dazzling smile, wink of an eye and the thought of “don’t you worry none, I will have a good time”.
Hunks in movies, don’t sacrifice or go beyond themselves for anyone unless there is something in to for them. Now observing the top three tax preparation organizations, they state a guarantee that they will maximize your refund. That means they promise to do their job. It’s like a waitress guaranteeing she will bring you your food out of the kitchen when it’s ready. Just to point out something obvious, a tax preparer is simply an historian. Their only job is to take the right number, put it into the right box on the right form at the right time. I guess maybe that’s why it’s so enticing about dating the hunk. It is all about right here, right now carefree to hell with tomorrow! While dating the wimp, they are constantly talking about doing something right because it will effect tomorrow. They may not have all of the answers but they will sure give it everything they got until they do.
Then there are some people who don’t even want to bother with ‘dating’. These are the do-it-yourselfers. I know how to recognize them because I am one myself. My two favorite stores are Home Depot and Lowe’s because they are built on the fact that people would rather do things for themselves, by themselves as long as they have the right tools and know how. There are several tax preparation software packages that you can get on-line, in the cloud or on a cd. They even come with a customer service phone number that has a CPA on the other end to help you, if needed. Again, it’s not that difficult to read the instructions or be ‘interviewed’ by the software in order to produce a 1040 and state return. And of course, the more complex your life is like itemized deductions or you sold something that incurred capital gains or you are self-employed then the more deluxe your version of the software needs to be. For instance, TurboTax basic is about $60 but if you have any further schedules then it will be closer to $100.
Time is a precious commodity. As you are contemplating choices this coming tax season of dating the hunk, the wimp or “yourself” think about your time. And not just about the time you are sitting doing the tax preparation but the time you wonder, does my hunk have my best interest at heart or am I going to get hurt in the long run, or did I do everything right as I spent those long hours after the kids went to bed or watched the football or basketball game. That is why I would rather Do It Together. You can get taxes prepared for a flat rate, which is the price of the Basic Edition of Turbo Tax, with a CPA or Registered Tax Return Preparer so we will do all the work plus double and triple check our work to make sure it’s right. But above all, we will be there if you need us and together we will plan ahead of time for next tax season. So, don’t waste your time worrying if you have done the right thing, don’t waste your time being just another client.; date a hero (wimp) they will treat you carefully, usually better than what you have ever experienced before now and forever.

Do You Really Save Money Doing Your Own Taxes?

I got a call last week from a woman who opened a small company this year. She wanted to know if it was advisable for her to have a professional prepare her income tax return or should she just get all the forms and do it herself or maybe just get a software package off the shelf and get them done that way?
I’m not surprised at the question, I myself had the same question 15 years ago when I first opened my doors. I’m a smart guy, I’m in finances… I can follow instructions and fill these forms out… besides it is only adding and subtracting from there. It’s not like calculating the time value of money…
But come to think of it, there are 75,000 pages of the tax code. And of course, the laws are ever changing especially for those who write their own paycheck or God forbid, have a payroll. Still, entrepreneurs are a smart bunch. They understand income versus expenses and the fact you don’t have to pay taxes on the money you don’t make right? Every year, scores of sole-proprietors list their sales, add up all the business expenses and viola, their tax return is complete!
My momma always told me, if it sounds too easy then you’re not looking hard enough. As a certified tax coach, we focus our long days on the tax code where we take many things into consideration, especially when it comes to start ups and how those expenses are treated, logged and reported. Unless you have spent thousands of hours researching, studying and networking with tax colleagues, you may miss some valuable deductions or worse, set yourself up for an audit. In fact, according to the Treasury Department, a person who prepares their own Schedule is 5 times more likely to get audited.
The IRS has increased its audit enforcement and will be conducting many more correspondence audits than ever before which leads to me to understand that whatever money a business owner may save on the front end make cost a lot more down the road. And isn’t it funny, how those things happen at the most inopportune times? Not that there is ever a good time for an audit, but it seems they always happen at the worst possible time!
Another client of mine who owns quite a few rental properties, has always done his own taxes. He understood that it is a simple process of adding up all of his rental income and subtract out the expenses. But he always seem to be complaining about the amount of taxes he owed, especially because he was taking all of the risk, doing the repairs and collecting rent. I told him unless you know the rules for depreciation, amortization, passive vs active losses, the difference between capital improvements and repairs and a myriad of other laws, he will continually pay too much in income taxes.
A now this year is going be even more fun because of the healthcare law changes that effect all of us. I always hear at holiday parties and family gatherings that they’re simply going to buy a software package for $50 and it will guide them through all of the ins and outs of the tax returns. They are good to a point. Those software packages cannot hold every question, and they certainly do not give guidance as to how to save on taxes going forward. They are simply there to help you put the right number in the right box on the right form. A seasoned certified tax strategist will intuitively ask all the right questions, to get you to the right answers to minimize your overall tax obligation from this year and every year thereafter.
One final thought, what happens if you make a mistake because you interpreted the rules or laws incorrectly? Is your software company going to come and represent you? One thing is simple when it comes to the IRS, not following the rules and the tax laws that are laid out for us may have serious ramifications. It first starts with a letter, then a visit with a friendly IRS agent who is only too happy to let you know how much you still owe the US Treasury. My momma also said, it’s better to avoid a problem than to fix one.