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Discussion:Do taxpayers prefer incompetent tax preparers?

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Discussion Forum Index --> Tax Questions --> Do taxpayers prefer incompetent tax preparers?


PVVCPA (talk|edits) said:

February 15, 2007
It often happens with new clients. I ask them about something on their return that their prior preparer either never brought up or disregarded (like a personal equity line on a rental property). And then I have that "Oh crap!" moment, take a breath, and explain to them that their prior returns were done incorrectly, and this return ain't gonna look as good as last year. And far some darn reason, I feel really bad.

I give them the option of grabbing their paperwork and leaving my office, but they are either OK with it or they are too embarrassed to tell me that they prefer lying by getting up and leaving. Some come back for year #2, some don't.

I often wonder what percentage of taxpayers out there would prefer going to an incompetent tax preparer if it meant that they would file an incorrect return but their taxes would be lower.

Perhaps, I should resort to listening to my IPod during the tax update classes.

Corptaxhelp (talk|edits) said:

February 15, 2007
Ignorance may be bliss but, sooner or later, your teeth will fall out.

Sometimes you go to the dentist and he says all you need is a cleaning. Days like that, you walk out with clean teeth and big smile. Other times, you go to the dentist, find out you need a root canal and will need to come back for major dental surgery. No smile and a big chunk out of your checkbook.

Visiting the tax preparer is the same thing. Some visits, you find out you are getting a refund and other days you find you owe Uncle Sam a pile of money.

I don't think the dentist feels especially bad when he has to tell a patient about a root canal. He certainly doesn't kick himself and wonder if he should just ignore the problem. If you are confident in your tax abilities and the underlying facts of the situation, that's the best you can do. Your client can either pay the taxes or ignore them and find someone else to do his taxes. Changing accountants doesn't change the fact that taxes are owed.

PVVCPA (talk|edits) said:

February 15, 2007
Good analogy, but there is one problem. Probablity of teeth falling out 100%. Probability of owing the tax because of an audit (assuming competent auditor) < 1%.

The last line of my prior post was in jest. We have a motto in our office, "We are going to prepare tax returns right until we no longer have any clients."

I just wonder, facing the odds of less than 5%, what percentage of taxpayers would prefer the incompetent preparer?

AHH (talk|edits) said:

15 February 2007
All errors found on prior returns are not 100% due to "incompetent" preparers. Are you sure the taxpayer gave the preparer ALL correct information? I've certainly prepared incorrect returns due to the client giving me the wrong information or outright lying to me.

Kevinh5 (talk|edits) said:

15 February 2007
I just e-filed an incorrect return and I'm certainly not incompetent. After the client got home, he called me back to say "Did you deduct the $25 a week we give to church? I didn't give you any paper on it because I figured you would remember we took that much from last year."


Funny thing is, this guy gave me about 50 other papers and excel spreadsheets for everything else, I figured as detailed as he was I had everything.


Now I've got to do an amended return, and have the discussion with him whether I pay for it or he pays for it.

Death&Taxes (talk|edits) said:

15 February 2007
"What's promotion?" I said to a new client, classical brass instrumentalist. "I don't know, Joe'd give me that every year, like my other deductions there." "Maybe once you made a CD to promote yourself, or had your photo taken but you play in an orchestra." "Don't remember doing anything like that. Well, can you give it to me?" I look at last year, and say, "you never got it anyway; it is an employee business expense and you were hit with Alternative Tax....have been every year according to this history." "What's that?" After I try to explain the AMT, the wife says, 'Joe never told us that.' Since they live in New Jersey, they did not even save state tax. Joe was not incompetent; he was only making them feel good, getting deductions for which they had no right, but which saved them no taxes. I am not sure this isn't worse than preparer ignorance, except I will say that their last year fee was not exorbitant.

Deback (talk|edits) said:

February 15, 2007
Kevin - If he is a long time client, I would probably not charge him extra for an amended return, especially if I forgot to ask him if he had any contributions.

I do charge for some amended returns, though. One guy was here in January and later brought me at least three more forms for an amended...W-2, mtg int and property taxes (he filed for bankruptcy and didn't think he had paid any int and PT), and something else I can't remember right now. I'm going to charge him.

Kevinh5 (talk|edits) said:

15 February 2007
That's usually my policy too.

PVVCPA (talk|edits) said:

February 15, 2007
You can usually tell the difference between client withholding information and incompetence/(or collusion).
  • Basis on depreciation schedule including land $150,000
  • Principal balance on first mortgage $120,000
  • Balance of equity line $100,000

Was the prior preparer incompetent because they never asked about this anomoly?

Believe me, I pressed them for possibly some improvements that were never added to depreciation schedule. Or maybe the funds were sitting in an investment account somewhere. I gave them the full opportunity to lie to me. Nope, they said they used it to pay off credit cards.

Rgtaxservice (talk|edits) said:

15 February 2007
My clients prefer a competent tax preparer. That's why they chose me.

Green hunter (talk|edits) said:

15 February 2007
PVV "I often wonder what percentage of taxpayers out there would prefer going to an incompetent tax preparer if it meant that they would file an incorrect return but their taxes would be lower."

I would not be suprised if the answer to that polling question would be the majority of tax payers i.e. certainly more than 50%. Most people want to pay the least amount of taxes and probably the least amount of preparer fees - thats a receipe for disaster. Also, although your term, "incompetent tax preparer", is a bit strong, obvioulsy there are a number of less qualified tax preparers, I am not sure if i would say they are incompotent. I think part of the problem is the business of tax preparer is unregulated - Oh, there is some regulation that I am aware of, for example Circular 230, but in reality any person can prepare a tax return regardless of their knowledge or qualifications. Now, I am not suggesting that its simply. a matter of someones credentials either I am sure there are tax prepares without any letters next to their name that do a great job just as I am sure that simply having letters (CPA. JD. LLM etc.) doesnt mean that the person is best qualified to prepare a Form 1040. All anyone has to do is read some of the questions posted on this message board or even some of the answers and you get to see a wide diviregence in the knowledge gap. Personally, I am hoping that a all states, such as California is attempting to do, starts to regulate the "tax prepration" industry so that some of the less qualified can be eliminated. Otherwise, you are always going to have teh scenario that you mentioned.

Yogafan00 (talk|edits) said:

15 February 2007
Guys, this might be a bit off topic but you'd be surprised at the huge number of "self prepared" corp returns and 1040s. A lot of small bus. owners are now preparing their own taxes by-passing experienced and less experienced tax preparers. Don't know what's worse: self preparers or less experienced preparers.

Kevinh5 (talk|edits) said:

15 February 2007
Can you say TAX GAP?

Taxref (talk|edits) said:

15 February 2007
By doing things right, after a while you wind up with a good core group of clients. I've seen other accountants who have alot of problems with their clients because of cutting corners. The client's aggressivness often expands incrementally, with the result that after a few years the returns are not even close to reality. Its hard to reel those clients back in. Unhappily, once a client does not get caught by the IRS they often assume they are either doing things right or simply cannot get caught. They tend to hold extremely aggressive preparers in good light, at least until an audit, at which time both the client and the preparer start pointing fingers at each other.

PVVCPA (talk|edits) said:

February 15, 2007
I absolutely agree, Taxref. I love those core clients.

The word 'incompetent' touched a nerve. Can I replace it with negligent?

All I was saying, is how many of those new clients are relieved when you point out an ongoing error on their return that has been saving them money? Certainly, they are not happy that they are going to owe more money than expected this year. But how many of them, in their head, are saying that they wish they would have gone back to Joe this year.


Disclaimer: The use of the name Joe is intended to be neutral and gender-free. In no way am I implying that all preparers named Joe (or any derivative of Joe) are negligent in their tax preparation services.

Taxref (talk|edits) said:

15 February 2007
New clients I get without referrals are sometimes disappointed, with a number (I would guess at about 15%)even going back to Joe (see above disclaimer!). Those are usually the ones who are looking at a fairly large dollar change (ie: the owner/operator for whom "Joe" gave 100% of the DOT meal allowance, even though the guy had a local route and was home for dinner every night). The referrals I get from my current clients tend to be (like many of my clients are)folks who would be worried at any thought that the IRS may find something wrong with their return.

Actionbsns (talk|edits) said:

15 February 2007
Corptax - I just printed out your comment and I'm going to include it when I send my client her revised set of 1099's. I posted the other day about the 1099 season being over (I was actually being a bit whiny after a nasty phone conversation, sorry for the vent) - I'm glad to see my office is very nearly finished with it! This client is extremely upset with me about a 1099 to her merchandiser for $13000, and is angry because I've told her what to expect by not sending the 1099, she has made it abundantly clear she's not going to do it and will most likely move on to someone else in the future. I can't lose by attaching your comments to the new package, and maybe she'll actually "see the light". But like I said in a separate post, if the clients won't do what you know is legal and correct, it's better to cut them loose.

Death&Taxes (talk|edits) said:

15 February 2007
The answer to the original question must be yes; all my appointments are filled!!!!  :)

PVVCPA (talk|edits) said:

February 15, 2007
LOL, D&T ... I mean, Joe.

Corptaxhelp (talk|edits) said:

February 15, 2007
Actionbsns: I'm glad you found that amusing. You're welcome to use that at no charge. If she has any questions or wishes to complain further, have her call: 800-829-4933. No charge for that one, either.

Taxea (talk|edits) said:

15 February 2007
I find alot of taxpayers want their returns done cheap. I tell them you get what you pay for. Either pay less and have it done wrong or pay the price and have it done right.

If I made an error, heaven forbid, I do the amended at my expense. If they failed to provide information that later requires an amended return, they pay for it. This is why I copy and keep every document they give me in the beginning. Otherwise how would I know whether I missed something or just didn't get it.taxea

Bottom Line (talk|edits) said:

16 February 2007
I find more cases where the TP thinks I'm a savior. I find deductions and/or credits that weren't previously taken. Fuel credit is an example. I got one return where fuel credit, depreciation and EIC weren't taken. Changed the return from owing over $2,000 to a small refund. I have a client for life!

Lizzit (talk|edits) said:

16 February 2007
You can get lots of different answers. There are a ton of grey areas in US tax. I'm going to make a case here that not all "mistakes" are, in fact, mistakes.

A common one I see US preparers do is "Get Every Deduction Possible". It's drilled into our heads like a heavenly mantra, day after day. I'm sure most of you do this Every Single Time. And it's great and fine, as long as there's just US tax to worry about. But I do clients who pay taxes in two or more countries, and sometimes doing whatever saves the most in the USA can really burn them in the other country. So I sometimes purposely choose things that result in higher US taxes, like ADS SL depreciation with no JAGTRA and no Sec 189, because it's saving them tax in the other country. I'm sure US-based tax accountants who see my work in later years think I'm incompetent because I didn't go for JAGTRA and Sec 189.

If you don't know the back story as to why the preparer did what s/he did, you might come to the conclusion that a particular choice was incompetentce rather than part of careful tax planning. A lot of returns that come to me previously went to Big 4 companies - each return had been prepared and reviewed by a massive specialist team. When they come to you from PWC, E&Y, or other specialist firms, and you think there's a "mistake" - you'd better be darn sure it isn't YOU who has overlooked something.

The biggest mistake I've noticed is that there's a bunch of preparers who never take a deduction for which the client didn't save a reciept. That's not right. If you don't have a reciept, it doesn't mean you can't retrace the papertrail for the expense after the fact. Most larger-ticket items are bought with credit cards and debit cards these days, which means the paper trail can be recreated from obtaining back copies of credit card statements and bank statements. Sure it costs $5+ a month, but as long as the proof exists somewhere, the client can claim it.

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