Category: Income Tax

Income Tax Refund Memo | Brooklyn Covered

Thank you for giving us more money during this last year than you were required to. Because of your kindness, we were able to use your refund as well as the pending refunds of millions of your fellow citizens to earn interest. We lent money to countries that may or may not pay us back. We even used some of the money to feed people in other countries who hate our way of life, especially since we ‘allow’ women the sacred rights of driving a car, or going for a walk by themselves. Let’s not even talk about the right to vote.

Tax Refund Memo To All Taxpayers

Dear (Taxpayer, please insert your name here):

Enclosed is your income tax refund of $ (Please fill in your normal annual refund).

Thank you for giving us more money during this last year than you were required to. Because of your financial laziness, oops, we mean kindness, we were able to combine your refund and the pending income tax refunds of millions of your fellow citizens to make loans. We lent money to countries that may or may not pay us back. We even used some of the money to feed people in other countries who hate our way of life, especially since we ‘allow’ women the sacred rights of driving a car, or going for a walk by themselves. Let’s not even talk about the right to vote. We provided funds to banks thought to be too big to fail. That’s right, the same banks that charge you all of those ridiculous fees if you don’t have a certain balance in your savings account. If you can afford to have a savings account. And don’t you dare be late with your credit card payments!

Especially pleasing to us is our ability to offer guaranteed rates of interest to those who, by not allowing us to keep their refunds for up to 15 months, watch their Treasury notes, bills and bonds investments grow. And don’t forget about the foreign investors who are buying Treasuries like ice cream on a hot summer day. Of course you can’t buy those investments since once you get your hot little hands on your refund, you dash to the stores for technology you don’t understand but must have because it’s new, shoes designed to destroy women’s ankles, knees, and reproductive organs just because they make you look good, and cars you can’t afford to maintain, much less pay the insurance for. Just to name a few. So what if you purchase things that really don’t make a significant difference in your life? Heck, they’re shiny and new, and isn’t that all that matters!? So what if you have trouble meeting the rent sometimes, you’re late on a credit card payment or two, or you’ll never save the down payment for the house you dream about. Don’t worry about it. Just keep getting those refunds.

And don’t listen to people like Eustace Greaves Jr. He’s got a big mouth. If it was up to him, you’d employ perfectly legal tax planning methods to bring your future money into the present. Then, you could use what is essentially your money work toward realizing the lifestyle you’ve always imagined. Being able to save, invest, and actually accomplish the important things in life, things that matter, like getting a home of your own, enjoying a secure retirement, having more liquid cash, or sending your children to the college of their choice and ability. What’s Greaves’ motto? “No income tax refund is a good income tax refund!!” Who died and made him king?

But hey, we’re not worried. We know income tax refunds turn you on more than watching your team playing in the Super Bowl every year. (That is, unless the big-screen TV you bought with borrowed money was repossessed. You didn’t have the money to pay the note. Doesn’t matter, you can’t pay the electric bill until you get your refund, anyway.) We know you’ll continue listening to us. So just keep doing what you’re doing and we’ll keep mailing those refund checks.

Thanks, and keep the excess money coming. Don’t worry, we’ll send it back eventually.

       

“An investment in knowledge always pays the best interest.” 

 Benjamin Franklin

Ten Reasons For A New Tax Preparer Review | Brooklyn Covered

You must remember your preparer possesses extremely sensitive information about you. Your Social Security Number, date of birth, your checking or saving account numbers, and employment and income information should be maintained in a secure site, safe from the dangers of identity theft. If your preparer relocates each year, you must ask them what precautions thy take to protect the information in your file. Find out who else has access to the information in your files and if so, for what purpose.

Make A Promise, Keep A Promise…

Let’s review why reasons one, two and three from last’s week’s post should make you really consider finding a new and competent Income Tax Preparer this year.

Reason Number One:

Back in 1991, I met an AT & T field technician referred to me by one of his co-workers for income tax preparation services. When the young man came to the office, he asked me to review a letter he’d received from the Audit Division of the New York State Department of Taxation and Finance.

First, let me tell you, it’s never good to get a letter from either them or the Internal Revenue Service.

The letter explained his tax preparer, a well-known Enrolled Agent, had pleaded guilty to charges of preparing fraudulent income tax returns. So she would avoid incarceration, she agreed to cooperate fully with the state taxing authorities during their investigation. She also agreed to relinquish her status as an Enrolled Agent, and gave up her ability to ever prepare income taxes again.

How did she cooperate? “Here are the keys to the office. These are the keys to the file cabinets. Here are the worksheets  I developed using fraudulent entries to generate the largest (though fraudulent) tax refunds possible for my clients.”

How simple was that?

Just to give you an idea of the scope of her transgressions, the Audit Department audited his New York State income taxes going back ten (10) years for this particular taxpayer. ( Yes I know, they say you only have to keep seven (7) years of income tax returns. There is, however, no statute of limitations for fraud.)

The amount he owed all by himself? Over $7,800.00.

And this was only what he owed New York State. He hadn’t been audited by the Internal Revenue Service yet.

And yes, each state and the IRS do share information about taxpayers.

And he wasn’t alone in his financial pain. She alone prepared the income tax returns for over 300 folks just like him.

Why Did She Do It?

She felt great pressure.

  1. The pressure of having to constantly justify her fees.
  2. The pressure of competition posed by other fraudulent income tax preparers trying to horn into her business with their own promises of large refunds.

 What were the lies she told? Taking large deductions on Schedule A for ‘work clothing’ purchases and maintenance costs.

Here’s a tax tip: If the clothing you wear to work can be worn anywhere else besides your job, you can deduct neither the cost of the clothing, nor its maintenance costs.

Who Qualifies?

So who can usually deduct uniform expenses? Police Officers, Firefighters, Sanitation workers and certain, specifically uniformed Transit Authority workers. Also, any article of clothing worn at work emblazoned with the name of the firm, and perhaps their name also.

Nothing you wear to church or your backyard barbecue.

What Else Did She Do?

She counseled married clients with children, to show different addresses so they’d qualify to file as Heads of Households, instead of Married Filing Jointly.*

Let’s Get to Reason Number 2

Your income tax preparer should be of stable character in all ways, including their business office.

Now, I am myself in the process of relocating my office (Gubernatorial candidate Jimmy McMillan was right when he said “The rent is too damn high.”) I have, however, occupied the same storefront since January, 1999.

You must remember your preparer possesses extremely sensitive information about you. Your Social Security Number, date of birth, your checking or saving account numbers, and employment and income information should be maintained in a secure site, safe from the dangers of identity theft. If your preparer relocates each year, you must ask them what precautions thy take to protect  the information in your file.  Find out who else has access to the information in your files and if so, for what purpose.

Make sure your preparer provides you with four (4) critical documents to review and sign. 

First, the Consent to Use Information and the Consent to Disclose Information forms. These forms are required by Section 7216 of the Internal Revenue Service code when the preparer of the income tax return offers other services to their clients. Without these documents, the preparer is legally enjoined from sharing the clients’ information with any other business entity.

Next, your preparer must give you a copy their firms’, Privacy Policy Statement, outlining what methods they will use to protect your information.

Lastly, your preparer, if they have a lick of good sense, will require you to review and sign a Tax Preparation Engagement Agreement.

No, it doesn’t mean you’re getting engaged. It outlines both the responsibilities of the taxpayer to provide all information the preparer enters into their income tax return. This means no fraudulent entries. It also covers areas relating to audits, privacy policy, fees, your copy of your return, preparation method and other services your preparer may offer you. (An example of this form is available on my website at www.insuremeeg.com/2011_Engagement_Agreement.html)

Are We There Yet?

We finally come to Reason Number 3. PTIN  and  NYPTRIN are not fancy acronyms for foreign cars. The first is the IRS’s Preparer Tax Identification Number. The second refers to New York State’s New York Tax Preparer Identification Number.

Who Must Have These Numbers?

Basically, any tax return preparer who prepares a substantial part of any return for compensation.  Ask your preparer what their numbers are. If they don’t know what you’re talking about, ask the preparer to give you your file, collect your paperwork, and leave the office as quickly as possible.

While PTINS have been around since 1999, New York State first required preparers to register in 2009 (and pay an annual  fee of $100.00 for the privilege. The IRS charges a fee of $64.95).

Why Did New York State and The IRS Do This? 

At last count, the United States Treasury determined there was a 315 billion dollar tax collection shortfall in 1985, 265 billion of which was directly attributable to taxpayers’ failure to file, and filing fraudulent returns. This new system will enable them to better identify and prosecute those abusing the system by flooding it with fraudulent returns. On the other, to catch those who prepare returns and fail or refuse to sign them. Why do they refuse? So they don’t have to declare the income. In fact, they often fail to  file their own income tax returns.

On several occasion last filing season, clients, thinking they’d save money, went to other preparers, only to be told the preparer had a “…problem with their New York State software. So tell you what, I’ll prepare and charge you for preparing your Federal return and you can go anywhere to get the NYS return done.”

Not with me. Sorry. I don’t do sloppy seconds.

Never have, never will.

No matter what, the federal return must always be done first. Many federal calculations then flow to the state return.

You come to my office and you’ll pay for both, because I must prepare both.  I wound up telling those clients to return to the other preparers and get their money back. And their files, too.

And You Thought This Was Going To Be Easy?

Next week we’ll review reasons numbers 4, 5 and 6. Until next time, wait for those w-2’s with bated breath.

Questions? Feel free to email me at [email protected]

* We’ll cover the subject of filing status in a future post.

Ten Reasons For A New Tax Preparer Review | Brooklyn Covered

You must remember your preparer possesses extremely sensitive information about you. Your Social Security Number, date of birth, your checking or saving account numbers, and employment and income information should be maintained in a secure site, safe from the dangers of identity theft. If your preparer relocates each year, you must ask them what precautions thy take to protect the information in your file. Find out who else has access to the information in your files and if so, for what purpose.

Make A Promise, Keep A Promise…

Let’s review why reasons one, two and three from last’s week’s post should make you really consider finding a new and competent Income Tax Preparer this year.

Reason Number One:

Back in 1991, I met an AT & T field technician referred to me by one of his co-workers for income tax preparation services. When the young man came to the office, he asked me to review a letter he’d received from the Audit Division of the New York State Department of Taxation and Finance.

First, let me tell you, it’s never good to get a letter from either them or the Internal Revenue Service.

The letter explained his tax preparer, a well-known Enrolled Agent, had pleaded guilty to charges of preparing fraudulent income tax returns. So she would avoid incarceration, she agreed to cooperate fully with the state taxing authorities during their investigation. She also agreed to relinquish her status as an Enrolled Agent, and gave up her ability to ever prepare income taxes again.

How did she cooperate? “Here are the keys to the office. These are the keys to the file cabinets. Here are the worksheets  I developed using fraudulent entries to generate the largest (though fraudulent) tax refunds possible for my clients.”

How simple was that?

Just to give you an idea of the scope of her transgressions, the Audit Department audited his New York State income taxes going back ten (10) years for this particular taxpayer. ( Yes I know, they say you only have to keep seven (7) years of income tax returns. There is, however, no statute of limitations for fraud.)

The amount he owed all by himself? Over $7,800.00.

And this was only what he owed New York State. He hadn’t been audited by the Internal Revenue Service yet.

And yes, each state and the IRS do share information about taxpayers.

And he wasn’t alone in his financial pain. She alone prepared the income tax returns for over 300 folks just like him.

Why Did She Do It?

She felt great pressure.

  1. The pressure of having to constantly justify her fees.
  2. The pressure of competition posed by other fraudulent income tax preparers trying to horn into her business with their own promises of large refunds.

 What were the lies she told? Taking large deductions on Schedule A for ‘work clothing’ purchases and maintenance costs.

Here’s a tax tip: If the clothing you wear to work can be worn anywhere else besides your job, you can deduct neither the cost of the clothing, nor its maintenance costs.

Who Qualifies?

So who can usually deduct uniform expenses? Police Officers, Firefighters, Sanitation workers and certain, specifically uniformed Transit Authority workers. Also, any article of clothing worn at work emblazoned with the name of the firm, and perhaps their name also.

Nothing you wear to church or your backyard barbecue.

What Else Did She Do?

She counseled married clients with children, to show different addresses so they’d qualify to file as Heads of Households, instead of Married Filing Jointly.*

Let’s Get to Reason Number 2

Your income tax preparer should be of stable character in all ways, including their business office.

Now, I am myself in the process of relocating my office (Gubernatorial candidate Jimmy McMillan was right when he said “The rent is too damn high.”) I have, however, occupied the same storefront since January, 1999.

You must remember your preparer possesses extremely sensitive information about you. Your Social Security Number, date of birth, your checking or saving account numbers, and employment and income information should be maintained in a secure site, safe from the dangers of identity theft. If your preparer relocates each year, you must ask them what precautions thy take to protect  the information in your file.  Find out who else has access to the information in your files and if so, for what purpose.

Make sure your preparer provides you with four (4) critical documents to review and sign. 

First, the Consent to Use Information and the Consent to Disclose Information forms. These forms are required by Section 7216 of the Internal Revenue Service code when the preparer of the income tax return offers other services to their clients. Without these documents, the preparer is legally enjoined from sharing the clients’ information with any other business entity.

Next, your preparer must give you a copy their firms’, Privacy Policy Statement, outlining what methods they will use to protect your information.

Lastly, your preparer, if they have a lick of good sense, will require you to review and sign a Tax Preparation Engagement Agreement.

No, it doesn’t mean you’re getting engaged. It outlines both the responsibilities of the taxpayer to provide all information the preparer enters into their income tax return. This means no fraudulent entries. It also covers areas relating to audits, privacy policy, fees, your copy of your return, preparation method and other services your preparer may offer you. (An example of this form is available on my website at www.insuremeeg.com/2011_Engagement_Agreement.html)

Are We There Yet?

We finally come to Reason Number 3. PTIN  and  NYPTRIN are not fancy acronyms for foreign cars. The first is the IRS’s Preparer Tax Identification Number. The second refers to New York State’s New York Tax Preparer Identification Number.

Who Must Have These Numbers?

Basically, any tax return preparer who prepares a substantial part of any return for compensation.  Ask your preparer what their numbers are. If they don’t know what you’re talking about, ask the preparer to give you your file, collect your paperwork, and leave the office as quickly as possible.

While PTINS have been around since 1999, New York State first required preparers to register in 2009 (and pay an annual  fee of $100.00 for the privilege. The IRS charges a fee of $64.95).

Why Did New York State and The IRS Do This? 

At last count, the United States Treasury determined there was a 315 billion dollar tax collection shortfall in 1985, 265 billion of which was directly attributable to taxpayers’ failure to file, and filing fraudulent returns. This new system will enable them to better identify and prosecute those abusing the system by flooding it with fraudulent returns. On the other, to catch those who prepare returns and fail or refuse to sign them. Why do they refuse? So they don’t have to declare the income. In fact, they often fail to  file their own income tax returns.

On several occasion last filing season, clients, thinking they’d save money, went to other preparers, only to be told the preparer had a “…problem with their New York State software. So tell you what, I’ll prepare and charge you for preparing your Federal return and you can go anywhere to get the NYS return done.”

Not with me. Sorry. I don’t do sloppy seconds.

Never have, never will.

No matter what, the federal return must always be done first. Many federal calculations then flow to the state return.

You come to my office and you’ll pay for both, because I must prepare both.  I wound up telling those clients to return to the other preparers and get their money back. And their files, too.

And You Thought This Was Going To Be Easy?

Next week we’ll review reasons numbers 4, 5 and 6. Until next time, wait for those w-2’s with bated breath.

Questions? Feel free to email me at [email protected]

* We’ll cover the subject of filing status in a future post.

10 Top Reasons It’s Time For You To Get A New Income Tax Preparer

So I thought this an opportune time to review my “10 Top Reasons It’s Time For You To Get A New Income Tax Preparer,” list. Then, in my next post, we’ll review why any of these reasons could definitely be a reason for a great deal less holiday joy for years to come.

Ah, the holidays, the holidays…

The leftover Thanksgiving turkey still rumbles in your gut and Black Friday is, for the merchants at least, just a happy memory. We’ve trimmed the Christmas tree, hung the lights, and kept spiking the eggnog.  Then, we took the tree apart and stored the decorations until next years. And now, one special thought begins to fill the minds of people everywhere…

…Income tax filing season is here!

So I thought this an opportune time to review my “10 Top Reasons It’s Time For You To Get A New Income Tax Preparer,” list. Then, in the next three (3) or four (4) posts, we’ll learn why any of these reasons could definitely cause a great deal less holiday joy for years to come.

Let’s just hope there aren’t too many of you already on a first-name basis with an IRA auditor because of your current tax advisor.

Reason number 10:

You own and live in a two-family home. Your tenant pays you $12,000.00 in annual rent, and you have use of 75% of the house. Your preparer, knowing you need a big refund, depreciates the house at 100% and shows only $6,000.00 in rental income for the entire year on your return.

Reason number 9:

You haven’t been to church, any church, in the last 20 years. Yet each and every year, your preparer says you can claim $10,000. For worshiping at a Church named Church.

Reason number 8:

You receive certified, return receipted correspondence from the IRS. When you show it to your preparer, she smiles and tells you not to worry, they just want to make sure you received your thank you note.

Reason number 7:

You’re a receptionist at a medical center. You earn $30,000 each year. Even though you never leave your desk, wear everyday clothes to work, and haven’t seen the inside of a classroom for 20 years, your preparer gives you generous itemized deductions of $9,000.00 for uniforms, $3,000.00 for educational seminars, and $2,000.00 for business-related travel on a Schedule A. Oh, and he reminds you your twice-monthly hair and nail appointments are deductible too.

Reason number 6:

Lost your 1099 Int’s and Div’s? “No worries”, says your preparer. “The IRS doesn’t worry about interest or dividends under $75.”

Reason number 5:

Your return shows three (3) brand-new dependents you’ve never met.

Reason number 4:

Your preparer guarantees you everyone qualifies for the Earned Income Tax Credit. “You earned an income last year, didn’t you?”

Reason number 3:

You ask your preparer if they have a PTIN and an NYPTRIN. He tells you he prefers to drive domestic vehicles.

Reason number 2:

Your preparer relocates each year. Luckily you find them. Again. (See Reason number 8, above)

And now the number one reason “Why It’s Time For You To Get A New Income Tax Preparer,” is:

Your preparer assures you he or she, “Knows how to get you the biggest refund you’ve ever received.”

 The next post will deal with reasons one (1) , two (2) and three (3).

Hey, who said we were going in order.

Until next time, start gathering and itemizing those receipts.

Peace and Blessings,

BrooklynCovered

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