The newsletter is out and it’s about taxes

[jfoxcpacfp]

This is the first opportunity I’ve had to be still and write a newsletter since February - which seems like a lifetime ago. This was before tax information was really rolling in and when we were still getting updates to our tax software. Compared to prior years, 2019 wasn’t a pretty picture. We did many things right (at least, I keep telling myself that ;-) ), but, on another level, it seemed to Laura and me as if we were gradually suffocating in a sea of slow-moving urgency as April 15 drew nearer and getting further and further behind.

I promised in a recent forum comment to write an article on how tax season went down this year - the good, the bad, and the ugly. In the spirit of accountability and full disclosure, here it is:

• We survived tax season - barely

Not sure where to start to begin a review of your return to see if you (or your preparer) missed anything critical? This post will get you started:

• How to review your income tax return (8 tips)

Finally, Michelle has a 2-minute vlog that I believe has something for everyone:

• 4 tips to save on your property insurance

I hope you find information in the above to improve your tax education, save a few bucks, and maybe get a little insight into what goes on inside a CPA firm during tax season.

[Tim]

Your story reminds me of a day at the beach. My son built a beautiful sand castle. Then the tide started coming in. Moats, walls whatever won’t stop the flow.

With a common deadline you need a way to smooth the workflow. Critical path items (documents, video conference issues. Client review) let alone your firms work in preparation and filing become too much at the end. That last week’s frustration overrides any previous value added. Some was client induced (you wisely avoided that.
Do your clients have unique deadlines?
Do you have incentives for meeting those deadlines?

I would think it’s preferable to give 5% discount for February, 4% for March rather than get swamped in April. The value added year round loses luster and credibility the last two weeks. You can’t staff for the last two weeks, you can give incentives for getting tax stuff in on SuperBowl Weekend. Of course with high income clients, monetary incentives are difficult. But if you are 50% successful, your halfway there.

[jfoxcpacfp]

Thanks for your comments, Tim. Too be honest, when all was said and done, negative feedback has come from < 10% of physician clients, but that is way below what we’ve ever experienced and it was mentally devastating for a couple of weeks for me. Laura seemed to handle it better, but she was too busy to think about it all, I think.

We’ve offered early payment discounts before, which worked well, except we finally decided we really didn’t need to give an early payment discount because we weren’t nearing overdraft in January or anything. If it would work - and we may try it - I’d be happy to offer a discount for early submission. The unique problem we’ve discovered for many, many clients is that K-1s don’t come out early. And so we are all waiting to finalize returns until some pretty complicated K-1’s arrive. So we’re working on that.

For this year, most of the problems we had will be resolved during the year. We won’t have another new tax bill next year, either (fingers crossed!)

[Larry Ragman]

jfoxcpacfp wrote:

This is the first opportunity I’ve had to be still and write a newsletter since February – which seems like a lifetime ago. This was before tax information was really rolling in and when we were still getting updates to our tax software. Compared to prior years, 2019 wasn’t a pretty picture. We did many things right (at least, I keep telling myself that  ), but, on another level, it seemed to Laura and me as if we were gradually suffocating in a sea of slow-moving urgency as April 15 drew nearer and getting further and further behind.

I promised in a recent forum comment to write an article on how tax season went down this year – the good, the bad, and the ugly. In the spirit of accountability and full disclosure, here it is:

• We survived tax season – barely

Not sure where to start to begin a review of your return to see if you (or your preparer) missed anything critical? This post will get you started:

• How to review your income tax return (8 tips)

Finally, Michelle has a 2-minute vlog that I believe has something for everyone:

• 4 tips to save on your property insurance

I hope you find information in the above to improve your tax education, save a few bucks, and maybe get a little insight into what goes on inside a CPA firm during tax season.

Click to expand...

Turning your top 8 into a top 10:
#9: Was your QBI deduction reported on line 9 of the 1040 (round out tax tip appropriately)
#10 Mega Backdoor Roth. Verify that the distribution reported on your 1099R was not declared as taxable income on your 1040 since it was a transfer of after tax contributions from your 401k/403b/401a to the Roth.

[CordMcNally]

Great article. It isn't always easy to self-criticize but I think those who are able to successfully do it are truly special. A lot of things were going against you, especially with a complete overhaul of the tax code. However, growing a successful business is never easy...or quick. I think your post history confirms what we all know...that you truly care about the financial well-being of your clients and you put yourself before others. I think I speak for everyone here when I say thank you for all that you do.

[Tim]

K-1’s? Last week is extensions and estimated payment. No your fault. My point was freeing up resources. I’d rather send an email offering $200 if everything is done in March rather than a refund in April or May.
That’s the business you chose! Congrats.

[jfoxcpacfp]

@cordmcnally, you ‘bout made me cry (but I’m in the airport and have to be a grownup :-) ) Thank you from the bottom of my heart.

@Tim, those thoughts are helpful and we will discuss.

And @Larry_Ragman, I think I’ll steal those and extend my list. Thanks!

[VagabondMD]

I had intended to move my tax business to @jfox, bit inertia set in, and given all of the changes, I stayed with my incumbent local firm.

I had the sense from dealing with my firm that they were extremely stressed out and behind. I think it was almost a relief for all parties when it became clear that RealtyShares K-1s were not going to be on time (still have not seen them grrr) and we filed for an extension. This was a new scenario for me, and I was a little bit nervous about it. We paid all of the taxes due based on the estimate, so if we fudged it wrong, I still might owe a few hundred bucks by October, but no big deal.

I agree that @jfox is a solid citizen, an asset to our community, and I look forward to reading her blogs and her posts on our forum. Well done!

[FunkDoc83]

Vagabond MD wrote:

I had intended to move my tax business to @jfox, bit inertia set in, and given all of the changes, I stayed with my incumbent local firm.

I had the sense from dealing with my firm that they were extremely stressed out and behind. I think it was almost a relief for all parties when it became clear that RealtyShares K-1s were not going to be on time (still have not seen them grrr) and we filed for an extension. This was a new scenario for me, and I was a little bit nervous about it. We paid all of the taxes due based on the estimate, so if we fudged it wrong, I still might owe a few hundred bucks by October, but no big deal.

I agree that @jfox is a solid citizen, an asset to our community, and I look forward to reading her blogs and her posts on our forum. Well done!

Click to expand...

Why do K-1s take so much time to prepare?  We received one this year just a week before the april 15th deadline, but apparently it's not uncommon for it to come after.  My spouse was pretty annoyed by this and investments requiring a K-1 now put a sour taste in her mouth.  Maybe if we have some good returns, she'll come around.

[jfoxcpacfp]

Vagabond MD wrote:

I had intended to move my tax business to @jfox, bit inertia set in, and given all of the changes, I stayed with my incumbent local firm.

Click to expand...

So glad to know it wasn’t something I said ;-) Thank you for the kind words.

[jfoxcpacfp]

FunkDoc83 wrote:

Vagabond MD wrote:

I had intended to move my tax business to @jfox, bit inertia set in, and given all of the changes, I stayed with my incumbent local firm.

I had the sense from dealing with my firm that they were extremely stressed out and behind. I think it was almost a relief for all parties when it became clear that RealtyShares K-1s were not going to be on time (still have not seen them grrr) and we filed for an extension. This was a new scenario for me, and I was a little bit nervous about it. We paid all of the taxes due based on the estimate, so if we fudged it wrong, I still might owe a few hundred bucks by October, but no big deal.

I agree that @jfox is a solid citizen, an asset to our community, and I look forward to reading her blogs and her posts on our forum. Well done!

Click to expand…

Why do K-1s take so much time to prepare?  We received one this year just a week before the april 15th deadline, but apparently it’s not uncommon for it to come after.  My spouse was pretty annoyed by this and investments requiring a K-1 now put a sour taste in her mouth.  Maybe if we have some good returns, she’ll come around.

Click to expand...

It’s not the K1, it’s the partnership/s-corp return. They are notoriously difficult to prepare properly because basis is so difficult to calculate. Then it can get very complicated for the CPA - if they’re doing their job properly - to enter all of the various numbers in the correct spots to track basis for the client. Not all firms even track basis (inside tip) because it is technically up to the client to keep track. It really matters when you sell the investment, though.

That said, I think some firms are simply used to filing extensions for partnerships and s-corps because there are no taxes due with the returns (except at state level, which can easily be paid with the extension).

In addition, if the same firm is preparing the individual returns, they don’t want to file before the individual return is calculated because the tax owed or planned for at the individual level determines what choices the preparer makes on the business return. This is applicable at the small business level (<50 partners/shareholders or so), not at the large investment partnership level. It’s one of the difficulties of preparing pass-through tax returns and there is no good solution for it.

[Tim]

@Johanna,
Honesty and integrity are priceless. Never in your life have you had a shortage of those qualities.
Your business will be fine because of those traits. Your knowledge and contributions give you a big shovel. Thank you for sharing for free as well.

Would you please post a selfie of the tears CordMcNally inspired?

[jfoxcpacfp]

Tim wrote:

@Johanna,
Honesty and integrity are priceless. Never in your life have you had a shortage of those qualities.
Your business will be fine because of those traits. Your knowledge and contributions give you a big shovel. Thank you for sharing for free as well.

Would you please post a selfie of the tears CordMcNally inspired?

Click to expand...

Well, gee, thanks. I hope that doesn’t inspire any docs on this forum who are not my loyal fans to toss their lunch, but I sure appreciate your sentiments.

As for selfies, I do well not to fumble my phone on a good day. And I think I’ve read somewhere it’s bad forum karma for mods to post vanity shots.

[Hank]

Here’s a good cautionary note to those folks who have filed for an extension and have a defined benefit plan and/or 401(k) plan:
Even if you have an extension until October to file your taxes, your form 5500 for the prior year still needs to be filed in July. Your extension to file does NOT extend your Form 5500 deadline.

[jfoxcpacfp]

Hank wrote:

Here’s a good cautionary note to those folks who have filed for an extension and have a defined benefit plan and/or 401(k) plan:
Even if you have an extension until October to file your taxes, your form 5500 for the prior year still needs to be filed in July. Your extension to file has does NOT extend your Form 5500 deadline.

Click to expand...

And if you have a solo-k with a balance of at least $250k on 12/31/18, that means YOU need to file a 5500EZ (or your CPA or planner does) by 7/31.

Nice reminder, @hank!