Estimated reading time: 13 minutes, 3 seconds

So a new client walks into the office of a local CPA firm in the Midwest, a not-so-organized contractor/landlord/real estate guy who buys and sells and rents out not-so-great places. His records are terrible, so the CPA sits down with him and tries to put things together, running a trial balance.

“You made $475,000 last year,” the CPA says. All the blood drains out of the client’s face. He says that’s absolutely impossible, that he didn’t make that much money.

“What are we missing?” the CPA asks. “Do you owe anyone any money except people at these three banks?” Nope.

How about properties, is this list accurate? The client looks through the properties list and says, “You don’t have the fourplex on here. I paid $500,000 for it.” The CPA sighs and says, “Now your income is a million dollars.”

The client looks at the CPA and says, “Forget about the fourplex.”

 We didn’t run into any real war stories like that when we surveyed a handful of CPAs around the country as the April 15 tax deadline neared. All-in-all, it was a pretty peaceful tax season, with a few exceptions. Here’s what we found.

Stam Stathis, Partner in Bradenton, Florida’s CPA Associates, could still laugh about some of this tax season’s foibles late on the afternoon of Friday, April 10. Perhaps because he’s been getting up at 3:30 in the morning for several weeks now.

But some things aren’t funny.  “The big thing with clients has been, it’s depressing to see the amount of wealth that has disappeared, the incompetence of managers managing mutual funds,” he says. He cites one fund that dropped 65% when the market had only lost 35%.

“Even tried and true investments – it’s just gone,” he says. Instead of telling people they owe money, he’s breaking the news that they made an overpayment and won’t have to pay estimated taxes for the next two quarters.

And brokerage houses still aren’t getting their statements right, he says. Even with the extra time they had this year, he’s still getting corrected 1099s in the beginning of April.

“If the brokerage houses are going to continue to give us bum information, they’re either going to have to move April 15 or start fining the brokerage houses,” says Stathis. “That costs us money, and we can’t pass it along to the client.”

Stathis also ran into problems with ProSystem. With certain state returns, he couldn’t print out city tax returns in worksheet mode, but he could in interview mode. And he entered identical data for two California returns, and was told one had taxable income and the other didn’t. Go figure.

In spite of it all, he says the tax season—his 29th—went fairly smoothly.

Tom Davis, CPA CITP, a partner at Bowen, Phillips, Carmichael & Davis, LLP, Certified Public Accountant & Consultants in Valdosta, Georgia, says the season went very well. In fact, the firm is 25-30% ahead of schedule in terms of the number of returns produced.

Davis believes, though, that that may be at least in part due to the economy. Work is being accelerated because people are expecting refunds and are getting their returns in faster.

“Our volume is very good,” he says. Davis’ firm uses CCH products, and he says there have been zero software glitches of any magnitude. “I’ve been very pleased with the technological aspect of the tax season.”

The firm has had a number of staff out for various reasons, but the good news for him has been that the system is holding up well; others can pick up the slack. Even in the midst of opening a new office -- that’s running well on a terminal server kind of implementation. Davis hopes that that kind of access will serve as a model in the future.

As a consultant for a variety of other firms, Davis has the opportunity to hear a lot of war stories. But he hasn’t this year. “I’m not hearing any huge issues out there at all. It’s been very quiet,” he says. He has been surprised, though, that more firms haven’t adopted document management systems.

Though this tax season went well, Julie Lepper, EA, Pinckney, MI, is looking forward to wrapping things up and moving on to an outgrowth of this year’s tax season: taxpayers’ needs for long-term tax and general financial planning.

Lepper found this year that people were looking for local accountants, staying away from H&R Block. She’s far enough from Detroit but still close enough that the damage to the automotive industry is trickling down to her city. People are concerned about money; they’re calling to see what she charges before making a decision, or bringing in what they did in TurboTax for her to check. They’re starting new small businesses in a bad economy, worried about tax law changes and complications.

And because her firm is small, she’s able to provide a different level of service, to work with her clients on a long-term basis, to help them, for example, get their resumes together and network with each other.

“One of the great things we can do is to help people look at their finances from a different perspective and give them opportunities,” Lepper says.

And though she’s had her share of new clients bringing in plastic bags stuffed with receipts—and one that lost everything in a fire, which was a nightmare for the client and added extra complexity, as she helped them with valuing their belongings —she sees the goodwill she gets from starting with a tax engagement and seeing how that morphs into a long-term relationship.

“A lot of bigger firms don’t really think about those opportunities,” she says.

Like Stam Stathis, Larry Gray, a Partner at Alfermann, Gray & Co., LLC in Rolla, MO, felt a great deal of frustration over the late, amended brokerage statements. “By giving [the brokerage houses] additional time beyond the January 31 deadline, it didn’t solve the problem of amended brokerage statements later in the season. It just made the amended reports 3-4 weeks later.”
One particular example is that famers—of which there are many in his part of the country—must file by March 1, and there is no extension for this date.

This year, though, things generally went well – he was ahead of schedule. Even considering the complicated returns in his firm, his firm didn’t seem to have as many issues. The rolling hills of the Ozarks—where most of Gray’s clients are  small business and retirees—hasn’t felt the recession as deeply as other areas of the country like California and Las Vegas, since the economy didn’t soar as high in the late 20th century and early 21st as in other geographical areas.

It’s a different pace in Rolla. “You don’t have all that pressure to buy a new house every few years,” says Gray. “People don’t buy a home here to roll it – they buy it to live in it.” So they haven’t seen the inflated housing market and foreclosures other parts of the country did.”If you’re going to retire here, I hope you brought the money with you,” he says.

 Still, with some dividends down 90%, and more of a recession feeling in the air the last six weeks or so, clients are understandably nervous. Is it time to get out of the market?

Hold and watch, is Gray’s advice.

In the meantime, those 1040s et al need to be filed. “We had a good tax season because we were ready for it,” says Gray, who consults for other firms around the country on technology integration. He studies inefficiencies and analyzes steps so he can keep collapsing the tax season, and does a lot of tax planning with clients.

One thing Gray is studying intently these days is the 7216, a regulation that makes it a criminal penalty to use or disclose clients’ information without approval. Client privacy is critical, but Gray feels there are too many unanswered questions within the revised regulation.

“I understand why they’re doing it,” Gray says. “But I believe it could be approached more from a best practice standpoint, resulting in better guidance.”

7216 requires that a signed use or disclosure statement be created before the taxpayers receive their returns. In the past, for example, if the client needed information released (i.e., for refinancing) he or she would have signed a disclosure form at the time of request. But there are many unforeseen circumstances that the client doesn’t know at the time the returns are prepared.

Yes, the taxpayers should always be in control of their information and they should be able to give a tax preparer an instruction to release information when they need it released. But the implementation and the timing of the new 7216 are unclear. “It’s like we just played the first inning of the game this tax season and we’re still trying to figure out what the rules are,” Gray says.

Plus, he says, not all professionals are aware of the impact of the regulations, and may not be giving the informational letter to the clients for signatures. So if something goes amiss, it’s the professional trying to be compliant who would be the one being picked on.

Still, overall, it’s been a really good season, Gray says.

Sometimes, though, it’s not the heat, it’s the humidity. Ray Busch, a CPA in Tinley Park, IL,
has had his share of everyday annoyances beyond tax filing.

Yesterday, for example, Busch’s provider of ACH direct deposits had a glitch, and the deposits that were supposed to be made the night before didn’t get transmitted until 6 in the morning. Professionals in the payroll businesses needed that like they needed a hole-in-the-head, Busch says.

And then there are the normal annoyances that don’t stop just because it’s April 10. Busch had just changed phone vendors to Comcast from AT&T, because of a savings of several hundred dollars a month. Suddenly, an AT&T rep showed up and wanted to talk to the boss and wouldn’t take no for an answer, even when the young woman at the front desk continued to explain that he was busy.

Finally, the young woman—who happened to be Busch’s daughter, who has a college degree in accounting and will take over the business someday—explained that the AT&T rep would never see the boss because she didn’t like him. Besides, AT&T only low-balled Comcast’s fee after Busch had already switched.

Even though most of Busch’s small business clients are doing OK, some having their best years ever, “…cutting costs is getting more important,” Busch says.

Busch is into his 39th tax season, and as of Saturday morning, planned to finish the returns submitted to his firm by his cutoff date. Those submitted after the cutoff date get extended. “None of this is worth having a heart attack over,” he says.

His tax practice has also had its share of annoyances. “It’s pretty frustrating,” he says. For example, the government comes up with these stimulus payments, and people can’t remember if they got one or not, so that slows everything down.

Then, they expanded the kiddie tax to cover more kids. You just can’t sit down and do a return and not be concerned that there’s not another return related to it out there somewhere, Busch says. Sometimes the kids and the parents have returns done by different practitioners, and they’re all interrelated.

As for the late brokerage statements – “They took two weeks away from us,” he says. “Gave the brokers two more weeks but didn’t give us two more weeks. Chopped two weeks off and gave it to the brokers.”

Busch agrees that the IRS should move April 15 if they’re going to do that. Not only because of errant 1099s, but because of the religious holidays that generally fall this time of year. “They screwed up Easter and Passover something terrible.”

David Primes, Shareholder at Sobul, Primes, and Schenkel in Los Angeles, CA, reports a good season. Within his practice, 40% of the clients are related to entertainment industry, so that can represent a fair amount of volume with relatively fewer clients, he says. Primes himself represents professionals like  attorneys, consultants, and doctors, and watches over the firm’s technical systems. One of his future projects will be setting up a system where clients can log into a secure site and grab a copy of their tax return.

“For the most part, it’s been one of our better tax seasons,” he says. Unlike some CPAs who reported early filers eager to get their refunds, Primes’ firm has seen a trend of people getting things later to them. “It’s been a bit more compressed than some years,” he says.

Maybe it’s a reflection of the economy, Primes says, but people have been reluctant to think about their taxes this year, even people who previously filed earlier. “They look at the numbers from last year and see all the losses,” he says.

Plus, a lot of the firm’s clients have sophisticated returns, like multi-tier partnerships, where someone has to file so someone else can file so someone else can file so they can get a K-1.

The firm staffed up pretty well this year, though. “That contributed as much as anything,” Primes says.

Chris Green, a CPA in Fort Worth, TX, says nothing has gone terribly wrong this year.

But there have been annoyances. “Probably the most frustrating thing is all the requirements and the CYA,” she says. “We have to be increasingly vigilant. You don’t slide on anything.”

 Like some other CPAs, Green has been seeing quite a few returns that she expected to be on extension coming in April 1st or 2nd, clients who might have a large refund because they planned it that way, and they want their refund.

Green’s niche is physicians, and she’s noticed that while they aren’t losing their jobs, their income is down, primarily because so many of their patients are losing their jobs and their health insurance. She works with lots of OB/GYN specialists, and some of their patients have lost coverage in the middle of a pregnancy. What do you do then? COBRA is expensive, and the doctors don’t want to work with Medicaid because of all the red tape and minimal revenue.

“I sense a lot of fear about what this [Presidential] administration is going to change,” Green says. “There’s lots of anxiety related to it.”

What would help make her life easier? “I want more diagnostics from the software companies,” she says.

“What has gone right is the success with which employees have been able to work from home after hours so that they are not completely detached from their family,” Green says. “Due to the technology available to us, we are more able to meet the personal needs of staff.”


Kathy Yakal
Kathy Yakal has been writing about personal and business technology since 1983, as an editor and writer at COMPUTE! Publications. She writes frequently for The Progressive Accountant on technology topics.She began freelancing and specializing in financial applications in 1988. Her columns, features, and reviews have appeared in publications including Barron’s, Kiplinger’s Personal Finance Magazine, and PC Magazine.
Last modified on Sunday, 02 June 2013
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