“Real World” Personal Strategy Blog

What to do with your tax docs & other items

“Life is like riding a bicycle. To keep your balance you must keep moving.”

- Albert Einstein

Well, the phones are STILL ringing around the office, but the pace is a bit slower. The dust is truly beginning to settle around here (ok, maybe that’s just pollen).

THANK YOU for trusting us with your finances this year. We know how personal it is to you, and that in this environment we’re all being as careful as possible with how we invest our precious funds! We’re grateful you chose us with that kind of care.

Speaking of tax returns (and personal details)…how would you like to see the current tax returns of our President and Vice President? They’ve been (transparently) released to the public, and are viewable here:

http://www.whitehouse.gov/blog/2010/04/15/president-obama-and-vice-president-biden-s-tax-returns

Tax returns can be a very revealing snapshot of the life of a family…and should be treated with care. Which is why you should handle them properly. So, this week, I’m dealing with that topic–as well as a few other questions we often get around here this time of year…

“Real World” Personal Strategy

What You Should Do This Week

It’s a familiar feeling after the taxes are done for our clients.

Relief. An unexpected windfall … or frustration at having to pay *more* taxes! Gratitude for a job well done by their preparer.

Unless you’ve filed for an extension–however you feel about your tax return…chances are, at least it’s done!

But, even now, we do get some questions. So, I thought I would answer some of the basic ones for you.

We’re here for you–even AFTER the tax “season” is done!

1. “When will I get my refund?”

Well, the IRS does seem to have entered the 21st century.

If you had us “e-file” your return, you can check your status right now, or if you had us mail a paper return, after about 3 to 4 weeks.

When you’re checking with the following options, make sure you have a copy of your tax return on hand or know your “filing status”, SSN and the exact dollar amount of the anticipated refund.

* Online: Go to IRS.gov and click on Where’s My Refund. (http://www.irs.gov/individuals/article/0,,id=96596,00.html?portlet=4)

* Automated Phone: Call 1-800-829-4477 24 hours a day, 7 days a week for automated refund information.

* In-Person Phone: Call 1-800-829-1954 during the hours shown in your IRS form instructions.

2. “Do I need to keep a copy of my return?”

Yes, for a *minimum* of three years. There’s all kinds of contexts where it’s useful. We do keep one on file, on your behalf, but it’s just smart and safe for you to keep one in a secure place at home.

(I’ve already written about Amended Returns, and you need a copy for that process, of course).

As for the supporting documents from your return, anything that relates to a home purchase or sale, stock transactions, retirement, business or rental property, should be kept much longer than the three years.

3. “I think there’s a mistake in my return. What should I do?”

Sometimes, you’ll find a receipt or a documentation after April 15th which really would have changed your prior year tax return. That’s, again, when you might have us file an “Amended Return”. It should be balanced against the cost of doing so, as well as the expected benefit–often these items can be dealt with the following year.

But here are some other, common reasons to amend…

* You neglected to report some income earned.

* You claimed deductions or credits you should not have claimed.

* You did not claim deductions or credits you could have claimed.

* You filed under one filing status, but you should have filed under another.

* You bought a residence and didn’t claim the First Time  Homebuyers Credit (or other credits available).

You might have other questions, which I haven’t addressed here. Let me know!

Well it’s over…or is it?

“If we do not change our direction, we are likely to end up where we are headed.”

- Chinese Proverb

Last week was crazy. We had so many last-minute folks come through our doors before the 15th, that I was (briefly) tempted to shut our doors so we could handle the flow!

But we didn’t. I’m glad to say that we worked very hard during the “offseason” so that we would be prepared for the tax season rush. We were able to work with everybody that came in, even folks who walked in on the 15th.

That said…shutting those doors at the end of the day on Thursday (the 15th) was sweet. My staff and I could look back on months of hard work, and take real satisfaction in hard work and a bunch of new client relationships which we’re excited to see last for years.

“So…what now?”

That’s a good question–and it takes me back to our offseason preparation. Sure, we’ll be taking some well-deserved vacation around here soon…

If you’re new to us this year…you’ll soon find out that we make big deal around here of keeping in touch, and offering you hope and wisdom about the current state of the economy–and YOUR wallet!

Many tax businesses shut their doors pretty firmly during the summer and fall. Not us. (In fact, check out the end of this email for a special “after tax season offer” that may make a lot of sense for your friends and family.)

This week’s Strategy Note, in fact, deals with a topic which most taxpayers have no idea about. This one, actually, is probably one to forward to your friends…

Roger Menden’s

“Real World” Personal Strategy

Little-Known “Secret”:  Amended Returns

As a client of mine, you’ve already got the peace-of-mind that you were able to claim every possible deduction legally allowed in the tax code. We put each return through an extensive review process to ensure that you’re keeping all the income you deserve to keep.

But what about your friends?

Well, since it’s now AFTER April 15th, they might think that the proverbial “fat lady” has sung on their 2009 returns. Not so.

Did you know that according to a 2002 report issued by the General Accounting Office, taxpayers overpay the IRS almost $950 million every year, which equates to an average overpayment of $400 per taxpayer. That’s a somewhat dated report…and the current numbers are certain to be higher.

What’s worse is that folks who prepared their own taxes (with a software, or on their own) are the most vulnerable. But did you also know that taxpayers who used one of the “big chain” preparers are almost as bad off?

An excerpt from a more RECENT report from the GAO (2006):

In a Limited Study, Chain Preparers Made Serious Errors

In GAO (United States Government Accountability Office) visits to chain preparers, paid preparers often prepared returns that were incorrect, with tax consequences that were sometimes significant. Some of the most serious problems involved these preparers…

1.  Not reporting business income in 10 of 19 cases;

2.  Failing to take the most advantageous postsecondary education tax benefit in 3 out of the 9 applicable cases; and

3. Failing to itemize deductions at all or failing to claim all available deductions in 7 out of the 9 applicable cases.

More clippings from the report:

* The 19 paid preparers we visited arrived at the correct refund amount only twice. On 5 returns, all for the plumber, they understated our refund amount by a total of $3,465.

* All 19 of our visits to tax return preparers affiliated with chains showed problems. Nearly all of the returns prepared for us were incorrect to some degree, and several of the preparers gave us very bad tax advice, particularly when it came to reporting non-W-2 business income. Only 2 of 19 tax returns showed the correct refund amount, and in both of those visits the paid preparer made mistakes that did not affect the final refund amount.

So what can your friends do about this? Simple: file an “Amended” Return.

Many tax businesses don’t provide this service, but even though we’ve completed our clients’ returns, we WILL review any of your friends’ returns–at no charge.

This is the final week…

Health Care Reform will affect you like this