We have all been there. We have a car that we take to the dealer because the “check engine” light is on. The dealership tells us it will cost $1,000 to fix. You hear that voice in your head and decide to get another opinion. The other mechanic tells you that the part to fix the problem is $100 and labor will be $100, for a total of $200. Which mechanic are you going to trust?
I review a lot of returns. The financial planner that I use sends a lot of business my way, and this time he saw something that didn’t make sense. He had a 90-year old woman that had a gift tax return, a trust return, and a personal return, so he sent me copies of the last three years to review.
The gift tax return was filed because this woman gifted $16,000. A simple 10-minute call to her tax pro would have told her that she can only give $14,000, and if she wanted to gift more, she could have given to the giftee some of the stocks that she had in her portfolio. She could gift stocks at her basis of $14,000 and when sold by the giftee, if they were in the 10% or 15% tax bracket, there wouldn’t be any taxes paid, much less a gift tax return. There was obviously no open communication between the tax pro and the client, otherwise a gift tax return would never have been filed. The tax preparer charged $500 for the return.
The trust return was a family trust return that was with her and her late husband. When the husband passed away, the family trust, which had been revocable, became irrevocable.
About Craig W. Smalley, EA
Craig W. Smalley, MST, EA, has been in practice since 1994. He has been admitted to practice before the IRS as an enrolled agent and has a master's in taxation. He is well-versed in US tax law and US Tax Court cases. He specializes in taxation, entity structuring and restructuring, corporations, partnerships, and individual taxation, as well as representation before the IRS regarding negotiations, audits, and appeals. In his many years of practice, he has been exposed to a variety of businesses and has an excellent knowledge of most industries. He is the CEO and co-founder of CWSEAPA PLLC and Tax Crisis Center LLC; both business have locations in Florida, Delaware, and Nevada. Craig is the current Google small business accounting advisor for the Google Small Business Community. He is a contributor to AccountingWEB and Accounting Today, and has had 12 books published on various topics in taxation. His articles have also been featured in the Chicago Tribune, New York Times, Yahoo Finance, Nasdaq, and several other newspapers, periodicals, and magazines. He has been interviewed and been a featured guest on many radio shows and podcasts. Finally, he is the co-host of Tax Avoidance is Legal, which is a nationally broadcast weekly Internet radio show.