Why This Tax Season Was Especially Tough

May 10th 2017
CEO Choice Tax Solutions Inc.
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The 2016 tax year filing was especially brutal this year. As much as we tax professionals prod our clients, it’s always on their timetable, and in my practice this year, more than the usual number of clients procrastinated until March. And, of course, the ones who waited the longest had complex issues that could not be resolved by the deadline.

About two years ago, the IRS commissioner stated the door would soon close on the international reporting amnesty programs. The reasoning behind this was that, by now, everyone should be aware of overseas account filing requirements, and anyone who does not comply must be doing so willfully.

This couldn’t be further from the truth. Throughout tax season, clients came to me with overseas account issues, such as:

  • They never reported their non-US accounts because they never heard of the filing requirement (many of them had used a paid preparer who never asked the all-important international questions), or they misunderstood the filing requirements (the threshold is aggregate and not per account).
  • Passive foreign investment company issues with clients who have a lack of understanding about the penalty regime for investing in foreign mutual funds.
  • The knee-jerk reaction of clients who are resentful about the required foreign reporting and hurriedly closed all overseas accounts without first getting advice about the potential consequences of their actions.

Imagine their surprise to learn that closing those very accounts will result in pension distributions and all of the complex reporting that comes with it! They’ve merely exchanged one reporting nightmare for another. Instead of extricating themselves from the reporting requirements, they’ve only dug themselves in deeper.

Another interesting observation was the do-it-yourself crowd. This year, they had an additional option, one that was free – Credit Karma. I had assumed that a very large number of people would hop on the free DIY bandwagon. Glad I don’t gamble, as I was wrong.

As we always do each tax season, my office fixed many DIY mistakes, as the taxpayers realized they were in over their heads and needed professional assistance. And most, if not all, of the DIY returns were done using TurboTax. When I inquired why they used that product as opposed to the free program, I was told that because Credit Karma was new, they did not think the program was “trustworthy.”

It’s an interesting verdict on the product. It’s also telling that the public would prefer to pay a little, yet still hold back on getting help until they got a notice or were at an impasse with the preparation.

The Affordable Care Act reporting brought nothing new, although I was expecting many clients to come in and demand that we do not assess any penalty based on proposed changes. Didn’t happen. Again, it’s a good thing I don’t gamble.

And, of course, on April 18, it was a flurry of emails from clients who waited until the absolute last minute to make payments. Many people had issues navigating the taxing authorities’ websites this year and, as a result, were unable to make the required payment online.

Murphy’s Law is always in effect, especially on the last day, so this really shouldn’t have been a surprise. I suppose there is nothing we can do with the procrastinators but hope they learn a lesson. But for those who haven’t quite learned yet, please note the following: When you have your completed tax returns in hand for over a week, it’s a good idea not to wait until 11 p.m. on the day of the deadline to attempt to set up accounts and learn to navigate a taxing authority’s website.

Many people think a tax professional’s job is easy. They think we work two-and-a-half months out of the year, throw some numbers in boxes, and do something that really anyone could do because their return is “straightforward.” We in the tax trenches know that’s nothing close to the truth. This is a physically and mentally demanding job, with punishing hours, dealing with a public that has been brainwashed by commercials to believe that a refund is something you are entitled to, and it doesn’t take any training to prepare taxes. Another tax practitioner said it best when she said that she didn’t think her electrician was a genius, but she still didn’t want to attempt to wire her own home.

While it may not seem this way based on all of the above, I really do enjoy what I do. Tax law is fascinating and I actually enjoy working with many of my clients. Additionally, I have had a great year with the release of my new book, 101 Ways To Stay Off The IRS Radar, as well as numerous articles and radio shows.

I suppose some much-needed sleep and getting through the numerous extensions will bring me back. And the best part of my job is coming soon: I’ll be spending the day at the beach and working on returns at night. Here comes the sun!

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