JohnH

I find the traffic usually runs in the opposite direction. Namely, people pay me for advice that they DON'T follow.

Maybe some good could come out of this. The stakes are so high that Robert Redford can fight it to the max. If he wins, then possibly something in the decision might set a precedent which could be used in other cases with smaller amounts at risk. Nothing better than to see a greedy state overreach and get its hands slapped permanently. Years ago something along those lines happened to North Carolina. The legislature tried to welch on a promise it made to retirees. When somebody took the state to court, our genius of an attorney general at the time decided to fight it. He wasted tremendous amounts of the taxpayers' money on a fools errand, and the resulting "Bailey decision" cost the state tons of money for many years afterward.

If we had a sarcasm font, I'd want to suppress it. Part of the fun with sarcasm is the challlenge of figuring it out. (Well, that plus having a little private laugh when someone misses it.)

Especially with this being an election year, the conversation was destined to become ever more polarizing. (and I say that as one of the likely polarizing culprits) Besides, many of us still have lots of tax work yet to do and now there's one less distraction out there.

I swear I did not have a conversation with your client....

If Utah has a 3 year SOL, he may have a huge problem. Assuming NY wins the lawsuit, he won't be able to amend the Utah return and claim a credit for the taxes paid to NY.

Very good article. I can see how a service-type business can squeak by without an understanding of break-even analysis. Not because a break-even point doesn't exist, but because the break-even point for many service businesses is the sum of all their fixed costs plus a few other simple adjustments & tweaks. The owners often carry this figure around in their heads even if they don't know what to call it. But for a manufacturer, fabricator, or any business for which COGS is an important consideration, failure to understand B/E analysis is a surefire route to bankruptcy. They can get by without it when times are good, but when business slows down they will tend to make very bad decisions. Or as Warren Buffett says, "You never know who's swimming naked until the tide goes out."

Maybe now he will find the motivation to dig through his records, miraculously find that long-lost promissory note, and show it to his next tax preparer.

My wife approved of this message.

I think we've answered Naveen unanimously, so I don't think I'm hijacking this thread. The larger issue is the entire matter of clients who are in a hurry and need things done their way. When I first entered this business and for many years thereafter, I saw this type of client as a challenge and an opportunity. My thoughts ran along the lines that I would solve their problem, they would be impressed with my responsiveness & efficiency, and I'd have a client for life. I'd say that happened in maybe 5% of the cases I encountered. For the remaining 95%, few of them cared beyond the initial grateful "Thank You's", and most really aren't impressed by our responsiveness - they just know that this appeals to our egos sometimes and so they use it to their advantage. Looking back, more often than not there was some hidden agenda or undisclosed problem that came back and now it was my responsibility to fix it. (Or at the least I had to sweat it out for 3 years). In one or two cases, when all the facts became known it turned out to be a scary situation (another story for another day). In any event, I learned by hard experience to resist EVERY request to do something quickly and/or on the client's terms. If they're in a big hurry or need things done to their specifications, then they need to find someone else. Fees are a small part of this issue, but sometimes they even try to use the fees as a smokescreen to take your focus off the bigger problems. If there's a legitimate need to do something with a quick turnaround or to accommodate the client, I think we are usually in an infinitely better position to judge than the client. And when our instincts tell us to refuse to compromise (as did Naveen's in this case), we should definitely follow those instincts. Based on my experience, I'm guessing there's only a 5% chance that our instincts are wrong. Pretty good odds IMO.

Good question. I think she wants a preparer's name on the return, probably with no questions asked. And none of the reasons I can think of are positive. Sadly, if she looks around long enough, she will find someone she can bully. Hopefully their E&O coverage is good.

The second question is "Where's the coffee pot?" There is a critical interrelationship between the two inquiries.

The first thing I usually ask is "Where's the restroom?"

I agree with Jack and KC. This wasn't a matter of fee size - it was about control. She wanted to exert some control over you by setting your prices. If you had given in, then every future interaction you had with this no-class client would have been on her terms. Next thing you know, she would have been calling you demanding all sorts of favors, free tax consulting, or just wanting to brainstorm something with you. The fact that she engineered the conversation in the manner she did tells you all you need to know about her character. Besides, I don't believe her story about being audited six years in a row with no changes. There's more to this than she is telling you. You can't avoid situations like this in the future, because there are plenty of ignorant loudmouths out there. Best thing to tell them is that you also do charity work, but you make the determination about who gets the charity and they don't fit the profile. You're much better off without her and people like her as a client.

IRS has a well-worded warning on their web site about this issue as well. http://www.irs.gov/uac/Newsroom/IRS-Reiterates-Warning-of-Pervasive-Telephone-Scam

That's what I was thinking. A letter for those for whom I don't have email, and a slightly revised version for those who do.

This is a big topic of conversation over on the Drake Forum as well. One would get the idea that this scam is increasing in size and scope. Wonder if it would be wise to brainstorm a generic letter to send to all our clients warning them about this scam and that it is growing.

I've often asked insurance agents why insurance companies don't offer policies which build cash value for houses or cars. The principle is basically the same - you are insuring your house/car/boat, etc against its death. If policies which included elements masquerading as "investments" are a good idea for insuring our lives, why not for these other insurable entities? The answer (which the insurance industry will never admit) is that the reason for buying a homeowners policy or a vehicle policy is more-or-less a business decision. People weight the cost vs benefits and generally buy the best bargain. But insuring one's life becomes an emotional decision, so it's easier to sneak all these other elements into the decision. As a practical matter, I agree with Michael that permanent insurance can function as a form of forced savings (although at very low rates of return). That's about the only positive thing I've ever been able to muster in its favor. But the tragedy is the fact that most young people wind up grossly uninsured because the premiums on the permanent policy are so exorbitant. Thus, they can't afford to buy the half-million or million dollars of coverage (or more) they actually need to protect their family financially during the critical years. So if an unexpected death occurs, especially if it is the primary breadwinner, the spouse and children often wind up impoverished. The insurance companies compound the problem by paying miserly commissions on term insurance, but healthy commissions on the various forms of permanent insurance. Thus, it's very difficult for an agent to earn a decent income without rationalizing that permanent insurance is "better than nothing", or employing another one of a half-dozen excuses. This isn't illegal behavior by the insurance companies, but in my mind there's no doubt it is immoral.

I'll bet inquiries for opening-day tickets are already flooding in.

Every time my agent suggests Whole Life, I tell him I'll consider whole life only if-and-when Consumer Reports changes their recommendations on the issue. Same answer for annuities.

He can obviate the estimated tax problem by taking a salary/bonus check in December and allocating most of it to withholding taxes. (for example, $10K salary, less $765 SocSec/Med, less $8K Federal Withholding for a net check of $1,235. Adjust as necessary for state tax, etc.) The withholding paid via W-2 is considered as being paid in equal amounts throughout the year.

I see this is your first post. Are you familiar with the issues surrounding "Reasonable Compensation" and S-corp owners? Did you explain this to the prospective client? This is the first conversation I always undertake, because if they won't deal with that, then we really don't have anything else to discuss.

Good article. How many on this forum are skilled with a slide rule? (I have one in my desk, although I don't stay in practice.) https://www.sciencenews.org/blog/context/logarithms-celebrate-their-400th-birthday I credit the slide rule with having enabled me to form a mental picture of how log tables actually work.

We still subscribe to the newspaper, but most of the time it sits in the plastic delivery bag until garbage day, then it goes out of the bag and into the recycle bin. If my wife didn't occasionally look for coupons, and if our paper didn't add the online version for an extra $10/yer, I'm not sure we would even renew. I get more info, and faster, online than I ever could get with the newspaper. Your nephew is pretty much on target.

Good point Mike. But I think the employer needs "buy-in" from the individuals being paid. In some states, it's probably illegal to make retroactive deductions from an employee's earnings without their approval. These people are now employees going back to the beginning of the year, so anything the employer does will probably fall under the laws dealing with employees rather than I/C's. It is going to be problematic, and could even stir up other legal issues. So leveling with them and getting their cooperation would be wise. It may even be legally necessary. I'd even consider giving them longer than the remainder of the year to pay up the SocSec/Med "loan" if that's what it took to enlist their cooperation. And in spite of all that, there will probably be one or two who will try and take advantage of the situation no matter what the employer does. They really don't have any leverage with the employer, but sometimes people believe they do and will overplay their hand.