Today's beef

[schirallicpa]

New clients.  Sold rental property in Florida for a nice profit in early January - before having their taxes prepared for 2023.  So the lady that prepared their taxes last year told them they would not have to pay tax if they put their money in a money market - you know - from one investment to another.  

Now I'm the bad guy.

[Lee B]

Send them back to their previous preparer 

Life's too short for clients like this!

[schirallicpa]

She moved to Florida.  She's probably handing out bad advice down there as we speak.

[jklcpa]

39 minutes ago, schirallicpa said:

New clients.  Sold rental property in Florida for a nice profit in early January - before having their taxes prepared for 2023.  So the lady that prepared their taxes last year told them they would not have to pay tax if they put their money in a money market - you know - from one investment to another.  

Now I'm the bad guy.

Sometimes clients hear what they want to hear.  If other withholding or estimates were already sufficient for 2024 to meet the safe harbor, are you sure that the previous preparer didn't really say that if they didn't pay tax on the gain during 2024 that they wouldn't have the underpayment penalty?  That could be the case here, a year later, especially when a client doesn't fully understand and aren't talking with the original messenger that can revisit the conversation and information or advice she discussed.

[Max W]

It seems that the tax preparer is probably confused.   Before 1997 if you sold your home you could defer capital gains by buying another for the same, or greater, amt of the sale.

[JohnH]

Could be bad advice from the preparer; could be bad listening by the taxpayer.  Just recently I had a client call me about a transaction which we had discussed 3-4 months ago. At that time she told me what a friend had told her about the taxation of the capital gains. I explained to her why that advice from her friend was dead wrong and I then gave her the correct information.  On this subsequent conversation she repeated the bad advice to me, and when I corrected her she said "But I remember you telling me that on our last conversation."  Fortunately I had made notes and more-or-less read them back to her. 

Either I'm a very bad communicator, she's a very bad listener, or (most likely) she only remembers what she wanted to hear rather than what was said.  

[Catherine]

16 hours ago, JohnH said:

Either I'm a very bad communicator, she's a very bad listener, or (most likely) she only remembers what she wanted to hear rather than what was said.  

They only time they remember something they do not want to hear is if their barber's wife's brother tells them!

[mcbreck]

Have one today who wants me to file an extension and the only contact we've ever had was 9 months ago a meeting about whether I could do their tax return. Haven't heard from them before today and she obviously doesn't comprehend what an extension means. She's wondering if it means she gets a 6 month extension on making estimated tax payments.

[jasdlm]

38 minutes ago, Catherine said:

They only time they remember something they do not want to hear is if their barber's wife's brother tells them!

I'm getting old and spicy, and now, when people tell me something preposterous (or give me some crazy tax rule they 'know'), I look them straight in the eye and say, 'Did your hairdresser tell you that'?  Stops them cold.  Literally.  You should try it.  They look at me dumbfounded for a minute, then they usually chuckle, and then they remember that it's a 'fantasy tax scenario', and we never speak of it again.  You have to be over 50 to pull this off, but I've now made the cut, and I use it every time.

[Catherine]

I should do that, @jasdlm!

[jklcpa]

58 minutes ago, jasdlm said:

I'm getting old and spicy, and now, when people tell me something preposterous (or give me some crazy tax rule they 'know'), I look them straight in the eye and say, 'Did your hairdresser tell you that'?  Stops them cold.  Literally.  You should try it.  They look at me dumbfounded for a minute, then they usually chuckle, and then they remember that it's a 'fantasy tax scenario', and we never speak of it again.  You have to be over 50 to pull this off, but I've now made the cut, and I use it every time.

I may use that on a difficult meeting tomorrow!

[michaelmars]

My client wanted to know if the $.02 interest earned on his single member account was reported on sch b or sch c.

[Jim Oh Bkkr]

18 hours ago, michaelmars said:

if the $.02 interest earned

"The bank said I don't have to report it because it's under $10.00."

[Lee B]

4 hours ago, Jim Oh Bkkr said:

"The bank said I don't have to report it because it's under $10.00."

The bank is partially correct. They don't have to file a 1099 if it's under $10.00.

[BrewOne]

Once I realized the IRS only recorded dollars--nothing after the decimal point--I started rounding down (essentially ignoring any cents) on tax forms; I did get push back from one client whose total withholding didn't match the number (-$2) I entered but I convinced them my system matched what the IRS has on record and was worth it.  Even though I was taught rounding up from .50, completing my second year doing this and I'm convinced it's the way to go. Plus it makes it easy to deal with those bank statements folks bring in with $0.97 in interest on them.

[Lion EA]

The IRS instructions tell us to round like we learned in school, up from .50 AND down. However, the IRS truncates numbers at the decimal point, essentially rounding DOWN ONLY. They make the rules, but they do NOT follow them!

[Catherine]

1 hour ago, Lion EA said:

They make the rules, but they do NOT follow them!

So what else is new?

[Patrick Michael]

I spent an hour of my life that I will never get back debating rounding with an engineer.  He wanted to know why his calculation of interest income differed by $2 from what was on his return.  After I told him it was due to rounding, he asked if I rounded first, then added, or added first and then rounded.   He proceeded to lecture me on why I should add all the interest first and then round.  I explained how the software required that each 1099 had to be entered separately and would not allow me to enter the cents, so I had to round first.  And how $2 did not change the amount of tax owed.  He insisted I add $2 to his interest amount.  Luckily he did not come back the next year.

[Catherine]

3 hours ago, Patrick Michael said:

I spent an hour of my life that I will never get back debating rounding with an engineer.

Ditto but it was $4 and on depreciation. Total difference on a long list of assets; he hand-calculated and I used software. Of course it made no change to tax. I later suggested he find someone closer to home and to my very great relief he did. Any engineer is a potential royal PITA client and treated (and priced) as such until such time (rare) as they prove otherwise. Engineers don't know the difference between precise and accurate. They are related but not identical.

While I know the IRS truncates, I cannot stop myself from rounding "properly" - as rounding is different from truncating.

[Corduroy Frog]

4 hours ago, Patrick Michael said:

I spent an hour of my life that I will never get back debating rounding with an engineer.

Engineers know more about anything than anybody about any subject.  Some of the worst returns I've had to clean up have been self-prepared by Engineers who knew everything.

[Catherine]

Just now, Corduroy Frog said:

Some of the worst returns I've had to clean up have been self-prepared by Engineers who knew everything.

100% agree!

I've heard this termed "the midwit problem" with people who are reasonably smart  & competent in their own areas of expertise mistakenly thinking that makes them smart & competent in every area. When they do it with tax returns, we get huge messes to clean up, for clients who will question and nit-pick over every bleeping line on the return. Charge accordingly, with pre-payment required.

[Jim Oh Bkkr]

The rounding issue reminds me of the spreadsheet days of ATX.  Most ALL calculations did NOT round, but "display" was globally set to zero decimal places.  I had a client get a "nastygram"(TM Catherine, IIRC) over EIC when AGI was shown as yadda 50,  but was actually yadda 49.70.  Took forever to track down.

I never entered cents after that, and any calculations that could produce decimals, were edited to include =round(x,n)!

[Catherine]

1 hour ago, Jim Oh Bkkr said:

TM Catherine, IIRC

Yes, that is my phrase. I'm tickled pink that you recalled!

[Sara EA]

Hey, please don't beat up on engineers!  We have two engineers in our immediate family.  Both are very smart, work hard, are kind and caring and friendly.  Sure they like some things exactly so, but they can give a little.  I think that where the clash with taxes comes from is that in their wildly complicated math computations, there is only one right answer.  Both of my relatives are civil engineers, and if that answer isn't right millions of dollars could be wasted or even worse, people could die.  In the tax world, our most common answer is "it depends," which drives engineers off the wall.  So be charitable, recognize where your engineers are coming from, and praise them for being smart enough to come to you.