Tax season is here with concerns about tax law changes effective this year while we still use the old rules for preparing the 2017 return. Several new tools are available to help you determine how the tax code changes will affect you.

Drake Software, the program I use in my office, has developed a Tax Planner incorporating the changes in the TAX CUTS AND JOBS ACT. If we prepare your return you will get a copy of this diagnostic automatically at no additional cost showing what your taxes would have been if the changes applied to 2017. No more guessing.

I am also officially opening my doors for additional tax clients! This is important. This summer will be busy as serious planning is needed for all taxpayers with rental properties or business income. Past advice is out the window as new rules mean new advice! Some people will need to consider different entity structures to take advantage of the new rules. Regular clients will have first pick of consulting sessions. If slots are available after serving clients I will open the doors for non-clients. I’ll keep you informed.

If you prepare your own return you should consider Drake’s DIY program with the link below and in the right column. You will receive the same diagnostic tax professionals using Drake provide.

 

If your tax professional uses software without an effective planner or you prepare your own return outside this blog you might consider the Tax Proposal Calculator offered by the Tax Policy Center. I’ve played with the calculator and find it helpful.

[After I published, Jeff from Maximum Cents (a blog you should consider reading) left a comment with a link to an even better tax calculator than I provided above.

https://www.maximumcents.com/tax-reform-calculator-much-will-save-pay/

This is what I love about the blogging community. Our group intelligence blows away anything I can do on my own. Thanks for sharing, Jeff.]

 

The stock market has been on a tear. Now is the time to consider monitoring your wealth building with Personal Capital. The easy money has been made with the massive market run-up. Having a plan and clear visual of where you stand financially is a powerful resource. Clicking the image below takes you to Personal Capital. Remember, you can’t manage what you don’t know.

 

Concerns over the market also have people thinking about different places to invest their money. Lending Club and Prosper were a great alternative until issues arose a year or so ago. I’m currently withdrawing all my funds from Lending Club and Prosper due to the high level of risk compared to the declining returns. This is a slow process, but nearing the end.

A similar investing model backed by real estate is offered by Peer Street with comparable returns. Lending Club and Prosper are unsecured loans with a higher level of risk. Peer Street isn’t a perfect answer, but certainly a consideration for a limited percentage of your portfolio. Clicking the image below takes you to Peer Street. Kick the tires and let us know what you think in the comments.

 

Student loans came up in the comments this week. Debt is the number one enemy of wealth and student loans are structured with serious risks to the borrower. I’ve pasted a link below to SoFi. At the very minimum kick the tires. Before interest rates climb higher you want to get your loans under control.

 

Before we get to the fun stuff, remember next week is our drawing for $100! The drawing is open to all subscribers. Check the Where Am I page calendar for more drawing dates and details.

 

Now for the fun stuff to enjoy the rest of your weekend!

 

What I’m Reading

Richard Branson has made a name for himself doing business differently and having fun in the process. I bought several of his books a few weeks ago and cracked open The Virgin Way: If It’s Not Fun, It’s Not Worth Doing.

Richard’s style is different and it resonates with me. I fell in love with the FIRE community for their frugal ways. Early retirement always sounds nice, but retirement in its traditional form isn’t for me. Enter Sir Branson.

Branson convinced with his words and lifestyle you can have the best of both worlds: free time with family and doing the things you enjoy, plus keeping the business. He also provided me with ample evidence I need to listen more and better. I tend to talk too much. (If you’re reading this dad do not comment. We, ah, you can laugh about this at the card table.)

Branson has a refreshing style I enjoyed more than I originally thought. If you want a fun, entertaining and informative read, I recommend The Virgin Way.

 

What I’m Watching

Natural history and science are common threads in my viewing habits. My guess is you’ll enjoy as much as I did this YouTube video on how the Earth’s landmasses moved over millions of years. [240 million years ago to 250 million years in the future]

 

Professor Brian Cox is a favorite. In the video embedded below Cox explains The Biggest Threat to our Civilization.

 

All that serious talk requires balance with a humor piece. Jim Jefferies is a riot. His humor reminds me of George Carlin with an Australian accent. Here Jefferies explains the situation between North Korea and the U.S. Enjoy.

 

What I’m Listening to

Talking about Australia, here’s a song from Midnight Oil I listened to this week. [Beds are Burning]

 

Finally, I rarely listen to recent music releases. The following video of Somebody That I Used to Know played at the gym ad nauseam a while back and YouTube must have heard about it. Now I can’t get the darn tune outta my head. I’m passing the blessing on to you.

 

Enjoy your weekend, kind readers! Can’t wait to get back with you again Monday.

We had some cold this winter.

The age-old question has flooded my in-box: Should I do my own taxes?

I try to give a short encouraging reply, but it always feels contrived. Normally I write: If you are comfortable preparing your own taxes you should at least see how the process works by trying. If you run into an issue or don’t know the tax law on a certain area of your return you can always call in a professional.

You may have already received a similar email from me if you asked the question. In the name of efficiency I should keep my reply in a file for a faster copy and paste. But I don’t. I write the thing out every time and it’s starting to sound like a broken record.

The short answer salves my conscious by answering a call from the dark. There real answer, however, is a bit more involved.

If I do this right you should be in a better position to determine if you should be doing your own tax return so pay close attention. I’m only going to say this once.

Either Way I Win

The reason so many people email me with “the” question is because they see I offer a DIY tax program on this blog. The banners and links are an affiliate program. I also get paid when I prepare a tax return. I win either way.

Don’t take this as an arrogant slight. My intention is to disclose my relationship to whatever decision you make. Someone in my profession is getting paid regardless.

Comfort Zone

My biggest concern when people prepare their own return is they think they know what they’re doing when they really don’t. I see self-prepared returns often enough to see some really ugly problems the IRS will take a serious interest in.

Refi student loans at low rates.

That doesn’t mean you should hire a pro. Many errors I see on self-prepared returns have nothing to do with tax law! Unreported income and missed deductions are the two biggest issues I see. This isn’t a tax law issue; it’s a sloppiness issue.

A recent return my office amended, the client reported all the rental deductions (except depreciation) but missed adding any rental income. It was a serious matter!

My first recommendation for you when considering preparing your own taxes involves organization. If your tax records are stuffed in a paper bag or scattered everywhere you probably need a tax pro to crack the whip. Guys like me are in a better position to make a judgment call on missing information. There are disclosures a tax professional can attach to a tax return telling the IRS how the situation was handled. If the tax pro uses a reasonable method it virtually avoids an audit on an issue with no clear answer. Remember, the last thing you want is to be in an audit going, “Ahhhhhhh . . . .”

Call in the Troops

There is nothing wrong with doing your own return to the best of your ability and then hiring a tax pro for the return you will file. (Read the last sentence again and again until it sinks in.) Yes, you might have two prep fees for the year: one for the DIY program (required when you print) and the accountant. But you will also see where you missed things.

An alternative is to hire a tax pro when you have a unique issue and then go back to preparing your return for a couple years. Some accountants hate this. I don’t. What you consider hard I consider a normal day at the office. My computer updates your personal information annually so when you come back is six years I just pick up where I left off. I probably have data you already forgot about allowing me to bring you back up to speed.

Finally, there is no harm in having a tax pro review your return prior to filing. Yes, you will be charged. You want to be billed for the review! A knowledgeable tax pro will demand payment for her time. Payment also increases the chances the tax pro will give your return the review it deserves.

Preparing your own tax return is scary for some people. It shouldn’t be. Most software, including the program on this blog, has plenty of help features. If you plan on preparing your own return I hope you consider the 1040 program links and banners here. (Man has to eat.) If not, no worries. (Zig Ziglar always said you must ask for the sale. I never argue with Zig.)

Even if you hire your tax work done, consider opening a file at 1040 (the DIY software here) and seeing how well you do compared to the pro. There is no cost until you print and/or e-file. You might be better at it than you think.

Regardless, you can always call in the troops if you find yourself in too deep. Hiring a pro if you are concerned about anything on your work is not a sign of weakness! At the very minimum you have a better understanding of what the accountant is doing on the other side of the desk.

Tax pros get it wrong, too! Much of what we get wrong is the result of a misunderstanding or outright lack of knowledge of your personal situation. You know you better than I ever can. If I don’t find the right questions to get the answers needed for an accurate return I’m going to get it wrong. Even practicing DIY preparation can open your eyes to additional tax liability reductions. No tax pro would ever be offended by that!

The Boss is Back

After several years of adjustment to a national footprint my firm is finally gaining traction. I’ve trained new staff, added new technology (something old guys set in their ways resist) and focusing on our niche, we are ready to accept a few additional clients this year.

I’m opening the gate (LOOK OUT TEAM!!! THE HERD IS LOOSE!) a smidge. Technology will free serious amounts of my time to work with more clients directly. Scanning technology enters virtually the entire return so my task is to review and organize the return for maximize efficiency and audit proofing.

Now that the computers will enter most data I stand a lower risk of a carpel tunnel relapse. (I never had carpel tunnel issues and hope to keep it that way.)

You don’t want to pay me for data entry services; you want me for my experience and tax knowledge. By unleashing the IT guys we can do more, better than before.

Game Plan

If you need an accountant, contact me. We aren’t the cheapest (just so you know up front), but I dig deeper than most accountants you’ve met. I don’t stop at a merely accurate return. I’m always looking for items missed. In short, I give every return moving through my office a proctology exam. Don’t worry. I have plenty of latex gloves.

Be prepared for a summer consulting session considering the new tax laws if my office handles your tax return.

I strongly encourage you to try your hand at preparing your own return. If you have a business or rental properties you might want to forgo the DIY option. A good tax pro will know many ways to cut your taxes the DIY programs can’t possibly ask in these situations. It is still a valuable exercise to walk through the process yourself, however, to see if there are things even the accountant didn’t ask.

If you start to feel uncomfortable you can always call in the troops.

An Even Better Game Plan

2017 tax year will look and feel like previous years. You can continue preparing your own return without much issue. The few changes from the TAX CUT AND JOBS ACT that do affect 2017 should be handled automatically by the DIY software (all of them, not just mine) as long as you enter the data correctly.

2018 is another animal. You might want to plan ahead. Secure an accountant for the 2018 tax return or at least have a consultation on issues pertinent to you.

Finding a qualified tax pro is hard to impossible. I feel your pain. I need to hire tax pros to do the work and face the same issues. But it’s not impossible.

Accountants will be under a lot of pressure over the next year as small business owners plan for the tax law changes affecting them. Time will be at a premium.

A summer consultation is probably a good idea. Be sure to provide the tax pro a copy of your filed 2017 return. Nobody has been shot amending a return to correct missed or incorrectly handled data except for three guys in Ohio, but they had it coming. (Sorry for picking on Ohio. I still love you guys. (Maybe I should have said Delaware.))

If you find yourself in too deep preparing your own return, call a tax pro! Yes, we are all busy during tax season. But nobody has ever been shot for filing an extension except for those three guys again from Ohio.

Oh, who am I kidding? Use good judgment preparing your own return or call me (or another tax pro).  It’s your only hope, especially if you’re from Ohio.

 

Fake deductions are sometimes legal! Many tax deductions don't require a receipt. Lost receipts and tax records are no problem when you know the rules. Claim every deduct due you even if you don't have substantiation to back it up. Made up deductions can be legal! #deductions #tax #fakedeductions #taxrecords #proofGoogle has a neat feature called Alerts. This feature allows you to get a daily update on any topic you desire. The setup process is so simple even an accountant like me can do it without a problem. Once set up Google scans the internet, news and social media for mentions of your selected topic/s.

I follow a few topics which rarely get an update. I also have an alert of my tax practice: Tax Prep & Accounting Services, Inc.

The name of my practice is generic for a reason. I wanted something simple like General Mills or General Electric or General Motors. While most accounting firms want to spray paint their names across the logo, I wanted a name a buyer would feel comfortable purchasing without changing the name. You see, I was thinking about my exit before I even opened the doors.

Thirty years later I’m still holding on without a sell date in sight. I also get a daily Google Alert on a dozen or so items Google thinks fits my criteria of interest relating to my business name.

Accounting Today is an industry newspaper with a Tax Fraud Blotter. It usually tops the list provided by Google when an alert is issued.

On an alert received Saturday was the clickbait title: Look Ma—Phony Deductions!

The title bothered me because phony deductions, or more to the point, unsubstantiated deductions, are not always illegal!

I clicked to the Tax Fraud Blotter and discovered, as I knew I would, there was more to the story than the headline. The phony deductions were illegal. But the topic of legally claiming unsubstantiated deductions is real.

A Story from the Underground

If you were a tax professional, what would you do in a case like this? A regular client starts a business and has questionable recordkeeping from Day 1. Then he expands his business and has almost no records at all.

There are only a few things you can do. First, you can fire the client.

Remember, as a tax professional you sign the tax return under oath that the return is “true and accurate to the best of your knowledge” under penalty of perjury. If you sign a tax return as the paid preparer and the return doesn’t pass the sniff test you can face some serious fines, some as high as $25,000 a swing!

Second, you can throw up your hands and tell your client, “You can’t file an inaccurate return so I guess you don’t have to file at all.”

This is another really bad idea.

Third, you can prepare the return with the information at hand and hope for the best.

Each of these choices has issues. Firing a client because they’re stupid they didn’t keep accurate records doesn’t solve the problem.

It’s illegal NOT TO FILE your tax return by the due date, plus extensions. You are required to file even if you can’t pay. Lack of funds is not illegal; non-filing is!

If you refuse to touch the return somebody else will have to or the client is out in the cold. So if you don’t do it, somebody will or your client is heading for the hoosegow.

Telling a client they don’t have to file their tax return if they didn’t keep pertinent documents is also a bad idea.  I don’t know the IRS penalty off the top of my head, but it includes a baseball bat and something about “behind the woodshed.”

And last, hoping for the best is not sound tax advice.

Super Accountant to the Rescue

If you’re a taxpayer reading this you might want to put your fingers in your ears for a few sentences.

There is an easy way to file the above mentioned tax return for a disordered client and you get to charge extra for the service. A lot extra!

Last summer I wrote about the Cohan Rule. Now with tax season racing straight for us at warp speed, it’s a good time to review an extreme case which will allow you to file an accurate return “to the best of your knowledge” and avoid preparer penalties.

The example client we used above for our thought experiment is a real client. He runs a liquor store. His records are a mess to be polite. When we ask for more documentation we get an annoyed, “We gave you everything. It’s in there.”

No it’s not!

Last tax season it was so bad I had to junk the entire return except for three things: the bank statements showing deposits and checks written, supplier printouts for cost of goods sold and property taxes paid by going to the county to get proof of what was paid and when. From these few items I had to reconstruct a tax return, avoid preparer penalties and stay out of jail.

What would you do in a case like this? The client is a good guy, just a bit light when it comes to recording business income and expenses. Dumping him on the street would almost certainly end in the return never getting filed for years until the IRS lowered the boom. Then it would hurt him really bad and certainly end his business, putting him and his employees on the unemployment line.

You already have a good idea what I’m going to do. I’m going to make up numbers. But how?

You can read the Cohan Rule post I wrote back in August. The Reader’s Digest version states you can deduct reasonable expenses ordinary and necessary to a business (Section 162(a)) with the exception of meals, entertainment, recreation, amusement, gifts and certain listed property (Section 274(d)) for unsubstantiated expenses.

In the case of our friendly client, we also had to reconstruct income!

Building an Elegant Tax Return

I will show you how I built this client’s tax return without triggering an audit. The odds of the client getting audited are slim as I told the IRS exactly what I did. Past experience leads me to this conclusion because I’ve never had a client audited when I disclosed what I am about to show you.

Our victim, ahem, client had a box of stuff to go through. I added the whole thing up once his retainer cleared the bank.

The numbers were well outside the expected norm. (Remember, a tax professional can’t just file a return based on client provided information. If the numbers are unusual the tax professional MUST quiz the client further to ascertain if the data is correct. Unusual items remaining on a tax return should be disclosed with the original return. The disclosure should include the item in question and how the number claimed was arrived at.)

I pay special attention to local clients. If they have a business I make a note when driving past their establishment if I’m in the area. Clients miss a lot of serious tax benefits I find from a simple drive-by.

Our client in question had a small shop. I expected that since it was a liquor store. The footprint of such establishments is generally small compared to sales.

Almost every deduction available can be fake and still legal. Fake deductions are okay with the IRS if you know the law. Lost records? Missing receipts? No problem. You can use a guesstimate when filing your taxes. #law #irs #legal #illegal #fakeI also had his prior year return to build from. The numbers were substantially different.

I plugged the numbers I had as a starting point. My software compares the current year to the prior year. It was a crazy mess.

To construct a return I’d be willing to sign off on I started with known variables. The client was slow to get me bank statements so I had him sign a power of attorney allowing me to pull his bank records.

With the whole year of bank transactions in hand I added all the deposits for the year to arrive at Gross Revenue. I asked the client if he had ever deposited personal cash or checks to fund company expenses. He said, “No, well, maybe once. Okay, but, yes. No! Now that I think of it, maybe.”

There is a price for bad records. It’s called double taxation. If you can’t prove any of those deposits aren’t business income you have to report it as income! My disclosure to the IRS will list my position as such for good reason. The IRS uses the same formula!

I also asked if any income wasn’t deposited. I got an answer identical to the last question. Facepalm.

The revenue looked reasonable compared to the growth in his company.

Next I used the power of attorney to get a printout of the cost of goods sold from his main supplier. This was another number I could hang my hat on with reasonable comfort.

The COGS allowed me to back out an expected revenue number. It was close so we will stick to what we originally calculated by adding all deposits.

Property tax records are easy to find online so that was one expense I was also comfortable with.

Now came the hard part. I had three months of rent receipts and the landlord wasn’t kicking him out so I multiplied one payment by twelve.

I asked the client if he ever took money from the business account for something other than a business expense. By the way his mouth was catching flies I took it as a “no”. I couldn’t add all the checks cleared and allocate between expenses. (Since some items are not allowed under the Cohan Rule I don’t use the bank statement for a total of deductible expenses when I have no substantiation unless I have no choice. That and I know how small business owners like to take cash here and there for personal expenses even if they say they don’t.)

Deep Science

Now we are going to get extremely scientific; we’re going to guess.

Advertising, utilities, office supplies, and other expenses still are allowed under the Cohan Rule.

For our client today I took his information from prior returns and compared the expenses as a percentage of revenue and COGS. Example: If in the past three years he has advertizing expenses of 12% of revenue and 27% of COGS, I will use the percentage that gives the lower number as a deduction.

I want two reference points whenever possible. I use the lower deduction because it’s not my job to put my neck on the line if you don’t care enough to keep good records.

I move to each deduction normal for the type of business involved.

As I work through the return I keep detailed records of how I arrived at the numbers I report and attach it to the tax return and keep a copy in our permanent file.

I’ve used the same process for clients who get audited but lose their documents between filing and the audit. A home or business fire or theft is an understandable reason for a client to lose their documentation, hence the need for the Cohan Rule.

We scan a lot of stuff in when preparing a return, but time is limited so we don’t copy every receipt for our records. That is the client’s obligation.

However, if we see documentation we note this fact in our records. Our contemporaneous record acknowledging we saw the paperwork and actual receipts are frequently enough for the taxing authorities to accept the numbers we report. Must be my honest face.

The Flower Girl

Virtually every number on the above client’s tax return is a guess. The IRS would have to use the same methodology to come to an estimated return. We just beat the IRS to the punch and documented each step we took.

And that is how claiming fake deductions is legal.

Now before you say a word, I can hear you thinking.

For any client willing to pay me a bit extra to see if my guess is a better result than the actual numbers, NO!

My guess will always be conservative and probably overstates your tax liability. The Tax Court has clarified what they allow and don’t when invoking the Cohan Rule. And they always lean in favor of the government. So do I in such instances.

But good try. I like the way you think.

 

More Wealth Building Resources

Personal Capital is an incredible tool to manage all your investments in one place. You can watch your net worth grow as you reach toward financial independence and beyond. Did I mention Personal Capital is free?

Side Hustle Selling tradelines yields a high return compared to time invested, as much as $1,000 per hour. The tradeline company I use is Tradeline Supply Company. Let Darren know you are from The Wealthy Accountant. Call 888-844-8910, email Darren@TradelineSupply.com or read my review.

Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to sky rocket, there is an alternative preserving the wealth of families all over America. Here is my review of Medi-Share and additional resources to bring health care under control in your household.

QuickBooks is a daily part of life in my office. Managing a business requires accurate books without wasting time. QuickBooks is an excellent tool for managing your business, rental properties, side hustle and personal finances.

A cost segregation study can save $100,000 for income property owners. Here is my review of how cost segregation studies work and how to get one yourself.

Amazon is a good way to control costs by comparison shopping. The cost of a product includes travel to the store. When you start a shopping trip to Amazon here it also supports this blog. Thank you very much!

 

The IRS was nice enough to tell us yesterday when they’ll open tax season this year: Business returns January 8th and January 29th for individuals.

Talking about tax season, things have been exciting around the office this week as a year of planning is nearly complete.

Finding qualified tax professionals locally is impossible in my small community. If only I could utilize some of the best minds in the industry from around the country.

Enter technology. I might know a thing or three about taxes, but technology eludes your favorite accountant. I do get there; I’m just incredibly slow to reach the destination.

Hiring a very experienced tax professional three states ways is a problem. I don’t want to expose client data to even a hint of risk. This summer I discovered I can have a tax professional work from anywhere with a setup as secure as if they were sitting in the office next to me.

That means I hired new people for the upcoming tax season. The final steps are falling into place. The best news of all is that when I asked my software provider about this they already had the process built into their software. Was I the last person to know about this?

Once I am comfortable the setup is secure (remote employees only see the returns they’re working on and no more) I’ll start responding to requests from people who want to be clients. Monday is the final test and we might be ready to rock ‘n roll then.

The best part (for me) is information never leaves my office or system. I am anal about security so bear with me as I finalize this expansion of Tax Prep & Accounting Services, Inc.

DIY

A common question floating in over the last week is: Should I do my own return on the program you offer on your blog? Usually a few details of the return are included.

My advice is: If you’re comfortable preparing your own return, then do it. If you run into an issue you can always call in the cavalry. You probably know if you are doing it right. And you can kick the tires for free.

The banner ad around the blog and provided here is the same company and software I use in my office. It’s a good program. They have plenty of Q&A like other online DIY software, but they keep it more reasonable. You can also go straight to screens to enter data to cut your preparation time.

They’re about the lowest in cost, too.

Finally, if we get enough people filing their own return from this blog I’ll swing for the $25,000 to turn it into a proprietary program with special features created by me personally. Realistically I need at least 1,000 people using the software to consider investing the time and money. About 280 used it last year from this blog.

What I’m Reading

Hoover: An Extraordinary Life in Extraordinary Times  President Hoover always fascinated me because he presided over the start of The Great Depression and the 1929 stock market crash. I finished this book a bit ago and highly recommend it. Hoover’s work ethic is incredible and inspirational! You will never see our 31st President in the same light again.

 

 

 

 

 

 

What I’m Watching

One YouTube video I watched this week stood out from the others. It discusses health care in America as compared to the rest of the world. I found it very interesting.

Music I’m Listening To

Once again my taste in music might surprise you. This week I read a news article that mentioned the Voyager spacecrafts. This led to the Golden Record attached to Voyager 1 and 2. The YouTube video below is the first message. After each video you should see a list of the remainder of the recordings. There is quite a selection of sounds and music we send into the ether.

 

Hope you enjoyed the small slice of my life this past week. Have an awesome weekend, kind readers.

A common request the last few months involves starting a tax preparation side gig. A seasonal tax prep business can be rewarding if you follow a few simple rules. And if it spirals out of control you might find yourself working a full-fledged business 30 years later like a certain tax professional we will not name.

To run a real tax prep side gig you will need some background tax knowledge, an e-filing account with the IRS, commercial grade tax software, workflow management and clients. We will touch on each issue.

Education/Experience: Experience comes with time; there is no shortcut. I started on day one like everyone else. In the beginning it’s best to stick with simpler returns to avoid getting in over your head.

Continuing professional education is widely available in the tax industry due to the requirements for CPAs and enrolled agents. This makes it easy to learn while you gain experience.

The IRS’ Registered Tax Return Preparer program ended in 2013, but you can still be a part of the Volunteer Annual Filing Season Program (AFSP). Without involvement in the AFSP it’s hard to work with the IRS on a client’s account. CPAs, enrolled agents and attorneys have unlimited representation rights before the IRS. A participant of the AFSP has limited representation rights. As you begin your side gig journey this is a great place to start.

It’s relatively easy to be an AFSP. You need 18 hours of continuing education from IRS-Approved CE Providers: 10 hours of federal tax law topics, 2 hours of ethics and a 6 hour Annual Federal Tax Refresher (AFTR) every year. (Note: The links are to  products used in my office with newer preparers.)

I have never been a minimum education type of guy. Generally CPAs need 40 Continuing Professional Education (CPE) credit hours per year; enrolled agents an average of 24. In a typical year I approach 100 hours of qualified CPE! If I’m going to do something I may as well do it at a high level of competence. I recommend you complete at least 40 CPE credits per year. The cost is a business deduction.

As you grow your practice you will want to add some letters after your name. I suggest the enrolled agent designation. EAs are a tax authority and have full representation rights before the IRS. EAs can also represent clients of returns someone else prepared, unlike AFSPs.

The EA exam is tough, but worth the effort. Here is the study guide I recommend. Take your time when working for your EA. Use the study guide and study and study and study. About a third pass the first time through. Success is in direct proportion to dedication of studies.

Here are some IRS-approved continuing education programs I approve:

Surgent CPE: It’s been a few years since I attended a Jack Surgent program, but they were always packed with solid information. Highly recommended.

Tax Insight: I attend Tax Insight’s Annual Tax Course every year. They are located in Wisconsin, but they also have a few classes in Mississippi, plus they are starting an online version this month.

National Association of Tax Professionals (NATP): I was a member of NATP for years, but they were a bit pricey for what they provided. Recommended if no other options available in your area. NATP also has EA exam preparation classes and an AFTR refresher. NATP members also have a tax research help line.

Gleim and WebCE: If you need something fast, cheap and easy you can use these two options. They are not recommended because the courses are very basic. Remember, we want more than minimum effort.

Once you start your side gig the educational programs will find you. Each state has its own list of providers. Feel free to experiment. The only way to find good programs is to try them out.

Become an Authorized IRS e-file Provider: Rather than list the details I will send you to the IRS page to complete the process. It takes about a month and a half to complete the process so start ASAP. Back in my day it took four months so things have improved a bit.

Commercial Tax Software:  My office uses Drake Software and has since 1988. Drake has always been as easy to use program with commercial grade power. I’ve been with Drake so long my account number with them is 197!

I’ve found new preparers find Drake easier to navigate than other commercial tax software. I’ve played with other software over the years, but never was tempted to leave Drake. Their support is second to none. They answer fast with a dedicated team ready to help preparers get the job done right.

Drake is a powerful tax software package at a reasonable price. You can license the full package or pay by the return. Review Drake’s pricing to determine which package fits your side gig needs.

Workflow: I started my tax practice out of my home and prepared around 2,000 returns annually (with the help of employees) for five or six years before moving to my retail storefront. When I ran my practice as a side gig it was always out of the home. From 1982 to 1989 I treated tax preparation as a side gig. I ran a full-time seasonal tax practice from 1990 to 1995 out of my home. Then I lost my mind, bought an office building and watched my practice explode. I tried, and mostly succeeded, in cutting back ten years ago. Then this blog and a push from Mr. Money Mustache happened.

Workflow issues are a constant challenge in a tax office. Even as a side gig you want to utilize technology to improve performance, reduce errors and remain profitable. I can’t tell you everything my office does because it’s always in flux. I do want to share one thing we do to keep the paper moving.

Tax preparation is largely data processing. The real value for the client is the conversation with the accountant. A simple, short dialog can save the client serious money! The problem is the workload of paper to process.

Plugging every number starts to affect the carpal tunnel. It’s also mind numbing. My office uses a tax organization program called GruntWorx. GruntWorx is integrated into six commercial tax software programs: All Tax Software, Lacerte, Go SystemTax RS, CCH ProSytem Fx, UltraTax CS, and of course, Drake Software.

A compact research book.

You want a paperless office so you’ll be scanning everything in for your record. From inside Drake Software you attach a file with scanned documents GruntWorx handles and send securely. The next day GruntWorx returns a file you import into your Drake software. Several items will need attention, but a large part of the grunt work is processed, saving you time and money. Review GruntWorx pricing to see how much it helps your side gig workflow.

Technology is your friend even with a seasonal side gig tax practice. You want a good computer, Drake Software, laser printer, scanner and security. Contact an IT professional to secure your data!

Tax preparers are a prime target of identity thieves! When Equifax was hacked most of the data stolen was already on the dark net! It came from small tax offices. You read that right, small tax offices. My office IT contract is north of $50,000 per cycle. As a side gig you will have few if any employees so your IT needs will be smaller. My guess is security will cost under $1,000 for most side gig firms.

Technology reduces stress and errors. The computer can read small type on W-2s better than you after hours in a chair. Note, even when using GruntWorx or other productivity enhancements, you must still review each return in its entirety!

Clients: I’ve talked about acquiring clients plenty in the past. Here is a short review.

As a side gig you want basic returns to start until you get your sea legs and gain experience. Decide which type of returns you want to prepare.

Once you’ve decided the focus of your tax side gig you need to study. Maybe a few study courses listed earlier are a good starting point. Take classes on your area of interest.

Clients outside your area of expertise will come knocking. It’s hard, but necessary, to turn some clients away rather than get in over your head.

In your area of practice you need to find where these people congregate. If you want to help elderly people I recommend speaking at churches on Sunday. You might even offer to prepare returns right at the church service. Portable printers and a laptop (with adequate security in place) make it easy to travel. One day a week at a church might satisfy your side gig lusts.

The Chamber of Commerce is a great place to meet business owners; one speaking engagement at the local apartment association will keep you busier than you want. There are so many places where you can grow your client list.

Get some business cards from Vistaprint and carry them with you. You never know when a future client crosses your path on August 4th.

Final Thoughts: Tax preparation is an enjoyable side gig with plenty of profit potential. If you start with smaller returns you can do a lot in an hour. Three hundred simple returns at $100 each is a nice side gig. After expenses you should net over $20,000 in this scenario. Not bad for two and a half months during winter.

Most of the questions I receive are repeats. Please leave questions in the comments below so everyone can benefit from the answers. I’ll answer as many as I can.

My last post on questions wealthy people ask their accountant struck an unexpected cord. It also uncovered a serious problem that has plagued this blog since the beginning.

The majority of bloggers come from one of two camps: they write a blog while in retirement or write while working for retirement.

Blogging is a lot of work. Writing is the easy part. Promoting the blog so somebody actually sees your work takes time. This blog does more than simply generate affiliate income. Aside from the passive income, readers discover there is more available from the right accountant. Not knowing a local accountant offering what I suggest they turn to the only place they can go: the contact page.

And as I said before a million times, I am one man. In the last two days if I would have said yes to every offer, I would have filled my calendar until tax season. It’s just not possible to serve all the readers who seek my help. Or is it?

It’s time to stop whining and start implementing opportunities already in place. Many of the comments over the last two days went something like this: Do you know of a tax professional you can recommend in [fill in the blank]?

It hurt as I deleted each request without a response. Even responding to each inquiry would consume more time than exists in a day. So far I am able to read most of what hits my email. It’s the best I can do.

Then I received an email that was firm, yet polite. It was an obvious answer and it would solve a significant problem for you, kind readers, and for your favorite accountant. The email said, “Why don’t you promote your forum more? You told me earlier in the year to use the forum to offer my services as a tax professional since I read your blog and use the strategies you suggest. You know, if you promoted the forum more, guys like me could help your readers while offering you minor respite.”

All I could think to say was, “Duh!”

Help is on the Way

The forum has a category: Wealthy Accountants in Your Area. I started the category because tax professionals wanted to know where they could find clients and I mentioned I have a load of un-served people.

I want more tax professionals to advertise their wares in this category of the forum. If you think it would be helpful for me to add a category for taxpayers looking for an accountant, I can add the category easily.

This is the time of year where you really need to consider consulting. The tax savings can far exceed any consulting fee you pay. There are tax pros out there who are as good (some even better) than me.

Now through tax season I will provide periodic reminders to check the forum. But let’s start today. If you send me a request and I don’t respond you know what my answer is. It is an awful part of this process; ghosting people. The laws of physics (maybe it’s relativity; you know, the time and space thing) forbid me to accomplish what I want. I can do anything, just not everything.

If I can’t take your account, consider one of the fine tax professionals just as good as I am, except they don’t write a blog generating massive amounts of workflow. I love you guys, you know that. If I could do it all, I would. Reality demands I delegate. What better place to find a qualified tax pro than in the forum here.

Before we move on the next piece of business before I let you settle in for the weekend, don’t get hung up on locality. Modern technology eliminates the need for a local accountant to serve your needs. Half of my clients are outside my home state of Wisconsin. Faxing, scanning, secure web portals and email can handle all your communications with your tax pro.

Accountants offering services in the forum should understand a few things. Unlike most traditional tax offices, you will do a lot more out-of-state and multi-state tax returns. You will also receive more unique situations. Readers here want more than a basic prep. They want consulting inside and outside of tax season. What I am saying is, don’t overextend as I too often do. The clients you get from here will demand more of your time and services because they want to utilize your knowledge for their benefit. You get paid to do this, so do it. You will get tough cases. Spread it out so you get work done faster than your favorite accountant. Take it from someone with experience.

Readers, if you need a tax pro who understands a bunch of the stuff I write about you now know where to find them. Don’t expect every tax pro on the list to be the same. Most tax offices specialize when they start handling difficult cases. The only reasons I do so much more is because I have a blog to write and keep researching for your benefit and because there is ample evidence I am mentally unstable. (Stop laughing.)

Readers, vet the tax pros in the forum. A short conversation can determine if it will work for you. There is no need to waste time for either party. There are plenty more tax professionals out there and plenty more clients. Spend a few minutes to determine if it is a good fit.

Back to the accountants. Answer questions in the forum. I don’t spend much time in the forum for obvious reasons. Discuss what I write about. It’s even okay to say I’m full of BS on my own blog. (More on this in Monday’s post.) Help readers seeking solutions. Some of these fine people will want to engage your services. This has to be a team effort. I provide the portal and a slight nudge with each post. You guys—tax pros—have to do most of the heavy lifting. It’s the only way the readers will be served.

Only one warning: Never share personal information that could lead to identity theft in the forum. If discovered by a moderator, your post is toast (for your protection). And no personal attacks. The tax code is huge and there is plenty of disagreement. It’s okay to disagree; it’s not okay to do a character assassination. Be firm without being rude. Respect the opinions of others. It’s also okay to be wrong from time to time. It happens to the best of us, especially me. That is why I am always learning.

Need a Job?

My tax office is actively searching for a full-time, year round CSR/Administrative Assistant and another full-time tax preparer for tax season. The Admin job is full-time all year. The tax prep job is for tax season only with some part-time outside of tax season work, if desired.

I am unwilling to outsource tax work at this time so you have to want to live in NE Wisconsin. You will work in my office on my secure equipment. If you want to work in a unique tax practice with real opportunity to see tax issues most tax professionals don’t see in a career, consider applying. I will also consider two part-time tax preparers as well.

If you work in my office you get famous whether you like it or not. I’ll know when Dawn reads this post. Count on it.

The tax professional I hire MUST be comfortable with S corporation issues. Pay is $20-$35 per hour, depending on experience. If I find a qualified candidate I will open my doors to new clients, so please apply using the contact form on this blog.

The admin position is a support job. Other accountants and the boss (me) need somebody to keep us in line, ah, I mean to keep work flowing smoothly. It’s a hard job during tax season and reasonably normal the remainder of the year. This position is a bit different than what you normally expect in a traditional tax office. This is why it is hard for me to fill the position. It doesn’t fit a traditional model. The work is interesting, satisfying and challenging. Pay is $12-$18 per hour depending on experience with opportunity for advancement.

The pay scale is wide, I know. I am willing to pay more for an exceptional candidate. I hate paying less to take a flyer; it seems to never work. You know a bit about me and my office from my writing. If NE Wisconsin sounds like a fun place, consider submitting your resume.

And last, if the forum really explodes due to my promoting it, I will need a moderator or three. If you want to be on the moderator list, let me know. We’ll let my site manager, Kevin, handle the moderating for now, but if it grows at all I will need some help. Unfortunately it’s an unpaid job. Moderators do it for love.

If the moderator/s job gets too much I’ll consider some forms of monetization for the forum to provide funds for paying moderators. But that is in the distant future.

Now, before you leave to enjoy your weekend, go check out the forum and have some fun. Introduce yourself and share ideas. Readers of this blog are very intelligent and educated. Ask questions. I’m one guy again. I don’t know everything and my opinion doesn’t trump all. You’d be surprised at the awesome people haunting this place. Get to know each other.

The past week has been an interesting one around the Wealthy Accountant world and all I can think of to explain it is. . .

Put up or shut up.

The best way to tell this story is to go back to the beginning.

Long time readers know I opened shop without knowing I opened shop in 1982. I prepared my first tax returns that year because I wanted the money and it seemed like easy work. It took until the 1989 tax season to realize this is something I could do for a living and still appear as a hard working, up standing (that illusion wore off fast) young man supporting his new wife.

The world was a different place back then. The local newspaper had two and a half pages of business card sized ads during tax season for tax preparation services. I was one of those ads. There hasn’t been an ad in that newspaper offering tax services in 15 years.

Leader of the Pack

To succeed in business you need to differentiate from your competitors. The stunt I pulled was free electronic filing. I heard through the grapevine there was a tax software firm only changing their accountants $1 per return to e-file. Back then everyone was charging $25-$35 for e-filing.

I called the IRS to find out who this firm was. Internet was still in the future. A search of the industry journals didn’t reveal what I wanted. And the IRS wasn’t willing to cooperate either. The IRS support member I reached explained they couldn’t help me because the IRS doesn’t endorse any tax software package. I get it.

So I kept calling rapid fire with the same question: Who is the tax software firm offering e-filing for a single dollar? After close to a dozen calls a service rep said, “Drake.” Click.

That was all I needed. I grabbed the industry journals and found Drake Software and called them. A short conversation revealed they were my mark.

The next tax season—my second as a full-time tax firm—I was utilizing cutting edge technology to crush the competition. In my office e-filing was free for all customers from then on. It doesn’t sound like much, but back then it was a big deal.

And the free e-filing offer was a profit center for my firm. It cost me a dollar, but I didn’t have to print a copy of the return to mail to federal. I estimated the cost of printing was at least a dollar so I reduced my costs more than what Drake charged me to e-file.

Wisconsin, my home state, was still a pain in the tail because they didn’t offer electronic filing. Not only do you print a copy of the state return to mail in, but attach a copy of the federal return too.

Then a miracle of miracles happened. Wisconsin tested e-filing. The state selected a small number of firms to test their system (I heard it was three) the first year and my firm was one of them because I offered free e-filing and had zero fraud cases.

My competitors were facing a punishing assault. The next year Wisconsin opened e-filing to virtually all tax firms with a limit on how many they could file this way, except for the original test firms which could file as many as they wanted.

By the time competitors caught on it was too late; I was well entrenched and not going away.

This was the first time in my career where I needed to put up or shut up. You’re going to be disappointed in me. I shut up.

History

My practice was growing like wildfire! I went from a bedroom in year one to remodeling my entire basement for the next few years to an office building by year five. Growth was out of control! I went from zero to the 2,000 client range by the sixth year in business with growth rates still in the neighborhood of 30%. The only reason it wasn’t higher is because management skills were needed.

I am reasonable good at taxes and personal finance. I like to brag how you don’t need a college education to succeed, but my lack of a formal business education started to show. Managing a rapidly growing business was causing problems.

This was the point where I had to make a choice. The accounting/tax industry has been consolidating for a long time. The choices were clear: sell out to another firm and enjoy a normal retirement at a very young age, open additional locations to expand the company’s geographical footprint or buy out competitors to expand the business. I did none of these.

Retirement is something I’m also not good at. You learn too much owning a business like mine and I love that part of the profession. I knew my limitations and understood my talents were woefully short when it came to running an expansive accounting firm. And I never considered buying a competitor. Finding clients has always been easy for me; getting the work done has sometimes been the challenge.

Stubbornness made me do what I did. I actually shrunk the business from 2,000 returns to 700 over a number of years and added more consulting, bookkeeping, payroll and tax audit services. I was more profitable than ever and happy as a clam.

Competitors became violent in their attempt to purchase my firm. It got so bad that for a few years attorneys would show up in my office and demand to speak with me, a lucrative contract in hand. I could sell for a lot of money and focus on the things I’m best at working for the acquiring firm. Unfortunately I make a poor employee so I sent the guys in suits packing.

A Short Time Ago

By shrinking the firm to a manageable size I was able to regain my sanity. The workload was reasonable until I met Mr. Money Mustache. As Kurt Vonnegut would say: And so it goes.

Rapid growth was back and all the weaknesses reappeared. All I want to do is talk with people to help them solve their money problems. It’s something I like and am good at.

Finding tax professionals at my level is like pulling hen’s teeth. (Any reader out there who has ever pulled hen’s teeth send me a note. There must be a story in that scenario somewhere.) Training one-on-one is not a strong suit either. I’m better in front of a crowd though I am getting better at training individuals in the office, however.

For someone who built his business on new technology and automation, I sure stuck my head up my, ah, head in the sand for several decades. New technology passed me by because I liked doing things the way I always have. You know the old story. Progress is made one death at a time.

I might be slow, but I ain’t dead! Circumstances forced me to grow up and start acting like a leader. Technology was introduced and I was so happy, wondering what took me so long to embrace the new world order. My employees rolled their eyes as they turned away.

New technology solved many problems and freed more of my time, except this blog keeps the flow of work consistent. More time meant I could handle more accounts. To be more accurate, I didn’t necessarily handle more accounts, just bigger ones. Now I need powerhouse tax pros to help me. A big problem.

Fortunately I made modest progress in this area. I found one, yes one, tax professional with the aptitude to be as good as me. She is good now and will exceed even me in as short a time as five years. She doesn’t believe it, but I made a living (and a fortune) reading people. Trust me, if you get Dawn in my office you are in good hands. She still needs my guiding hand periodically, but she gets it. Her intuitive instincts serve her clients well.

But one is not enough and my management skills are still stretched to the limit. I may lack the skills of a superstar manager, but I know how to fix these kinds of problems. But it means doing something that feels unnatural. What I planned would be almost impossible unless I found the right people.

You’re Fired

A recent news article on CNBC (I wish I would have saved the page so I could link to it) told the story of a young man who started a business and had the same problem as me. He was smarter than me in one regard. He knew he was the problem as CEO of his fast growing company and did something about. He fired himself!

A qualified CEO was brought in to replace him and he was demoted (or promoted, depending on your perspective) to lead the creative team. It was what he was good at. Instead of wasting time and feeling miserable trying to manage a company he fired his tail and took the job he was best suited for. It is okay to be the owner and still have a boss!

If I were a true leader I would fire me too. I belong in the creative department consulting with clients, designing products, writing blog posts, researching tax issues, training future tax professionals and preparing taxes. All those things are what brought me into this field in the first place and all the detritus of management has been put on the back burner as much as possible and it shows. A firm any larger would fail due to my mismanagement as the CEO. Next time you envy my position, ponder my weaknesses. I’m great because you read my stories. When the lights go out I have tremendous flaws, many fatal in the business world.

Once again I wasn’t putting up; I was shutting up. And I convinced myself the world was flat because I kept it small enough for me to excel in. Fool!

Earlier this Week

Virtually every day I get requests due to this blog. A few weeks ago I was asked for permission to syndicate this blog by a firm with a mailing list north of 100,000. I said yes, of course, and referred them to my policy of encouraging people to steal my stuff.

A reader offered my family a place to stay near a prime eclipse viewing area. If weather permits I will take him up on the offer. It looks good. All he wants in return is to pick my mind. I’m good with that and informed him I will be bringing a few cases of Wisconsin’s finest Spotted Cow beer. He lives in the bourbon capital of the world and has a few samples for me to try. If you were a gambling man I’d place my money on me imbibing some of those samples.

So I can focus on the eclipse I have a guess post next Monday and another blogger has requested a guest post opportunity. I will say yes.

If all these things weren’t good enough, I continue to get several requests per day from potential clients. A publishing house asked to secure prime real estate on this blog for a banner ad early this week. I’ll probably say no. I don’t think their publications mesh well with my readers. I’ll review more before making a final decision, but the odds are not good. But I still received the offer! Opportunities, people. Opportunities.

Then I received the most important, and probably life altering, phone call of my career. Remember how I said I am not the best candidate for CEO? I think the solution walked in my front door.

In January of this year I met Jonathan from the ChooseFI podcast. They wanted me to be an early podcast in their program. I was okay with that. To date it is the only podcast I’ve ever done. (I’m open to do more if anyone cares to hear my voice.) Jonathan and Brad recorded the podcast shortly after tax season ended and it went live on Memorial Day (in the States) while I was attending Camp Mustache in Seattle. The podcast was well received. Thank God I didn’t end anyone’s career with my normal wit.

Jonathan forwarded a question from a listener this week and I was the appropriate choice to answer said question. Jonathan also emailed he needed to speak with me pronto on an important issue. The Wealthy Accountant felt like he was being called to the principal’s office (as if that never happened in high school).

I recorded an answer to the question and set a time for Jonathan to call me.

When he called he wanted to present me with an idea for expanding this blog and the services it could provide. I have mentioned in passing some of my ideas here and on social media. Jonathan, not one to let a great idea slip by, knew I was struggling with bringing my ideas to life. They are great ideas, but who will mange bringing these things to life? Me! I have a company to run and doing a piss poor job of it. Adding more to the pile of things to do in areas I’m not a good fit for is a BAD idea!

As Jonathan laid out his case, his elevator pitch if you will (it was a long elevator ride), he recommended a program I already had started to flesh out. We discussed several programs to serve you, kind readers, in a way a simple blog alone cannot. The problem for me was digital and Jonathan knows a thing or three about digital.

I never had a dream of running the world. My ego has no such needs. Finding and training more employees is a good idea, but the number of people who need what I have to offer is in the millions! The need for quality tax and personal finance advice is desperate. Jonathan’s idea similar to mine was to train other accountant’s already in place, building a network of qualified tax professionals to serve you, kind readers, one-on-one; the kind of personalized service you deserve.

This is all a good thing! I’m not going to live forever and the world has a hard time dealing with one of me so cloning is out. Without boring you with details I can say Jonathan and I have more discussions planned to make this a reality over the next few years.

There is one more point to make. Jonathan’s talents are different from mine. He is unlikely to be a good fit as the CEO of my accounting practice, but he will be the natural fit for the new entity that evolves from this coordination of efforts.

My job will be creative design. It’s what I’m good at. Jonathan will probably do more of the management and all the digital. I am always available to discuss management issues, but implementing them will probably be stripped from your favorite accountant. No need letting a man with mental challenges run with scissors.

I am excited for what the future hold.

Inflection Points

You may have noticed I offered no solutions to the problem. Everyone, no matter how good they are, will have inflection points like I have had recently. Your issues will be different, but they are inflection points all the same.

Inflection points happen in all areas of life. A crisis of religious faith, the death of a family member, the decision to get married or (gulp) divorced are only a few. Personal finance has inflection points you have read plenty about in this neighborhood. And business is filled with inflection points.

When effort is applied the Wealthy Accountant can look respectable.

You will not see me taking a lap. I struggle as much or more than anyone else. I’m not better so bragging is out.

So why do I bother bringing this topic up? I am proud of how far this blog has come. Now J$ from Rockstar Finance has asked me to guest post on his sister blog (also this past week) Budgets are Sexy. He thinks if I write the story he requested it will be picked up by national media. He plans on giving it a nudge to encourage the activity. I am both humbled and terrified at the same time. It is time to put up or shut up.

My goal here is to share my story so you can learn from it. You are not my competition and I have zero fear you will use my experience to harm me financially or any other way. I wish I could give a few step-by-step answers to make it all better, kind readers, but life isn’t like that and your favorite accountant can’t deliver those goods.

What value can some country boy provide? That was always my opinion so I made a habit of shutting up. Oh, you can build a remarkable net worth shutting up! I’m living proof of that. But the real value is growing up and putting up. And that is what I will now do for the first time in my life. It is all possible due to the remarkable people I have met in this demographic over the last few years.

All the rest is a waste of good talent.

The Wealthy Accountant is turning into a vibrant community. Readers share their stories helping me do my job of teaching you, kind readers, how to live a joyful life without money problems. Readers also do things your favorite accountant cannot. For example, you would never ask me anything about IT. On my best days I am dangerous when given the access codes to computer files in my office. Karen, my office manager, has a standing order with the IT firm managing all our information to never give me a pass code or access to any secure files. It’s better that way.

When it comes to taxes, the story is different. I immerse myself in taxes the way a college guy plays video games. Most tax questions are front brain answers to me and minor research for most of the rest. (Every now and again someone throws me a curve requiring serious research, but we will not talk about those times to protect the ego of the innocent accountant in the room.) Then a reader sends me a link for a website that blows my mind. John Haldi did just that.

Missing Deductions

Clients tend to have the same problems when providing records to my office. Preparing an accurate return is required. Tax professionals sign tax returns they prepare under penalty of perjury. This means a tax professional better perform her due diligence. Still, the tax pro is not auditing the return, only preparing it. As long as numbers look reasonable, the tax pro will sign off on the return and move to the next. Tax season is triage. Tax accountants have no spare time to debate issues until after the due date.

One area I never gave much thought to was charitable deductions, especially the non-cash kind. If a client gives a car to charity I notice because those situations require special reporting. What I am talking about here is the mountain of clothing and household goods donated to Goodwill and other non-profit organizations.

A significant portion of clients drop receipts in their tax folder for non-cash donations. With rare exception, they put a best-guess estimate of the value of the goods donated. The client thinks they are being aggressive, but experience tells me they are under-deducting, leaving tax dollars in the government’s hands.

The Salvation Army has a worksheet they provide online to track your donations, including the thrift shop value. This is a perfect tool to maximize non-cash donations, but people rarely use it. My office prints a large stack every year for clients; most go unused because they need to be filled out by hand.

John Haldi, a long-time reader, emailed me a website he put together to track  non-cash donations. The best part is it is FREE!!! I wanted to get that out up front so people don’t tune out. John is not a tax guy, but he knows his stuff when it comes to getting the largest deduction for non-cash donations. He has his own accountant (not me) who helped him put accurate information on his site.

John’s site is 8283ez.com, in honor of the form used when itemizing non-cash deductions in excess of $500. 8283ez has simple pull down menus with all the values built in. The program automatically takes the midpoint value for each item which you can change if necessary. (Sometimes a donated desk is worth more than the listed range.)

You still need to get a receipt from the organization proving you donated the goods. What is better with 8283ez is the time it takes to record the deduction. Paging through the Salvation Army worksheet is the main reason few people use it. It takes time to find all the items on the form and tally the donation. It’s easier to just tell your tax guy (or gal) you donated $250 to Goodwill. And in most cases you just screwed yourself.

Taxes are bad enough without overpaying. Mrs. Accountant this past week did some spring cleaning, hauling unused stuff to Goodwill. In the past I would spend an hour entering all the items and adding the amounts. Using 8283ez I was done before I started. It blew my mind.

Minimalists Take Notice

The worst part of non-cash donation recordkeeping is when you move or decide to turn minimalist. The stuff you collected over the years for the first time starts to look like a mountain. In most cases the client tells me they donated, say, $3,000 of stuff. I dutifully enter the deduction on their return. People have no idea how much it is really worth, missing massive tax deductions.

My staff respectfully offers the Salvation Army worksheet for them to fill out; I get maybe three back a year. It is easier to stamp a number on the receipt and move on. Life is too short. I predict this will change with 8283ez. Plugging the numbers is fast, easy and you get a really nice printout to share with your friendly accountant. The way this thing is designed I predict many taxpayers getting a big sloppy kiss from their accountant.

The client thinking their donation was worth $3,000 is always surprised when they list each item out separately. A $100 bag of stuff donated to Goodwill is probably worth double that amount. With 8283ez you can do the right thing and get the full tax break you deserve without painful recordkeeping.

Check out John’s site. Be sure to thank him in the comments below. He created 8283ez because he likes doing that kind of stuff and he doesn’t charge a dime. Anyone who puts together a useful tax site for grins deserves a round of applause. Thanks, John. Thank you for the email introducing this old accountant to a new (and useful) way to do business. You made my life, and that of my clients, better. A good day in my book.