Friday, November 6, 2009


I ended last Saturday’s (Halloween) BUZZ, appropriately, with Prof Jim Maule’s holiday-themed post “Unmasking the Deductibility of Halloween Costumes”.

In this post Prof Maule responds to some tax advice on deducting the cost of a Halloween costume that was presented in an email by a published tax preparer and, apparently, former tax blogger. He took exception to some of the advice given in the email, which said, “Yes, if you bought it to attend a client's Halloween party”.

It seems that I was not the only one who’s eye was caught by this, as I originally described it, “scholarly and well-documented” post. Fellow bloggers Paul Caron, the TAX PROF, and Joe Kristan, of the ROTH AND COMPANY TAX UPDATE BLOG, also mentioned it, it was featured in “Popular Tax Stories from Around the Web” by the Wall Street Journal, and was reprinted at various other online locations.

The post also generated comments from lawyer Jamal Razavian, who was concerned about the problems that bad online advice can create -

It is quite problematic that Ms. Walker (who provided the advice) fails to discuss the nuances that are relevant to the deductibility of Halloween costumes. Even more problematic, based on a casual review of that website and her own professional site, I noticed that the Ms. Walker generally does not discuss the difficult nuances present in the tax law, instead choosing to focus on blanket statements (which may or may not be inaccurate depending on the advisee’s particular circumstances). My fear is that tax laymen will read advice of this type and (i) mistakenly come to believe that there are more easy answers in tax than there truly are, or (ii) follow such advice blindly and misreport their own income. I worry about the Service’s ability to administer the revenue system when individuals like Ms. Walker are out there providing inaccurate and misleading advice, and I wish there was more the Service could do to prevent such abuses.”

As an aside note – it is interesting that I, and pretty much the entire tax blogosphere, also took exception to bad advice offered by Ms. Walker in the answer to a different question that appeared in her now defunct tax blog. Ms. Walker is one of two tax bloggers that I know who go "postal" when others do not accept their pronouncements as gospel.

Prof Maule addressed an important issue raised in Jamal Razavian’s comments in a follow up post titled “Tax Illiteracy as a Threat” – “the flood of incorrect, misleading, inaccurate, and over-simplified information drowning those who travel the information highway”.

He points out that -

The internet is replete with sites operated by tax protesters, people who lack expertise, and a variety of people who mean well but don’t quite understand tax law. The problem reaches beyond tax law to other areas of law and other professions and trades.”

And -

The internet simply magnifies and disseminates more widely the same sort of misguided advice and information that inhabited, and still inhabits, newspapers, journals, magazines, radio, and television. Too many people, particularly those whose entire lives have been accompanied by internet access, think that ‘if it’s on the internet, it’s true’.”

Jim, and Jamal, bring up a very important issue.

In the discussion of regulating tax preparers I have often said that any cafone can hang out a shingle as a “tax professional”. Similarly, any cafone can create a website or blog and fill it with, as Jim puts it, “incorrect, misleading, inaccurate, and over-simplified information” about income taxes or any other subject. How can the “great unwashed masses” know who is giving good and valid advice and information and who is just publishing garbage to see his/her name in print?

How do you know that what I say here in THE WANDERING TAX PRO is valid, or if an answer that Kelly Phillips Erb provides in one of her “Ask the Tax Girl” posts is correct?

One question you can ask is how long has the blog been around? Blogs by non-tax professionals or that provide bad information usually do not last very long. I, for example, have been writing THE WANDERING TAX PRO since July of 2001.

When reading a post be sure to also read all the responding comments. However, you should know that most bloggers will “moderate” comments to weed out “spam”, and so it is possible that comments that point out errors in posts will not be published.

Often a post on a tax issue will include specific references to a section of the Internal Revenue Code, or relevant IRS Revenue Rulings and Tax Court cases, as Jim Maule’s often do. These references can be verified online.

Be skeptical of tax advice in articles, blogs or websites that give quick and easy answers, or, as Jamal Razavian puts it in her comment about Ms Walker’s website, “blanket statements”. As I have said time and again, “The answer to just about every individual or business tax question is ‘it depends’” (see my posts “It Depends” and “Absolutes”).

The best way to verify that what you have read is true or valid is to ask your own tax professional. If he/she is “up to speed” he/she will be able to tell you whether any information or advice you read is correct and relevant or just a load of bunk.
Whenever providing tax advice in a post, TAX GIRL Kelly Phillips Erb always ends with the following statement -
"Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this sit, contact a tax professional to discuss your particular situation."
This is also true with information you read in a newspaper, magazine or newsletter, either online or in print or hear on tv or radio. Most items on tax topics that appear in these publications and on air are written not by practicing tax professionals but by writers. Some writers are truly educated on tax issues, like Kay Bell of DON’T MESS WITH TAXES (Kay is not a practicing tax professional but a professional writer) and provide good and valid information, but some are simply quoting press releases or other sources without knowing their arse from a hole in the ground about the Tax Code.

Prof Maule provides an excellent answer to the problem of “tax illiteracy” –

The answer, it seems to me, is tax education of the citizenry at an early age, with some sort of transitional catch-up for all the people who have made it through 12, 16, 19, or even 22 years of education without learning basic tax principles and concepts, without getting good advice on where to look and where not to look for tax information, without being given the opportunity to learn how tax law is enacted and developed, and without a glimpse into what the IRS and state revenue departments really do.”

Jim uses as an example the Tax Literacy Program, which is based at the Sandra Day O'Connor College of Law at Arizona State University and headed by Professor Marjorie E. Kornhauser. The web page for this program excellently explains its reason for existence –

Studies show that most Americans are ignorant about general concepts, like the difference between a deduction and a credit; about their own tax situation, including what tax bracket they are in; and about the law. Many people believe the taxes they pay are unfair. And many do not understand why taxes exist.”

Many years ago I was asked by a client to give a brief presentation on preparing a tax return to a high school class. As I recall I walked the students through a Form 1040A. Thinking back at the time I thought this was a good idea. I had no introduction to taxes in any way, shape or form in my high school education and had many misconceptions about income taxes before my formal education with James P Gill and Company. There was a tax course offered at my college, but it was pretty much only for Accounting majors.

Jim is on the right track. High school civics courses, which if not should be mandatory for all students, should include a basic education in income tax concepts. And all college students should be required to take an introductory course in federal income tax geared not toward potential preparers but the individual taxpayer.

Now there is a good project for “post tax season” – develop basic tax education “textbooks” for public high schools and college freshmen.



Monica said...

A great post! I too enjoyed Jim's discussion of the lack of tax education. I'm hoping to devote a lot of my future career to education -- whether it be to students, employees, or clients. I'll definitely be checking out that site.

Keep up the good work!

Hal said...

Ms Walker's blog is not defunct. She has a post dated Nov 4 announcing she was back and where she had been. She has blogged since Nov 4.

Stacie Clifford Kitts said...

Well, I don't know what to say about the Halloween Costume deduction issue....Other than, I guess there is no shortage of bad advice out there...

I agree with Monica - maybe we should all devote some time to helping to spread the word through education.