Monday, April 26, 2010


Once again – THANK GOD IT’S OVER!
This was my 39th tax filing season.
It seems that each tax season in the past few years has had a “gimmick”. Like the telephone excise tax refund and the two George W “stimulus” rebates. This season’s “gimmick” was BO’s “Making Work Pay” credit, with its accompanying unintended problems resulting from screwing around with the withholding tables.

I did see several occasions where retirees and dependents were under-withheld due to the FU – although not to the extent that it would cause the assessment of underpayment penalties (which I can get abated anyway if assessed because of the FU).

This “gimmick” apparently caused much confusion among taxpayers - and apparently at the IRS also. A few of my clients have told me that their 2009 refund was reduced by $250 and attributed to the MWP Schedule M. I have yet to investigate the individual returns to see where the IRS, or possibly I, went wrong.

On occasion I have found a “theme” in a particular tax season. One year when I still had the storefront office it seemed that every third person in the door had won something in the lottery or a raffle. A few years ago just about every homeowner refinanced a mortgage at least once during the year. I also noticed a “theme” this season – death.

Between January 2009 and the end of the season last week the Grim Reaper took far too many of my clients, several of them personal friends as well. I “inherited” close to 75% of my current clientele from my mentor - who had been in practice about a dozen years before I did my first 1040 for pay - and many of these clients had been with JP for 30-40 years before continuing on with me at his retirement. So I do have many elderly clients. But not all of the passings were due to advanced age. Several were victims of cancer.

My family did not escape GR’s touch. As many of you are aware my mother passed last April (after the tax season ended) and my father went to his final audit on New Year’s Day 2010 (before the tax season began).

GR took a lot of good people in 2009 and early 2010. I hope he balanced the scales a bit by also taking some not-so-good ones as well.

And each year something goes awry that forces me to take valuable time away from 1040 preparation. This year it was my GDMFPOS computer – on two occasions. In mid-season the thing was so damned slow as to be inoperable – but was fixed by a long-time friend and client. And then during the heavy rains at the end of March both the phone, which is through the internet via VONAGE, and internet access went down. I was eventually able to get the phone working again – which indicates that my actual connection was working – but still could not access the internet.

While it is a known fact that I am proud to do all my returns by hand – I have never in 39 seasons used tax software to prepare a 1040 – I still heavily rely on the computer in my practice. The internet is invaluable – to download federal and state forms, to research stock basis and other preparation issues, to email clients with questions, to receive faxes (I get my faxes via email and special software), to submit NJ returns online via NJWebFile, and so on. I could do none of this at my home office during the last three weeks of the season – the absolute worst possible time – and had to rely on the public computer at Global Mail for an hour at least every other day to get some of the more important stuff done.

Of course I did not want to enter the personal financial information necessary for online filing of NJ returns via NJWebFile on a public computer. So all NJ-1040s prepared in the past 4 weeks have been done “the old-fashioned way” – by hand. But all of them were not done manually due to the inability to access the internet – more on this later.

I finally scheduled COMCAST to come to my home/office to get me back online last. I thought I would have to sacrifice my VONAGE telephone service - I would rather have no phone and internet access than no internet access and a working phone – but the service person was able to fix it so I continue to have both.

I also lost some 1040 preparation time this season due to my daily week-day tax tip column at The internet inaccessibility also caused this to take more time during the last weeks. Next year I plan to write and submit just about all of my column entries in January – before the season actually begins.

I didn’t have many home-buyers – either “first-time” or “long-time” – claiming the $8,000 or $6,500 credit this season. There have only been 2 so far – one a 2009 purchase and one a 2010 purchase – both “long-time” homeowners.

I did have many clients who were able to claim BO’s new American Opportunity Credit for college tuition. Several were able to get a bigger tax benefit than had been available in the past - $2,500 maximum “in pocket” instead of $2,000 – and some whose income had always exceeded the AGI phase-out or elimination limits for either a credit or deduction were able to finally get some tax relief. A few benefited from the “refundable” portion and others were able to use books and materials to increase the credit amount.

A few clients took advantage of the special sales tax deduction on new car purchases – either as an additional standard deduction or an itemized deduction in addition to state and local income taxes.

I also had several clients who, whether on purpose or just by luck, took good advantage of the 0% tax rate on long-term capital gains on the sale of investments, real estate and, in one case, a business. These clients paid absolutely no federal income tax on $20,000+ to $50,000+ of capital gains! I don’t know how much longer this special rate will be around.

I had some real surprise “early birds” this season – pleasant surprises indeed. But at the same time many clients continued to be forced to wait until mid-March to send me their “stuff” due to late mailing of brokerage-related 1099s and, still common, corrected brokerage 1099s.

To be continued . . .