Milwaukee Accountant Explains “Why You Pay Too Much In Taxes”

We’re rounding third base, and headed towards the “home plate” of April 17th, and the resultant END of “tax season”. This has already been one of our best tax seasons yet  — not just because we’ve seen so many new Milwaukee tax preparation clients added to the “Neal office family”, but because of the stories we’ve been privileged to share.

Stories of new financial freedom and recovering from losses … new family members (both biological and adopted) … new careers and the sunsets of “old” ones.

Our clients never let us forget that what we do is never only about “which forms to fill out”, or even how much money we can save you. No, it’s always been about the stories, and it’s always worth it.

So, if you haven’t had a chance yet: would you send us YOUR “tax season story”? We’d love to hear how things went with us, but even more … we’d *really* like to know what’s underneath those tax forms we fill out for you! It truly helps us keep our vision straight through the entire year…

And one more thing we’d like to ask:

Many of our clients are active on Facebook or Twitter. If you’re willing, would you make a post about us? Here’s something you can write:

Are you procrastinating on your taxes? Well, Jon Neal wants to help! I had my taxes prepared there, and just found out that their office is making special efforts to help procrastinators this year! Give them a call: 414-325-2040 … you won’t regret it!

Or some such. We want your “procrastinating” friends to know that they don’t have to rush out and download unreliable software, or rush to some “big box” preparer. (Especially in light of stories like the one I just saw this morning: http://www.accountingtoday.com/news/HR-Block-Manager-Arrested-Identity-Theft-Tax-Clients-62102-1.html Yikes!)

Well, I also wanted to address both current and future clients with this little Note today…
Your Best Milwaukee Tax Professional Says: ‘It’s A Report — Not a Strategy!’
It’s true — there are certain people for whom this Note doesn’t apply. There are those who are perfectly fine paying the amount of tax they pay every year, thank you very much.

However, since YOU have chosen to invest yourself in our services (or at one point considered it), you are probably in the second group of Milwaukee taxpayers: those who would love to pay less in taxes, THIS year.

There are two main things which you need to understand:

Immutable Fact #1: Our tax system is not fair.
Yes indeed — the Mitt Romneys, Warren Buffetts, Barack Obamas, Rick Santorums etc etc operate under a vastly different system than most “regular” taxpayers. This is NOT because they are politically-connected (though they are), and the sooner you quit complaining about those who *seem* to be connected … and make the decision to JOIN their ranks, the sooner you will pay less in taxes.

Because all of those men, and other people like them, understand the second fact…

Immutable Fact #2: A tax return is a report, NOT a strategy.
Yes, we’re pretty good at coming behind with our magic brushes and cleaning up the mess made by many of our clients in their finances and taxes. But there is a much better way to fly.

It’s called tax planning, and it’s essentially comprised of three parts:

1) Strategic review: Assess the current situation, and identify short-, mid-, and long-term strategies to lessen your taxes, and grow your income.
2) Implementation: This can be a little tricky (especially if you do it yourself), because there are bound to be accounting and local regulatory questions which arise. We recommend that you stay with your same team who developed the tax strategy so they make sure you’re doing what you need to do.
3) Proper compliance: There are plenty of folks out there who will give you “the secrets to paying less taxes!!!” — but are they willing to put their name on a dotted line and defend it? If not, RUN from these people. They are true blowhards. Or worse, they know that their advice will lead to a fraudulent return.

But the main thing to understand is that in order to REALLY get your tax situation improved, you MUST plan ahead.

Otherwise, you’re just cleaning up a mess when filing your tax return.

I hope I didn’t ruffle too many feathers … but if so, understand that most of all, we are here to walk with you no matter WHAT kind of planning you do (or don’t do)!

Give us a call today: 414-325-2040, or drop us an email. We’re here for you!

“Our Clients Are Afflicted With Madness” Says Milwaukee Accountant

Our clients here in Milwaukee are afflicted with “March Madness”, along with the rest of the country, it seems.

Unfortunately, this little national hoops holiday isn’t one which my Milwaukee tax preparation staff and I get much chance to participate in. We’re too busy doing your taxes!

Yep, this is close to our busiest time of the year, and we’re working like mad to handle the increased volume this year. Because with all of the economic uncertainty out there, it’s clear that people both inside and outside of the Milwaukee area want real answers from someone who knows them — and cares..

But let me say this: though my business does well this time of year, I’d rather things were better and our tax code was simpler! I’d rather the economy was thriving and everyone felt confident enough to handle their own situation.

The sheer complexity of the tax code keeps me in business — to take the hassle from you and other Milwaukee taxpayers, and apply our expertise to your situation. But wouldn’t it be more efficient if paying taxes didn’t actually require so much expertise?

I know … a bit of a controversial statement from an accountant. But I get tired of seeing new clients bring last year’s tax returns to us–and realize that if we’d helped them sooner, they would have saved a bunch of money (fortunately, we *can* file amended returns!). If things were simpler, people would keep more of their money — and THAT’S one of my passions.

Now, I have a thought or two about your refund (if you’re receiving one), and other such close-to-the-wallet thoughts. I’d love to hear your opinion…

A Milwaukee Tax Professional Suggests Giving Your Refund Away?
We have many clients who are receiving refunds this month, and that number of course will only be rising. So, here’s a thought for you: What would it look like for you to give your refund away?

Yes, this is a radical idea to think about, but consider: what does this refund represent to you?

If you’re like many families, it’s a bit like “found money” — i.e., an unexpected windfall. And, in those scenarios, it’s tempting to hoard, or to splurge.

However, as with other windfall scenarios which I’ve written about in the past, one of the smartest things you can do is to give a portion (at least) of it away.

Why do I suggest this?

Well, I believe it’s actually “enlightened” self-interest in the long run. And not just in our sense of feeling good.

I see the balance sheets of folks from every walk of life, and over the years I’ve noticed an interesting phenomenon: individuals and families who make giving a priority, even when they aren’t “wealthy”, seem to do better in the long run. And I mean financially–not just in their state of mind.

(Though, there are significant “state of mind” reasons for giving. Have you seen, as I have, that those who freely give seem to be more pleasant company?)

Before you write this off as being “ask the universe” mushiness, understand that A) I don’t subscribe to that baloney and B) I am merely reporting an observed phenomenon. Do with it what you will.

You see, I make it a point to seek to observe how money works. And, for some reason — money gets attracted to those who aren’t only in hot, desperate pursuit of it. It’s almost like in romance — potential lovers are usually turned off by the overly-aggressive seeker.

Consider this. I know it might feel painful. But trust me when I tell you that it can actually provide you with a deeper feeling of joy than if you choose to cling tightly to everything which comes your way.

I hope I didn’t ruffle too many feathers … but if so, understand that most of all, we are here to walk with you no matter WHAT your balance sheets look like!

Milwaukee Accountant: “You Might Need To See This Again”

The IRS just released a study which shows that the average time it takes ALL taxpayers to do their taxes is a total of 18 hours. (Editor: I wonder what the number is for Milwaukee-area taxpayers? Probably even higher)

The number is even higher if you don’t just use the 1040EZ form. Bet you wish you had that hour of daylight savings time back, don’t you?

Seeing that figure once again reminded me of the Milwaukee tax service we get to provide. Truth be told, it doesn’t require those kind of man-hours for us to complete most returns, even those which are more complicated. But that’s also because after all — we’re sort of experts at this stuff (It’s not for nothing that we’ve been called the best tax professionals in Milwaukee — and the most trusted).

Already, we have many, many clients who have filed, have received refunds and have written us notes telling us that they’ve never been more pleased. This makes me happy, as you might imagine.

Well, we’d like to ask you a favor, and we have a simple way to help you help us, as it were. Yes, we’re extremely busy, but we’ve set aside some capacity for friends and family of our clients. The reason we’re willing to do this is that we already know that you are a good person to work with (else we would have released you as a client!) so it stands to reason that you associate with similar people.

Would you send this blogpost to your friends (post it on Facebook, even?) and have them let us know you sent them?
Now, we posted this in the beginning of the year, but I thought it worth "re-releasing", if you will, as we reach about one month left in "tax season" …

Neal’s Tax Time Document Chase List for Milwaukee-area TaxPayers
Yes, this is a long list — but it’s the unfortunate reality of our tax code that it’s not even comprehensive! But these items will cover 95% of our clients.  Really, this is for ensuring that we’re able to help you keep everything you deserve to keep under our tax code.

Even if for some strange reason you won’t be using our cost-effective services this year, feel free to use this list as a handy guide…

Personal Data
Social Security Numbers (including spouse and children)
Child care provider tax I.D. or Social Security Number

Employment & Income Data
W-2 forms for this year
Tax refunds and unemployment compensation: Form 1099-G
Miscellaneous income including rent: Form 1099-MISC
Partnership and trust income
Pensions and annuities
Alimony received
Jury duty pay
Gambling and lottery winnings
Prizes and awards
Scholarships and fellowships
State and local income tax refunds
Unemployment compensation

Homeowner/Renter Data
Residential address(es) for this year
Mortgage interest: Form 1098
Sale of your home or other real estate: Form 1099-S
Second mortgage interest paid
Real estate taxes paid
Rent paid during tax year
Moving expenses

Financial Assets
Interest income statements: Form 1099-INT & 1099-OID
Dividend income statements: Form 1099-DIV
Proceeds from broker transactions: Form 1099-B
Retirement plan distribution: Form 1099-R
Capital gains or losses

Financial Liabilities
Auto loans and leases (account numbers and car value) if vehicle used for business
Student loan interest paid
Early withdrawal penalties on CDs and other fixed time deposits

Automobiles
Personal property tax information
Department of Motor Vehicles fees

Expenses
Gifts to charity (receipts for any single donations of $250 or more)
Unreimbursed expenses related to volunteer work
Unreimbursed expenses related to your job (travel expenses, entertainment, uniforms, union dues, subscriptions)
Investment expenses
Job-hunting expenses
Education expenses (tuition and fees)
Child care expenses
Medical Savings Accounts
Adoption expenses
Alimony paid
Tax return preparation expenses and fees

Self-Employment Data
Estimated tax vouchers for the current year
Self-employment tax
Self-employment SEP plans
Self-employed health insurance
K-1s on all partnerships
Receipts or documentation for business-related expenses
Farm income

Deduction Documents
State and local income taxes
IRA, Keogh and other retirement plan contributions
Medical expenses
Casualty or theft losses
Other miscellaneous deductions

We hope this helps, and we really look forward to seeing you this year!

Milwaukee Accountant Just Making Sure You Won’t Get Audited

I haven’t been paying too close attention (we have been a little busy around here!), but I was sent this priceless little nugget about the Republican primaries recently…

You see, Rick Santorum recently released his tax returns. They’re nothing special, he’s doing quite well, but he is an ex-Senator so that’s no surprise. But here’s what I thought was interesting:

Santorum paid a tax rate of an average of around 28 percent — which is double the effective tax rate Romney paid on much larger earnings. So who’s to blame for such a discrepancy?

Here’s what Santorum said: "Look, I do my own taxes. Heck, Romney paid half the tax rate I did, so obviously he doesn’t do his own taxes. Maybe I should hire an accountant in the future."

The thing speaks for itself. Now, I’m not Romney’s accountant (that would be a fulltime job!), but I can tell you with good authority that Santorum is NOT alone. There’s no peer-reviewed study I can cite, but when new tax clients from all around Milwaukee bring in prior year returns which they prepared on their own, one of the things we often do is to review them — and we almost always find additional ways to save (and we get that for them by filling an amended return on their behalf).

But one of the "hidden" benefits to using a good Milwaukee tax preparer to file your taxes is that we have a hair trigger for avoiding things which might cause an audit.

And I thought that ALL of my clients and contacts would benefit from some (but not ALL) of our little internal list of what we look for, to make sure that clients are doing what they can to keep from getting socked with a notice.

Here’s what we (AND the IRS) look for …

The ‘Best’ Milwaukee Tax Professional Reveals: Seven Audit Red Flags
1. Indefensible claims
There are so many old wives’ tales saying that certain items trigger an audit: home office deductions, passive losses, schedule C (sole proprietorship) activities, etc. But you really can’t predict the trigger (and you can drive yourself crazy trying), but you *can* adopt the "be reasonable" mantra about every item on your return (with the help of the best darn tax professionals in the Milwaukee area, of course!), including these. So if you don’t have a decent claim for a home office, we’ll help you not to claim it. If your money-losing sole proprietorship is really more a fun hobby, treat it as such.

Look–don’t be scared to take deductions and losses you’re entitled to, but don’t take tax positions you aren’t comfortable defending. If you take reasonable tax positions, you’ll likely find you won’t end up needing to defend them. And if you do face an audit, it will likely be far easier.

2. It doesn’t all add up.
This seems like it should go without saying, but make sure you add, subtract and multiply accurately. Check your numbers through each step and do some simple math checks when you finish. If you do make a math mistake, you are likely to get a math correction notice from the IRS. This isn’t an audit. But our goal is to minimize your interaction with the IRS bureaucracy, which, ah… isn’t known for the best mail handling practices.

3. Lost 1099
This can be confusing, because the Form 1099 comes in many varieties, including 1099-INT for interest, 1099-DIV for dividends, 1099-G for tax refunds, 1099-R for pensions and 1099-MISC for miscellaneous income. These forms are sent by payers of such funds to both you and the IRS.

So regardless of how many 1099s you receive, make sure they all are accounted for on your return. There are also Forms 1098 which lenders send (to you and the IRS) recording how much interest you paid. The IRS matches your return against the 1098s and 1099s. So one sure way to guarantee an IRS query is to fail to account for something! If a Form 1099 is wrong–say it reports more income than you had–you can explain or deduct it on the return, but you need to first report it.

4. Suspicious OVER-reporting
I’m not talking about under-reporting income, or holding necessary information back. But you’d be surprised how many Milwaukee tax professionals and amateurs alike try to submit too much *supporting* information. True, if your return is complex, you may need to add explanations or disclosures in footnotes. Be concise, truthful and accurate, but don’t provide copies of sales agreements, settlement agreements, bank statements, etc., unless you are later asked to by the IRS.

Disclosures can be made on regular paper or special IRS forms. A Form 8275 "Disclosure Statement" on plain paper can be used any time you need to disclose something that can’t be adequately disclosed on the forms. Form 8275-R "Regulation Disclosure Statement," is for disclosing positions that are contrary to IRS Regulations or other authority. You shouldn’t be filing a Form 8275-R–or taking a tax return position that would require it–without professional help.

Frankly, though, any disclosure statement should be checked with someone who can take you by the hand and ensure it’s done properly (ahem).

5. Fighting unnecessary fights.
Here’s where some of our clients here in the Milwaukee area have gotten in trouble in the past, despite our admonitions: If you take reasonable tax positions, and complete your return accurately, checking your math, why should you pay a bill if the IRS sends you one? Frankly, it’s a matter of practicality (and wisdom) rather than principle. It just doesn’t pay to fight with the IRS on small matters. So don’t get into the bureaucratic system and risk bigger problems for a few dollars. Just pay it and move on.

6. Ticky-Tack Prior Year Amending
Here’s the reverse situation of my previous point: amended returns are reviewed much more regularly than initial returns. So if you forgot a deduction or otherwise think you can get a small amount back by amending, think twice before amending your return (i.e.–consult with a pro). Consider whether you might have bigger problems if other matters on your return, unrelated to the amendment, are reviewed. Yes, you can win a battle…and lose a larger one.

7. Trying to go it alone.
Yes, this is a bit self-serving — but I’ll also make a "damaging admission" here: some tax professionals argue that a return prepared by a professional is less likely to be audited.  However the facts are that there’s little reliable data to support it. That being said, having a professional prepare your return will give you the added firepower of years of experience in handling such matters in your corner.

So to absolutely ensure that whatever happens, you’ll have such a someone at your side — and that your back will be guarded on the front end, give us a call: 414-325-2040.

And a last word: No matter how careful you are, there’s no way to guarantee you’ll never have a tax controversy. Sometimes your number just comes up. But when your number is called … make sure you aren’t alone.

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