Tax law too complicated for standardized software
Today I would like to answer a number of questions that are frequently asked to me by individuals who have to make decisions about their taxes. So this is it :
1. Gaps in Home Tax Preparation Software
There is a variety of software that will prepare and file your federal income tax return for you. This is supposed to avoid the time and expense of hiring an accountant or tax preparer, taking your paperwork with you to an appointment, and waiting for the return to be completed.
I am not in favor of these programs and I encourage you to hire an accountant or tax preparer to prepare your return. The reality is that tax law is too complicated for standardized software to adequately represent you.
I have repeatedly found errors in the software that harmed my customers. I also found a variety of opportunities that were lost because standardized computer programs failed to recognize them. I also think there are ways to look at various circumstances that a tax preparer can use to lower your taxes, but a computer cannot.
And finally, if a mistake is made and a penalty is imposed, it is much more difficult and often almost impossible to have the penalties waived if you have prepared the return yourself. Having an accountant who makes a mistake is a well-accepted excuse for reducing penalties.
And, of course, there’s always this: If you’re audited by the Internal Revenue Service, you want to make sure your accountant meets with the agent and not you personally.
2. Problems with tax advertising on TV
I continue to receive a number of new clients who previously used a television advertising agency with an 800 number to represent them before the IRS. I recently had to meet with the manager of an 800 number to discuss their mutual client representation situation.
Folks, the reality is that IRS agents are often just as unhappy with the quality of service you receive through these 800 numbers as I am with having to repair the damage they have done to you. It breaks my heart to learn how much money has been paid to these companies, the shoddy work that has been done, and the hostility of IRS agents because of it.
I realize that cable television and internet advertising are popular today. Nonetheless, I strongly encourage you to do your research and hire someone who doesn’t have that kind of advertising budget.
3. Tax defenses to obtain a penalty abatement
The IRS appears to be pursuing companies that have failed to file timely information returns such as the 1099 and W-2 forms. The same goes for the various foreign disclosure transaction notice forms that should have been filed with your return, but may not have been inadvertently filed. These notices are usually computer generated and impose penalties which can generate enormous liability.
If you receive any of these penalty letters, be aware that there are a number of defenses that can result in them being canceled or reduced.
However, it is essential that the right document is filed at the right time, claiming the right defenses to the right division of the Internal Revenue Service. If you don’t do it on time and correctly, you can in practice lose your case over the procedure alone, regardless of the substance.
Again, it is essential that you make sure to contact an experienced tax lawyer as soon as possible.
Dear friends, these are some of the questions I get asked frequently and I hope these answers will be helpful.
David Leeper is a Certified Federal Tax Lawyer with 40 years of experience. He can be reached at 915-581-8748, [email protected] or leepertaxlaw.com.