Paul L. Caron

Wednesday, October 27, 2010

'I Don't Know Any Tax Lawyer Who Does Their Own Tax Returns'

Time, Why $1,700 Means Joel Stein Is Rich, by Joel Stein:

I've always believed the rich were different from you and me, but it turns out they're different only from you. When I listened to the nuanced economic debate over whether the Bush tax cuts should be kept for rich households making more than $250,000, my overwhelming response was, I'm rich! My total income for 2009 was $288,115, placing me among the richest 2% of Americans. ...

I called Mike Foster, a tax lawyer at Venable LLP. After hearing the specifics of my tax returns, Foster informed me that I am not rich. The debate is over people who report more than $250,000 after deductions, and I had only $182,532 in taxable income, thanks to my giant mortgage and high income and property taxes. ... Even more confusing, my income was high enough that I had to pay the alternative minimum tax, which makes the Bush tax cut irrelevant. Or something like that. Foster wasn't sure.

"I don't even do my tax returns anymore," he said. "I don't know any tax lawyer who does their own tax returns. The forms are Greek even to us."

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How many congress critters and staffers do their own returns? How many of them realize what a burden it is.

Posted by: jr | Oct 28, 2010 9:19:36 AM

Half Sigma, actually, the tax program that I have does allow the taxpayer to sign on to his brokerage account with his password and forward all stock transactions to his tax file within my program, which automatically places them within Sch. D. Otherwise, he could pay me to manually input hundreds, and sometimes thousands, of transactions in individual detail, as required by the IRS.

Posted by: Woody | Oct 28, 2010 9:17:54 AM

I use TaxCut, and I don't see how it would save me any time to pay someone, because the majority of the effort is in finding all of the documents and figuring out that Schedule C and Schedule D stuff. Or do people just hand their tax accountant the passwords to their brokerage accounts and say "figure it out for me"?

Posted by: Half Sigma | Oct 28, 2010 7:18:28 AM

PalmettoBuckeye, did you practice in SC?

Posted by: Matt | Oct 28, 2010 6:49:49 AM

It's amazing how many rules, schedules, phase-out formulas, etc., have been added in just the past three years. To complicate things, many of those phase-out rules -- each of them motivated by envy of "the rich" -- have different income thresholds. Could the Enemy (i.e., Congress) have made it any harder for us by trying?

Posted by: bitsnbytes | Oct 27, 2010 10:41:15 PM

I am a retired corporate tax lawyer and haven't done my own tax return in 30 years primarily because of my investments (K-1's, energy partnerships, etc.). Much my early career success stemmed from finding gross discrepancies between what the Internal Revenue Code specified and what the IRS forms and instructions contained. In short, the forms and instructions failed to comply with the IRC to the taxpayer's detriment. Revenue rulings and PLR's often were the same-not grounded on the IRC but on what had been the Service's practice. And this was in the relatively straightforward area of employment taxes, not income taxes.

Posted by: PalmettoBuckeye | Oct 27, 2010 7:19:08 PM

It is not enough that you should make all Congress-critters and fart-catchers do their own returns. The paper-shufflers at the IRS (and CCRA) should also be forced to do so.
And then ANY and ALL of them that get it wrong should be thumped with the max in penalties and interest.

I have been "audited" an idiot (with a B.Comm. no less) who did not understand the difference between cash and accrual based accounting. And NONE of her superiors could or would realize that there was a mistake. I'm still paying no tax because I'm still writing off the cost of my tax accountant and tax lawyer.
We really DO need a simpler system.
Flat tax anyone? Only ONE deduction: a personal allowance and 18-20% thereafter.

Posted by: Dyspeptic Curmudgeon | Oct 27, 2010 7:07:15 PM

NMH: I second the motion, that all senators and congressmen (I would include all congressional aides and staffers, and anybody who works in the White House) be required to fill out their taxes BY HAND, EVERY YEAR. I have said this for years.

Posted by: Ken Mitchell | Oct 27, 2010 6:39:12 PM

audit insurance really isn't a I sit in the office doing an audit for someone that bought audit insurance through TurboTax. (yes, that is my day job). Of course, I really hope you tax pros aren't the ones making the big errors on their returns!

Posted by: Joancpa | Oct 27, 2010 6:34:29 PM

TurboTax Audit Defense; NOT a racket. I know the guy who runs that business, and he buys copiers and scanners from me. :-)

Seriously, he is as straight-arrow as they come. He's bright as a whip, the only guy I know who is both an Enrolled Agent AND an MCSE.

Posted by: Ken Mitchell | Oct 27, 2010 6:31:44 PM

I'm no one and I use TaxCut and have for over ten years. Fifty grand a year and stocks bought and sold through Sharebuilder, with a little web design business on the side.

If you can read and follow simple instructions anyone can do it. I am sure they make it for a certain education level and test it over and over. Though, I have noticed over the years that it has become simpler in its descriptions.

Posted by: Penny | Oct 27, 2010 6:10:11 PM

I prepare my own tax returns...using Turbo Tax. However, I do not take deductions I was not entitled to. :P

Posted by: Chris Bolts Sr | Oct 27, 2010 4:06:17 PM


You too! Do you have the situation where your wife says, "You're a CPA, so go back in that room and do not come out until we pay less in taxes." After 26 years of marriage, I have learned to fudge the first estimate I give her to the "high side."

Posted by: Steve | Oct 27, 2010 4:02:11 PM

I am also a tax lawyer and do my own taxes. But then Mike Foster (the lawyer quoted in the article) doesn't know me and I don't know him, so my doing my own taxes doesn't disprove his claim.

Posted by: Joshua | Oct 27, 2010 3:51:50 PM

Geez, people, TurboTax and TaxCut are not that hard.
Do you really think that your situation is so special that it's not covered by their top-end offering?

It's not like you don't get to look at and modify the forms it generates when you're done.

Posted by: luagha | Oct 27, 2010 3:44:14 PM

In most cases, I think a CPA would give you little advantage on your taxes over just using something like Turbotax. Since you have to collect, identify and organize all the data for the CPA yourself anyway, I don't think much time is saved either. I'm a CEO with diverse income sources, and I have always done my own taxes. I thoroughly hate it more than just about anything I have to do in life. Mostly because of the mind-numbing stupidity and drudgery of it as a way to collect taxes. It's borderline torture, and yes I'd rather be water boarded repeatedly instead. Few things anger me about my government like income taxes do.

Posted by: bagoh20 | Oct 27, 2010 3:35:04 PM

I'm guessing this is the wrong place to pitch my proposal that all congressmen be required to prepare their own taxes with only a #2 pencil, a pad of paper, and a calculator. Lock them all in a room and only let them out when they're done. Do this just once and we'd have a tax code that would fit on a postcard the next day.

Posted by: Joe Miller | Oct 27, 2010 3:26:15 PM

the tax system is a disgrace. If anyone has tried to figure out the lease inclusion schedule, they would understand.

the IRC has morphed from a revenue raising tool to a system designed to manage desired behaviors and reward favored constituencies. its ridiculous the hoops someone would have to jump through just to take advantage of certain credits etc. I would love to know how much tax payer money is paid into the system that shouldn't have been if the tax payer had known how to properly take advantage of the available credits and deductions. We always hear about what isn't being paid, but how about a study on what is paid that shouldn't have been if only the tax payer or the preparer were sophisticated enough to understand the byzantine nature of the system?

Posted by: nmh | Oct 27, 2010 3:15:54 PM

I do mine, with a little help from my good friend Mr. Turbo Tax. :-)

Posted by: MPM (UC Law '89) | Oct 27, 2010 3:04:33 PM

I'm a CPA, and I do my tax returns on TurboTax. And this year, I spent $40 to buy the "audit defense" insurance, which I recognize as a racket.

Posted by: John Galt | Oct 27, 2010 2:44:16 PM

I'm a CPA and I do my own tax returns...after everyone else's...or, when it gets too much listening to my wife to get them finished.

Posted by: Woody | Oct 27, 2010 12:49:27 PM

I am a tax attorney that prepares my own tax returns. Golly gee wilikers, I did not know I was the only one.

Posted by: dtc | Oct 27, 2010 12:09:44 PM

This would be a good poll question for the site.

Posted by: guy in the veal calf office | Oct 27, 2010 9:17:41 AM

Tax lawyers don't file their own returns because they are lawyers, not accountants. They send their taxes to be done by a CPA who stays up to date on the forms and (tries to stay up on) all the rules. The lawyers could do it, but it would take a much longer time because they are not in the practice of doing it and so would have to slow down to read the ridiculously extensive instructions to ensure proper reporting on the forms.

Posted by: loki | Oct 27, 2010 8:29:05 AM

I completed my 2009 tax return to understand the compliance burden and in effect, "get down with the people." I had to file Schedules A, B, C, D, E, SE, as well as 4 disclosure forms. It took 7 hours and will be outsourced for 2010.

Posted by: Abogado de Impuestos | Oct 27, 2010 6:32:34 AM

I think this article is supposed to be satire. As for Mike Foster, I suspect tax lawyers pay someone else to do their taxes because they can make more money doing some corporation's taxes for the time it would take.

Posted by: great white north | Oct 27, 2010 5:04:40 AM