In a move to turn the adage “You get what you pay for” on its head, 15 CPAs gathered Feb. 20 in White Plains to dispense free technical advice of the highest order.
Those who called into a hotline found themselves talking to pros who provided answers to an array of tax questions.
“I find myself cleaning and amending returns right and left,” said Felix Lopez, a certified public accountant at White Plains-based Boncor & Associates Inc., who has seen the industry shift over the years. “The No. 1 mistake people make is hiring somebody who doesn”™t have the ability to understand the tax laws. The majority of my business now is based on amendments, which is a sad statement. Most of the people coming to my office are already being audited, which could have been easily prevented by hiring the right people to do the right thing.”
Cash-strapped clients may look for what is economical and “they are more desperate and taking positions my father would never have dreamed of,” he said. “It”™s a new generation.”
Attorney and tax director Michael Moss of New York-based ERE Accountants & Advisors said “clients are either getting into tax trouble intentionally or unintentionally and the correspondence that has come out of the Internal Revenue Service or any other tax jurisdiction has been quite voluminous and severe.”
A major part of his practice has “shifted away from traditional tax preparation and has focused on IRS practice and procedure, negotiating installment agreements, liens and penalty abatements.”
“Many clients have restructured the way they operate and look toward whether tax credits are available,” Moss said. “Businesses and individuals are looking for the opportunity to squeeze every possible, legitimate deduction they can, so when they do come see me, clients are running into a financial problem.”
Clients are now facing the reality that it”™s not all about tax debt, but rather, personal debt, credit cards and mortgage payments, he said.
The Great Recession”™s lingering impact on clients is widely felt.
“I find that overall, taxpayers feel like they”™re paying too much income tax and they want to get more aggressive on their tax returns,” said Susan Kozera, managing partner, Atti & Co. CPAs P.L.L.C. in Brewster. “There are a lot of people who say, ”˜just take it (what they”™re claiming) and I”™ll deal with the audit if I get audited”™ and that”™s a problem for us. I”™m not going to perjure myself. I”™m finding people are really trying to push the envelope more than ever.”
The aftermath of the financial meltdown “has affected the industry as a whole,” according to Spencer Barback, a partner at Citrin Cooperman & Co. L.L.P. in White Plains.
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“You see a lot of the less financially strong firms either merging or laying people off, which you normally don”™t see,” he said. “A lot of people used to merge because they wanted to plan a strategy of exiting, but a lot of firms over the last year have merged because of finances.”
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Realities of tighter finances have touched everyone, Moss said, but ignoring a fiscal problem can be detrimental to personal and business success.
“When it comes down to it, if it”™s putting clothes on my children”™s back or paying my taxes, people are trying to make a decision of who will come first,” he said. “But unfortunately, your failure to comply with your obligations from the taxing authority won”™t just go away. It has bad consequences. If you are up front with the IRS or the state of New York or Connecticut, and show a willingness to work with them, it actually resolves itself.”
New York State Society of Certified Public Accountants Westchester Chapter members fielded calls from the offices of the Westchester County Business Journal Feb. 20. Check out some of the questions and answers below and see if yours made it in the paper.
Marcy in White Plains asked: “I have multiple IRA accounts in different banks. Do I have to take a distribution from each account or can I take my RMD out of only one account?”
Response: “As long as you take the proper amount for your required minimum distribution (RMD,) you can take the RMD from only one account or any combination of accounts. The downside is that you are responsible for calculating the RMD.”
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Bill in Yonkers asked: “I have parents in Bronxville who are getting a STAR break. Considering their age, are there any other tax break benefits the assessor”™s office can offer?”
Response: “Ask if there is enhanced STAR credit program enrollment. Veterans receive additional tax breaks. Perhaps if the father, mother or both were veterans, they may be eligible for an additional reduction of real estate taxes. In addition to veterans, certain firemen are entitled to real estate tax breaks. The parents can call the local assessor to go over a list of categories for exemptions or partial exemptions.”
Sue in Yorktown asked: “I accepted a job in Connecticut. What are the tax consequences?”
Response: “You will file a nonresident Connecticut tax return and a resident New York tax return. You will have Connecticut withholding taxes taken out of your salary and you will receive a credit on your New York tax return for the lesser of the income tax payable to Connecticut or to New York on the income being taxed by both states.”
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Greg in White Plains asked: “I am currently self-employed and have incurred large amounts for health insurance premiums. Can I obtain a tax deduction?”
Response: “Yes. Health insurance premiums incurred by self-employed individuals are deductible on page one of form 1040 (in arriving at adjusted gross income.) If the premiums are not deductible on page one for any period of time, the self-employed individual was eligible to be covered by an employer or spouse”™s employer plan.”
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Sheila in White Plains asked: “My husband is an attorney and he is an employee of a law firm. The firm separately compensates him, not through his W-2 for new business generated by him. Can he deduct business expenses against this income?”
Response: “Business expenses directly attributable to the generation of new client business for which he is not reimbursed may be deductible from the other income generated. Your husband receives a 1099-MISC for this other income, reportable on Schedule C. Any expenses directly attributable to this are deductible. The taxpayer is advised to evaluate the exact nature of this compensation with the husband”™s employer since the payment is in the form of a ”˜commission”™ and he is an employee of the law firm. It was also emphasized to file unreimbursed employee business expenses on Schedule A versus Schedule C. Finally, they were advised to retain all receipts and a diary documenting the new business.”