| (Copyrighted) | | | | involved. The CPA caused this family that had |
| A lot of people don’t realize their ability and | | | | two young children (in day care) to pay a little |
| potential to negotiate, do their tax returns or | | | | over $1,000.00 in additional taxes on their tax |
| even how to expect to receive their refunds. | | | | return when they had already paid nearly |
| Referencing my previous article where and when | | | | $8,000.00 of tax withholdings to the IRS through |
| I said: “I repeatedly use the expression that | | | | their W-2 on their nearly $85,000.00 W-2 and |
| “lack of knowledge costs a person a lot of | | | | retirement distributions income. The client came |
| money” or “knowledge is wealth.” I | | | | to me on some unrelated issue (mortgage loan |
| interpret this expression by saying, | | | | consulting). I asked to see his returns for the |
| “scammers see your lack of knowledge as | | | | past two years (for informational purpose-- w-2 |
| PRICELESS.” The book I wrote costs | | | | employs don’t need tax-returns for mortgage |
| about $25.00 but WILL save you so much in time | | | | loans…) and noticed many more mistakes the |
| and money, giving you so much knowledge so | | | | CPA’s had made (even on past returns). |
| that when you get fraudulent calls from collection | | | | I then discussed and decided to amend their most |
| agencies or even those so called “debt | | | | recent return and faced the obstacle of an IRS |
| consolidation”, “debt reduction”, and | | | | law stating, that you can change everything else |
| “debt management” companies or others, | | | | but your filing status. As a result, I |
| you will be able to immediately recognize the | | | | communicated with the Tax Payer Service |
| scams and fraud. In the “Fraud Watch” | | | | Manager (TSM) and discussed the issue of the |
| article, I will give you examples. | | | | law. She addressed a publication that contained |
| Most of us are scared of IRS because the fear | | | | filing status tax law. Then, I diverted her |
| the agency created or the horrible stories | | | | attention to another publication that was thicker |
| we’ve heard. Scares come from the facts | | | | and had more details. I explained to her that she |
| that most people lack knowledge. Besides the | | | | needs to reconsider her words as a) the mistake |
| fact that the IRS is a fruit of several rich | | | | was not at the fault of the taxpayer but a CPA |
| individuals to create shelter for the government | | | | who is authorized by the IRS to do such |
| so on and so forth; you must understand that the | | | | “crappy” work and b) that the law does |
| IRS agents (who you as a taxpayer deal with) | | | | allow changing the filing status under particular |
| are not only easier to work with than most | | | | situations. She then argued, “but they signed |
| customer service representatives of credit card | | | | the return…” I had to corner her by asking |
| companies and banks, but also are more helpful | | | | her a question that would put her in the |
| and understanding. I am not trying to take sides, | | | | taxpayer’s shoes when and where she |
| but have dealt with a lot of them. | | | | needed to rely on the expertise of a third |
| I have seen a lot of people that pay the IRS a | | | | party… She had nothing further to say and |
| large sums of taxes because they don’t | | | | my client received a refund check of a few |
| realize the mistakes their taxpreparer makes | | | | thousand dollars a couple months later. |
| made. I don’t care if a person claims to be | | | | 2. My tax Audit. |
| a tax-preparer or even a Certified Public | | | | In 1993, I purchased a property in Austin, TX |
| Accountant (CPA). I have seen several | | | | (several years after I left TX). The property |
| CPAs’ work that cost their customers-clients | | | | was purchased sight-unseen (as I was in GA). |
| unnecessary tax expenses, because of their | | | | Relying on the words of a “Real Estate |
| mistakes. In fact, I had to rescue several people | | | | agent” who I thought I could trust, was a |
| from paying over $20,000.00 to $50,000.00 taxes | | | | horrible thing to do. Not until after the purchase |
| to the IRS because their accountants did not | | | | and my visit to the property did I realize how bad |
| include a lot of their legitimate expenses (such as | | | | of a shape it was in (as opposite to what the |
| education loans/expenses, business expenses | | | | agent led me to believe). After spending a |
| when business income was included or so much | | | | massive amount of money to repair the property |
| more). | | | | myself, I sold it for a bit of profit. However, the |
| Now allow me to explain this a bit differently. Of | | | | IRS hit me with a little over $51,000.00 of tax |
| course your accountant does not have a crystal | | | | liabilities for 1993 and 1994. Through the years |
| ball to know what your expenses were the year | | | | of audit (1997 through 1999) and providing a lot |
| past before he/she prepares your return. I have | | | | of receipts and my appeal, it reduced the claim to |
| an expression for Crystal ball. When someone | | | | over $25,000.00. Then, finally came the Tax |
| asks me a question that requires guessing or | | | | Court. During my communications with the U.S. |
| predicting, I tell that person, “sorry, my | | | | attorney who was defending the IRS, I learned a |
| crystal ball broke several years ago.” | | | | few things. But before I get there, allow me to |
| Your CPA’s crystal ball must be like mine. | | | | explain a couple of things about myself. They |
| Therefore, you must help him/her to do the best | | | | are: |
| job possible for you. There are some clueless | | | | 1. Not until this issue, did I ever know how or |
| preparers (no disrespect is intended); however, | | | | what to do about tax returns. |
| one thing I noticed that most (90%) CPAs or | | | | 2. My 1993 and 1994 tax returns were done |
| even tax-preparers don’t have is AN | | | | by a CPA and amended by a tax-preparer before |
| EFFECTIVE INVENTORY OF ALL YOUR | | | | my audit nightmare began. |
| EXPENSES AND INCOME. | | | | Now let’s see what I learned from the U.S. |
| Let see, what do I mean by that. Tax season is | | | | Attorney representing the IRS. |
| right around the corner and most people | | | | 1. This wonderful lady was telling me that she |
| “assume” (you don’t know how much | | | | represented the IRS for over 12 years and she |
| I hate this word) that we’ll do the same way | | | | knows the tax laws very well. |
| as did last year. Just because you or your CPA | | | | 2. She was disallowing some of my receipt |
| makes the mistake of preparing your return | | | | because some receipts were faded. Please note |
| incompletely, don’t blame the IRS for your | | | | that the audit and Tax Court issues are taking |
| lack of effort in your tax preparation. The IRS | | | | place in 1997 through 2000. |
| says, do what you can do to maximize your | | | | 3. She was telling me that just because I |
| benefit as long as you are truthful and don’t | | | | have cancelled checks showing that I paid for |
| fudge numbers. OKAY. The IRS says take | | | | some of the expenses, those are not considered |
| advantage of your refund and reduce your | | | | receipts. |
| liabilities in the best method available to you as | | | | When she made the remarks about the canceled |
| long as you are not deceitful. Some | | | | checks are not sufficient, I had to stop her and |
| tax-preparers are deceitful and some are | | | | tell her the exact words as: |
| honest. Some CPAs are clueless and some are | | | | “Ms. ???, I now realize that you need to go |
| knowledgeable. However, the bottom line of | | | | back to law school, because you must have |
| responsibility FALLS ON YOUR SHOULDERS. If | | | | missed a few things before you graduated and |
| there is something wrong with your tax return, | | | | took your bar exam. You are doing injustice to |
| even if the tax-preparere or CPA signed the tax | | | | the IRS.” |
| return (below your signature), the IRS contacts | | | | She was stunned, surprised and silenced for a |
| you (ALWAYS through mail the first time) for | | | | minute. She didn’t have anything to say. |
| any inaccuracies. I hope I am clear on this. | | | | Then I continued by asking her: |
| Let’s go back to the “Crystal Ball” | | | | “You live in Charlotte, Is that |
| issue. You have been going to the same | | | | Correct?” |
| tax-man/woman for years. You take some | | | | She responded, “Yes.” |
| papers to him/her to do your tax return. He | | | | I asked, “let’s say that Duke Power |
| she tells you are going to receive so much refund | | | | disconnects your power, you get home and learn |
| or going to owe so much. You blindly say, | | | | that you are the only one in your neighborhood |
| “OK. Yes, Sir/Mam,” sign the documents | | | | who does not have power. You call Duke Energy |
| as he/she instructs and send it out/file it… | | | | being angry of its mistakes. The company |
| Neither you (an uninformed person about the tax | | | | representative responds by telling you it was |
| laws) nor he/she bothers to ask you if your | | | | disconnected for non-payment. You argue |
| lifestyle, spending habits or any situation has | | | | otherwise. The rep. tells you to prove that you |
| changed over the years. So, he | | | | paid. What do you show for proof?” |
| “ASSUMS” you have no changes from | | | | Take a wild guess what her answer was. |
| the years past. You are at fault for your own | | | | That’s right. She said, “Canceled |
| losses by not sharing any changes. For that | | | | check.” |
| reason, I had created a six-seven (6-7) page | | | | So I acted as though I had a hearing problem and |
| inventory sheet (called expense report) which I | | | | asked, “What did you say?” |
| provide to a few of my clients before I talk with | | | | She repeated her response and then she became |
| them. Although I don’t prepare tax returns, | | | | very quite. So I had to break the silence by |
| but (as said before,) I have rescued a lot of CPA | | | | telling her to stop with her double standards. She |
| and tax-preparers’ customers from massive | | | | then agreed to accept my cancelled checks. |
| tax liabilities to the IRS (at no direct fault of | | | | However, it did not end there. As I was |
| taxpayers, but their preparers’). | | | | recovering some more of the 1993 receipts, I |
| I told a couple of my clients whom I’ve | | | | marked some of the very faded ones by placing |
| helped with credit issues, I don’t want to do | | | | circle around the date and dollar amount and |
| their taxes (especially if they do not have any | | | | wrote the information outside the circles. During |
| problems with the IRS or state). Therefore, I | | | | the first hearing before the Tax-Court, the Judge |
| give them my “Expense Report” and | | | | asked, “do parties have any comments or |
| explain the line items of the report. I even | | | | objections before we start”. The same |
| mention to them that some of the line items are | | | | attorney along with her partner immediately |
| for informational purposes only or that a CPA or | | | | jumped to object my receipts by calling it |
| tax-preparer may not be able to use the | | | | “tampering with evidence”. The Judge |
| information if they are not self employed and/or | | | | was shocked and asked for the evidence. He |
| don’t fall within certain categories. Of | | | | looked at them and asked me, “Mr. Samadi, |
| course, I knew these people’s entire financial | | | | what do you have to say about this?” Since |
| as I have reorganized their entire financial life | | | | I did not know what the attorneys were talking |
| (except stocks, bond, life insurance and a few | | | | about, I asked the Judge if I could view the |
| other long term investments). Sadly to say, | | | | evidence they were addressing. I was handed |
| when they filled out the sheets and took them | | | | two receipts. Immediately after looking at the |
| along with their w-2’s, 1099s, 1098s, and | | | | receipts, I started laughing. The Judge was |
| other supporting documents for the purpose of | | | | surprised and asked about my behavior. So I |
| tax return, their CPAs said; “there was no | | | | explained: |
| need for that…” and handed them a two | | | | “Your honor, I was trying to avoid giving the |
| page expense report which did not cover most of | | | | government representatives eye-ache and |
| the important issues. The clients came back to | | | | headache by rewriting the figures outside the |
| me with those reports and I had to contact the | | | | circle so that they would not need to squint to |
| CPAs in order to make certain that the expenses | | | | figure out what was on the sheets.” |
| are accordingly covered. | | | | The judge looked at them and said. ”Is this all |
| Dear wonderful taxpayer. There is nothing wrong | | | | you got? Go and work out your deals. I do |
| with you claiming all your legitimate and legal | | | | not want to see you about this case.” |
| deductions and maximizing your refund or | | | | So here we (the U.S. Attorney for the region, the |
| reducing your liabilities. The IRS doesn’t | | | | two (2) assistant U.S. attorney, the Appeals |
| deny you, but says, “be honest.” Until | | | | Manager, the then retired Tax-Auditor and I) |
| the day you become an expert and are capable | | | | went at it again in a conference room. When we |
| of fighting the IRS (by not paying any taxes), you | | | | finished, they agreed to write me a check based |
| are a small fish in a big pond and must pay your | | | | on my w-2 withholdings. |
| taxes accordingly, but maximize it to your benefit | | | | The moral of the above two TRUE stories. |
| (as allowed by law). | | | | A. Stay stupid and pay for your ignorance. |
| Allow me to share a couple of arguments I had | | | | Learn about your life and finances and prosper. |
| with the IRS managers and even the U.S. | | | | B. Do not give up when you have a fight |
| attorneys representing the IRS interest. | | | | ahead of you. |
| 1. About filing status: | | | | C. Just like if you were going to have brain |
| The IRS says, use the best method of filing your | | | | surgery, you would need to get a second |
| tax return that benefits you. It even includes | | | | opinion. Do that with all your financial issues |
| the first thing on your tax return “Filing | | | | (especially taxes, life insurance, stocks and other |
| Status.” I had a client whoes CPA worked | | | | investment, mortgage loans and big ticket item |
| on the families’ tax returns and marked the | | | | purchases). |
| return as “Married Filing Jointly”, when the | | | | Again, stay ignorant and pay the price. |
| best result for the family was married filing | | | | I hope you are enjoying these. I will expand on |
| separate (as they were for the last 7 months of | | | | this and the Tax Preparer Scam issues in the |
| the year). Of course, itemized deductions were | | | | next article. |