Archive for March, 2011|Monthly archive page

Lost in Transition

Originally Published in the Pacific Grove Hometown Bulletin

March 16, 2011


In my experience in the tax profession and from my vantage point as a Certified Public Accountant, I can tell you stories that will make your heart sing.  I can also tell you stories that will make you shudder like you just heard a bad contestant on American Idol.  The stories that make you cringe are usually caused by moments of stupidity by other tax preparers, or sadly, by people losing at a game of Tax Return Russian Roulette1.  I like to think the stories of hearts singing involve me riding in on a metaphorical white horse to save the day, heralding a banner “To correct stupidity and promote safety locks on roulette guns…”  I grant you, it is an unusual banner.

If I may spare you some pain, dear reader, I would say be mindful of transitions between tax preparers (including yourself) – particularly if you are “downgrading” the type of preparer you use.  Over the years I have seen countless returns where valuable tax attributes from prior returns were not carried forward to the next year’s returns by a new preparer (effects ranging from hundreds to several hundred thousand dollars in tax).  Some of you may be under the impression that your tax returns each year are distinct; this is rarely true.

Let us look at a simple example and suppose that you bought or inherited some mutual funds in 2007 worth $11,000; you sold them in 2009 for $6,000 resulting in a $5,000 loss.  There is a good chance you would have been limited to using $3,000 of this loss in 2009 and the other $2,000 would have been a capital loss carryover to your 2010 returns that could save you $500 or more in tax.  Of course, if you switch preparers and the new preparer does not have the training or presence of mind to find the Schedule D from 2009 and look for any unused capital losses, the cost of your new tax preparer just went up by $500.  Sadly, you probably would never know a costly mistake was made.

There are many areas similar to the above item including: carryovers of net operating losses, basis in retirement contributions and depreciable assets, state tax payments or refunds, office-in-home expenses, charitable contributions, rental property expenses (passive activity losses), alternative minimum tax (AMT) credits, foreign tax credits, general business credits, etc.  Often there are different amounts for the federal and state returns, and perhaps even AMT amounts for each of those if you are or may become subject to AMT.  Unfortunately these are scattered throughout forms in the return, and just because your new preparers show you comparative figures in a tax summary when you pick up your returns, does not mean they entered any of the carryovers in their software.

You do not have to be rich or have a complicated return to be affected by a number of these.  However, it does generally hold true, that the more money you make and the more types of activities you are involved with (rental properties, investments, etc.) the more heavily you are affected.

If you are doing the returns yourself with tax software for the first time, look carefully through the returns for hints of the above mentioned items, and be very diligent in answering the tax software questions.  Also, be wary of deleting items you think you no longer have, as they may have carryover or suspended items attached to them.  One of your big challenges is to know what the returns are supposed to look like when you are through.  If you are switching preparers, make sure the new preparer is qualified.  You may want to ask what specific carryover information was picked up from the old returns.

Let it be said of you, “You have chosen…wisely.”  I hope I do not have to saddle up my white horse on your behalf, as I still prefer a regular appointment.

Travis H. Long, CPA is located at 706-B Forest Avenue, PG, 93950.  He can be reached at 831-333-1041.


Tax Return Russian Roulette – noun – a form of legalized gambling with generally poor odds whereby untrained participants willingly subject themselves to cruel and unusual punishment in the form of self-tax preparation, risking thousands of dollars in order to save hundreds.

Mr. Postman Has No Tax Forms for Me

Originally Published in the Pacific Grove Hometown Bulletin

March 2, 2011


If you are still waiting for your tax forms to arrive in the mail and you refuse to file without them, you might find yourself on a blind date with an IRS agent next year.  No doubt, the agent will be very interested in you, however, the personal finance questions may be a rude topic on a first date.  In case you missed the IRS postcard last October, the decision was made not to mail forms for the 2010 tax year – primarily for economic and technological reasons.  (It is not because the new Congress repealed the income tax system as I saw rumored on one online blog!)

The decision is only estimated to save taxpayers about $10 million – a seemingly trivial amount by today’s standards.  Computerized e-filing continues to devour the tax filing landscape and only 8 percent of Americans received paper packages in the mail in 2009.  In the near future, it is conceivable that virtually all filing with the IRS will be electronic.

So what do you do this year if you still want paper forms?  April 15 is fast approaching. Well, you could go to and try to navigate and download the forms and publications (I also have links on my website – but then again, if you have a paper persuasion, that may not be the answer for you.  You can still get paper forms at the local post office or IRS office and some local libraries.  If you experience a hardship getting the forms or publications, you can call the IRS at 1-800-829-3676 to request them through the mail (it takes about ten days).

If you decide you would like help filing your return there are a number of free options sponsored by the IRS and available for taxpayers meeting certain criteria.  People 60 and older may contact Tax Counseling for the Elderly (TCE) – 1-888-227-7669.  People making $49,000 or less may be able to get assistance via the Volunteer Income Tax Assistance (VITA) program – 1-800-906-9887.  There are other programs as well and full details are available from the IRS.  These programs do not meet the needs of everyone, and your best option may be to call a local tax professional.

No matter what you choose, make sure you file a return if required – I assure you the new Congress did not repeal the income tax system!

Travis H. Long, CPA is located at 706-B Forest Avenue, PG.  Travis can be reached at 831-333-1041.