THE TOUGH CUSTOMER- Turbo Taxman: Why I fired my CPA this year
A common theme in my experience as the Tough Customer has been that we learn lessons when our unrealistic expectations and resulting actions run into the hard reality of what actually occurs on planet Earth.
In that spirit, and given the time of year, I thought I'd relate some lessons I've learned over the past year about– wait for it– income taxes!
First, while I occasionally grumble, for the most part I don't mind taxes. Government services have their price. Further, until last year I had always used a tax preparer, a former neighbor from Washington, D.C., an accountant who did tax returns on the side. So for me the process of completing and filing a return has been relatively– although not completely– painless.
Last year, however, that former neighbor was nowhere to be found. And as March stretched into early April and my unreturned phone calls drifted off into the ether, I needed to make alternative arrangements.
I was hesitant to use a storefront operation, having heard they were pretty hit-and-miss in terms of quality. Fortunately, through a friend I was able to find a CPA firm here in town willing to take me on at the last minute.
I was over a barrel and happy to find someone. Regrettably, I did not inquire in advance about the fee.
My trusted neighbor typically charged me around $150. My bill last year, based on an hourly rate, came to $1,700. The shock has almost worn off.
Lesson: When hiring a professional who charges by the hour, get a cost estimate at the beginning.
Because I was late, I needed a filing extension. As a result, I was advised I had to pay additional federal taxes in advance, but no additional state tax.
As it turned out, both of these estimates were shockingly low. As a result, I ended up owing a significant tax bill for which I was not prepared, not to mention a $600 penalty to the state of Virginia for failing to make any payment at all.
My new accountant attributed this error to my coming to him at the last minute, although he did allow, "We did not do the best job possible for you." Still, he expressed no willingness to attempt to rectify the situation for me and just suggested I go ahead and pay the penalty.
Lesson: !@#$%&*. Professionals make mistakes. And if they do, it's you who pays, not them.
Left on my own, I checked out the Virginia Department of Taxation website (tax.virginia.gov), where I got some news– good and bad.
The bad news was that acting on the poor advice of a tax expert is not, in and of itself, grounds for waiving a penalty.
That very same website, however, provided a clear procedure for appealing penalties. And a quick call to a "customer service representative" at the Department of Taxation told me the penalty collections procedure could wait until my appeal was heard.
I thought I had some circumstances in my favor beyond merely following bad advice, such as my inability to locate my long-time preparer, which left me desperate at the last minute. As I write this, I have yet to hear back from the State (no rush!).
Final lesson: If you've made an honest mistake and acted in good faith, don't assume that the Department of Taxation, at least in Virginia, is your enemy.
This year, using TurboTax, I prepared my own taxes for the first time. My taxes are not the simplest, what with itemized deductions, several dependents, and the huge income I earn from this column alone, but when my printer spit out my returns at the end of the process, they looked every bit as professional as my $1,700 product last year, and I feel pretty confident about them.
And if I missed out on some esoteric deduction here or there that only a professional could find, I'm betting I more than made up for it in savings on those fees.