A Simple Return?

Pop Test! One question; what is a simple tax return? Correct answer; whatever return the caller has. Their goal is to get you to under price the return. This will be something they will hold you to no matter how much they mislead you.

Okay, it was a trick question but a real world answer. I get it all the time. I price returns by the forms and entries I have to use. When a shopper calls, they are given the price for a Federal/Kansas return with one W-2 ($70) and told that is with absolutely nothing else. I don’t price on the phone. If they want to come in and let me look at their return, I’ll give them a ballpark figure. No obligation.

I define a “simple return” as one with income from W-2s, interest or unemployment. The filing status doesn’t matter as long as there are no dependents. Dependents, other types of income, credits all make the return more complex.

Dependents are the single most complicated issue any preparer will handle on a regular basis. I would rather figure a Kansas NOL carryforward (and I hate them) than be stuck in the middle of a dependent fight. Once there is a dependent on the return, the child can affect many credits, deductions and filing statuses, each with their own rules. And don’t get me started on the due diligence I have to do for Earned Income Credit. Not at all simple.

Yes, type of income is also a deciding factor in how simple a return is. The amount of the income doesn’t change the complexity. I still have to figure the special capital gains tax calculation on a return with qualifying dividends. It doesn’t matter if the amount is $15 or $10,000+. And just because it comes on a 1099MISC doesn’t mean that it is treated like a W-2. Too often, a special form or 2 is required. And all investments are not the same. If you buy a stock and don’t sell it, you just have dividends to report. You buy a limited partnership and the complexity level of your return can go through the roof even if you don’t sell it.

Finally, for me, the more organized the client the simpler their return. A shoe box of loose receipts can turn a one W-2 return into a complex preparation. I can’t rule out that you might be able to itemize or have another deduction or income until I go through the box. Just clipping receipts together by type (charity, medical, taxes) can simplify my life tremendously.

Bottom line, a simple return is the return that someone else does for you. The real test of complexity is the time it takes to fully prepare the forms required to properly report your income and claim your credits and deductions.

Comments

[Anthony]

I wonder if these same people who call and ask us to give a price over the phone call up their mechanic and say "My car is broken, how much to fix it?"

Anyway, one little point about the "amount of the income doesn’t change the complexity". People with a certain income level are pretty much guaranteed to have AMT nowadays. There's also usually (though not this year) PEP and Pease for higher income taxpayers, which adds little to lots of complexity depending if you rely on your software, double-check your software, or don't use software.

[Allison]

It's just like we learn in elementary school- stay organized and it might just pay off! With so many opportunities to take deductions for x and y, it makes sense to be organized. It benefits the accountant who can more quickly and efficiently do his/her job, and it benefits the client who will get the maximum on their return if they've got their ducks in a row!