Can You Review My Tax Return?

I’ve recently been contacted by a couple of people, asking me to review the tax returns they prepared themselves with TurboTax. They’re just part of a long list of people over the years to contact me about this, which is what prompted me to write this article.

Having been in public accounting for about thirty years, I’ve always used professional tax preparation software that’s meant for people who know their way around tax returns. The difference between the software I use and TurboTax is sort of like the difference between a Viking and EZ-Bake oven. You’ve heard the line “kids, don’t try this at home”, right? Well, when it comes to taxes, it’s the same thing. You shouldn’t be doing it yourself. I must confess, though, that for a very simple tax return (with one W-2 and one 1099 for bank interest, for example), you probably can get away with using TurboTax.

I have a problem with Intuit, the company that makes TurboTax. They’re trying to convince the world that all you need to do is pay $49 (or whatever the cost is) for ‘The Box’, and ‘The Box’ will guarantee your biggest tax refund, will support you in case of an audit, will guarantee its calculations, and will answer all your questions (wow, maybe I should use TurboTax!). The problem is, taxes are just not that easy, regardless of what Intuit is trying to brainwash the masses into thinking. Neither is bookkeeping, and Intuit has the same tactic with QuickBooks, but that’s a subject for another day.

The question I have for all those people who have contacted me to review their self-prepared TurboTax returns is “if Intuit is giving you all this support, and making these guarantees, and you think you know enough to do the return yourself, then why are you contacting me?” It seems to me that there’s some sort of doubt in the minds of these people; that maybe placing so much faith in ‘The Box’ isn’t enough assurance that the job is being done correctly. I’ve had many people come to me over the years, who have found out the hard way that putting blind faith in ‘The Box’ has led them to notices from IRS, and paying hundreds or thousands of dollars in tax and penalties and interest that could’ve been avoided by spending a little more than $49, to have a real person/tax professional, advise them.

I recommend that you think long and hard about whether you’re really qualified to prepare your own tax returns, or if it’s a better use of your time and hard-earned money to have a knowledgeable tax professional help you instead.

I Started a Nonprofit, and Now I Have to Do What??

You just formed a nonprofit organization. Congratulations on your altruism, and your chutzpah! Most people would’ve just made a donation to the charity of their choice, and considered that to be doing their part to help humanity, or the environment, or the planet, or something else. You’ve taken a step past that; a BIG step. You’re going to personally help further a cause that’s near and dear to you, and that’s beyond commendable, because you’re about to sacrifice yourself in ways that you may not have considered.

This is a brief discussion of some things that you’ve hopefully thought of, when you decided to form your nonprofit. For those of you considering starting your own nonprofit, think about these things before you take the big leap. The following issues have all arisen in discussions with clients, over the years.

I’m in business for myself?

In a word, yes! Starting a nonprofit is the same as starting your own for-profit business, except you’re using the public’s money. Until you’re large enough to have your own staff, you’re going to be the program director, development director/fundraiser, bookkeeper, and other positions, all rolled into one. Taking into consideration other ‘adult’ duties (i.e. spouse, parent, ”real job”, soccer practices, etc), when you add the responsibilities of managing a nonprofit business, you may run out of hours in a day.

I have to file what with IRS?

Just because you filed with the Virginia State Corporation Commission (SCC) to be a non-stock corporation, doesn’t mean that you’re done with the formation. When most people think of forming a ‘nonprofit’, they’re thinking of a 501(c)(3) public charity, as recognized by IRS. That doesn’t come automatically with your SCC filing. To be recognized as a public charity, Form 1023 “Application for Recognition of Exemption…” must be filed with (and approved by) IRS. The application is fairly rigorous, and is not rubber stamped, so make sure all the information is completely and accurately filled out, before submitting.

I need to be a bookkeeper too?

For us CPAs, this part is a breeze, but for the general public, maintaining accounting records can be a real drag. If you’re going to be a public charity using public funds (contributions), you will be accountable to the public as to how you used their money. By some means (yourself, a bookkeeper, etc) you will need to keep books and records of the organization’s finances, for different purposes, one of which follows, next.

I have to file what with IRS?

I know, you’ve heard that already. The issue is, filing that original application for tax exemption with IRS doesn’t fulfill your obligations to them forever. A report of one length or another must be filed with IRS annually. It can be as detailed and complicated as the Form 990 (Return of Organization Exempt From Income Tax), which is the “long form” 990, or can be the 990-EZ “short form”, or even the 990-N “e-postcard”. Which form you file is dependent on how much your gross receipts and total assets were for each tax year.

This article barely scratches the surface of things that you need to consider when you form a nonprofit organization (or think of forming one). Remember, you’ll be using other peoples’ money, and will be held to a higher standard than if you were in business for yourself. Be prepared!