Recently, an individual (let’s refer to him as Mr. X) that has been my client for three years came in to pick up his return. He happily handed me the remainder of my fee as he entered my office. I was soon to learn the nature of his joyous demeanor.
But first, let us back track a bit. To date, this individual (who’s 65 years of age) has only been able to file Single status. Mr. X’s adjusted Gross Income (or AGI) for 2013 was about $56,000. Also pertinent to this story, is the fact that it’s the policy of W SCULLY CPA PC to send clients an engagement letter and tax organizer to aid in the efficient and effective preparation of their tax return.
Via a telephone conversation, I was advised that $4,200 of out-of-pocket medical expenses were incurred on account of the fact that he has no medical insurance. I prudently informed Mr. X that the aforementioned expenditure may impact his refund but would be undetermined until all the facts for the tax year are brought to the fore. We spoke no further about the matter. He dropped off his tax documents while I was out of the office. Based on information presented, the return was prepared and reviewed.
He happily paid me because he was under the impression that he would be getting $4,200 back from the government. I disappointingly had to inform him that he had been misled. I further explained that his medical expenses had to exceed 7.5% of his AGI in order to be considered an itemized deduction. And that all his itemized deductions must be substantially greater than the standard deduction for his filing status. In Mr. X’s case, the standard deduction is $7,600. When we talked about his other potential deductions, we realized that those only amounted to $3,000. Therefore, he could not itemize his tax return.
Sufficed to say, Mr. X wasn’t very happy and began to complain about this country “…only takes and doesn’t give anything back…” “I am moving back to my country of birth,” he explained. Apparently, it was his dentist that told him he would be getting the $4,200.
Lessons learned or affirmed:
· Insist clients complete tax organizer (some folks don’t like the paperwork even though it’s generally 9 – 11 pages long) · Always take time to discuss any and all issues with client · Don’t be afraid to give it to them straight (saves the hassle later)
· Always complete tax organizers and provide all pertinent info to the preparer · Always ask the preparer questions (don’t take tax advice from your dentist) · Be reasonable (almost nothing in the code results in a dollar-for-dollar credit or deduction)
Need more info? Please contact W Scully CPA PC at 718-938-0387 email@example.com. You may visit us at www.wscullycpa.com or 366 Stuyvesant Avenue, Brooklyn, NY 11233