BY THE STAFF OF FRANK J. PAVLICA CPA
The personalities of tax returns
Having prepared tax returns for a
number of years, we have come to the conclusion that individual income tax returns have
their own personalities, as do the taxpayers
that they represent.
take, for example, the return that has W- 2
income that just won’t quit but doesn’t have
any investment income. We call this one the
“spender” because we always wonder “where
the money went.” But when you ask, the answer is usually, “i don’t know, but if you find
it, let me know.” (We never found it.)
We also have the opposite — the “savers,”
with huge amounts of interest and/or dividend income compared to their W- 2 income.
they have many bank accounts and own
many individual stocks. so, they want each
piece of income listed separately on the tax
return, instead of showing it any other way.
Then we have the “generous” — the cash
and non-cash contributions to charitable
organizations that are equal to or better than
the tithe. Just wonder how much of this is
true. now that the irs has changed the rules
on receipts, the “cash” contributions have
gone down compared to the past.
and the “stingy,” whose income is high, but
whose contributions are low. Maybe charity
does start at home.
The “aggressive” are the ones with deductions that are so large, it scares us just to read
them. The amounts are always rounded numbers like, “publications — $2,900.” amazing
how this all adds up to round numbers.
and the irs’s favorite taxpayer— the “
timid.” Those are the ones that are lucky to have
claimed “exemptions” for themselves. They
should get a birthday card from the irs every
year because they never try to deduct even
the most deductible expenses.
That is why they are the irs’s favorites.
even the address on the tax return can tell
you something. sometimes the spouses live
in separate states. You hope one day they
can live in the same taxing jurisdiction. Then
there are the complicated family structures
where the identity of dependents changes
from year to year (“John” in even years and
“Joey” in odd years).
Then there are the “sneaky.” These clients
come to you with a complicated question in
the middle of tax season. They know the answer they want, and ask very specific questions to lead you there. You have to pay close
attention — no multi-tasking (or “
multi-tax-ing”) when listening to these clients.
missions from him. it’s hard to know if he’s
better or worse than the “holder,” the client
who doesn’t give you anything until april 14
because he had to wait for that last K- 1.
Then there is the “blender,” who sends you
information spanning several years. not only
do you have to cull the documents to find the
current year, but sometimes you find a document from a prior year that you have not seen
before, forcing you to amend that prior year.
This article was written by the staff of Frank
J. Pavlica CPA, in Inverness, Ill., including
Jane Hamer, Elisabeth Whitlock, Susan
Holmberg, Marilyn Aman and Frank Pavlica.
SELF-STARTERS AND EX-FACTORS
The “self-starters” are risk-takers. You usually
see them with a schedule C. These entrepreneurial taxpayers are not afraid to start out on
their own. schedule e (rental income) taxpayers have a lot in common with the schedule
Cs, but they are one step down in aggressive
risk-taking. They prefer to manage concrete
things like buildings, rather than stocks or
other financial instruments. interestingly,
you hardly ever have a taxpayer with both a
schedule e and a schedule C, unless they are
a real estate professional.
some take a more laid-back approach to
investing, preferring to let others do the work.
You can tell these by their passive-income K-
1s. a subspecies is the taxpayer with multiple
K-1s from non-publicly traded partnerships.
These are usually investment partnerships
bought through a “friend.” These taxpayers
have a taste for exotic investments.
Then we have the “ex-factor” taxpayers —
either payers or receivers of alimony. sometimes you think of the recipient as receiving
a benefit from their term of service with the
ex-spouse. on the other hand is the divorced
taxpayer who is not paying alimony. You wonder what he gave up in the settlement.
Then we have the “double-dippers.” These
are taking a pension while still drawing a salary. However, if the taxpayer’s retirement distribution is accompanied with the 10 percent
penalty tax, they have a different issue.
You also have the “credit seekers,” who use
every tax credit that they can qualify for. They
have positioned themselves during the year
for a nice credit, either through an energy-ef-ficient vehicle or home improvements.
taxpayers also have their own habits of
dealing with their tax information. There is
the “dribbler,” who sends in his information
piecemeal. You may receive 20 different sub-
DAZED AND CONFUSED
The “confused” is the taxpayer who lets his
broker handle all his investments, and has no
clue about his financial situation. He doesn’t
know how many brokerage accounts he has or
what transactions have been made throughout the year. an even more extreme type is the
client who doesn’t know his own occupation
or whether he had any income or expenses on
his schedule C. The most extreme example we
have ever encountered is the client who filed
under incorrect social security numbers for
both himself and his spouse for over 25 years.
But perhaps the irs was really the confused
one — they accepted the returns!
The “meticulous” is the client who provides
every medical and prescription receipt. or
how about the “overkiller” who gives you ev-
ery single receipt from the tax year and ex-
pects you to decide what is deductible?
“That’s $117.50 for parts, $75 for labor, and $321 for employee health care.”
YOUR TURN: TELL US WHAT YOU THINK
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