Background on Chuck Sloan
Know the
Tax Process
It's
YOUR Return
What you
should be looking for in a Preparer
Who is
Chuck Sloan?
I had
no intention of becoming a tax preparer.
I came to Los Angeles to pursue an acting career and like most
actors could have cared less for the tax process.
My first year in town I went to the same preparer my roommate had
gone to based solely upon his recommendation.
The preparer was friendly, filled out the forms by hand, seemed to
understand everything I was saying and I was getting a refund.
What could be better? I
went to this man for three years until he moved out of state.
During those three years I started receiving residual checks from the
studios and one studio in particular was withholding far more than the
others and I couldn’t understand why.
As with most people, I wanted my take home checks to be the highest
amount possible and the total being withheld was bothering me.
One step of information led to another and soon I was the owner of
a tax preparation program for my computer and I was trying to emulate what my preparer had
done by hand.
Over time
the education I was picking up caused me to learn that because the preparer
didn’t know my business, the business of acting and performing, several deductions that could have been
applied to 1099 income in the same basic industry, weren’t being used as
well as they could have been.
As a result I had lost close to $500 per year in additional
refunds.
Looking
back however I realized that ultimately it was my own fault.
Like most preparers who work for individuals from all kinds of
jobs, this well meaning man was no expert with actor's deductions except how to fill out
the forms with the information I gave him.
The mistake was mine in not knowing what I could write-off and how
I could apply those write-offs, not his.
He could be of little assistance to me in using deductions
that he knew little about. And I had made a huge mistake not looking closely enough at
my preparer’s background.
As I
learned more I found myself helping friends and others in the business with their
own understanding. I was saving many of these people hundreds, and
sometimes thousands, of dollars a year. Eventually I realized that I was losing out on
tremendous potential income by not getting my license and getting paid for
the assistance I was offering my friends to save on their
taxes.
The
one problem with the tax preparation is that the height of the business
comes right in the middle of pilot season; a time when I should be
devoting even greater attention to the real reason I am in Los
Angeles. Who
knows, maybe someday a producer will do a sitcom about tax collection and
the IRS and need me.
Yeah
right…but then it is a business built on dreams.
Know
the Tax Process
I believe
that everyone should prepare his or her taxes themselves at least once.
That doesn't mean they must prepare them without supervision or
inspection, but they should fill out the forms and understand the
relationship and usefulness of their possible deductions to their taxes.
For that
reason I became involved in, and eventually was the chair of the VITA (Volunteer Income Tax Assistance) in
Los Angeles, sponsored by the Screen Actors Guild, AFTRA and Equity, for a
number of years. We
opened our sessions with a discussion of the deduction form so if they
knew exactly what they could and couldn't be writing off. If they left anything out they
could leave and come back another time with more complete
information. Then we walked them through the tax forms
that they all filled out individually by hand. I had no doubt
that the people left the program with a greater understanding of their
taxes than most people who pay hundreds of dollars to a professional to do
the job for them.
Because of
that experience
we prepare the returns in front of the client and explain to them the
process from beginning to end. They develop a complete understanding
of exactly what they are having placed in their return and, if information is
not as comprehensive as it could be, we can show
them right then what they are losing as a result. Most clients learn
the lesson very quickly.
It's
YOUR Return
No matter
how much understanding a preparer has, they are only supposed to put on
the tax forms the information you give them.
If they know and understand the business you are in, they can
certainly guide you into providing information that you may have missed.
But by the time you are filling out the forms, the year is over and
the chance to find that information and checks, receipts and other records
are usually gone with it. Therefore we like to say that Tax Time is
ALL the Time. It is not just the few hours before your appointment.
There are preparers out there who are willing to put almost
anything on your return to improve your situation for the purpose of
looking good to you and seeing you again, or perhaps to justify their high
cost. Unfortunately you are
the one signing the return; you are the one responsible for providing the
back up proof of whatever they have placed on those forms for you; and
ultimately you are the one who will be handed the bill from the IRS if you
can’t, not the preparer.
Therefore,
when you sign that return you had better know exactly what is on the
forms.
BRIEF
STORY: One year we
experienced a loss of several clients who were all in the same field of
the entertainment industry. One
of them had found a preparer who was able to come up with refunds
providing hundreds, and in some cases thousands of dollars more than we
were finding and he spread that good news to all of his friends.
It turns out that the preparer was creating write-offs that
didn’t exist and because the clients didn’t know what he was doing,
their immediate gratification at receiving huge refunds was overtaken in
less than a year when the preparer had all of his records taken by the IRS
and every one of his clients was audited.
The
following year we saw the return of almost all of the former clients.
The experience had ended up costing them hundreds of dollars in
penalties and interest on the “loans” they had received from the
Government in the form of bogus refunds for deductions they knew nothing
about.
What
you should be looking for in a Preparer
I would
urge everyone to find a preparer that specializes in preparing taxes for
others in their industry. Unfortunately most preparers don’t specialize
and they do returns for clients in all kinds of businesses.
That’s not to say they can’t do the job as well as someone
else, but they surely can’t remind every client of every possible
deduction they may be missing because they don’t fully understand the
business each and every client is in.
At a recent
seminar I was questioning an attendee who said he had no deductions.
By the time I was finished, the listener learned he had over $7,000
in deductions that they could write-off simply by going back and asking for
receipts and gathering other forms of proof for those write-offs.
One year I
sat down to help a VITA client who had perhaps allowed $600 for agent’s
fees. However it was apparent
by the form of his income, primarily 1099’s for modeling work, that he
was under-reporting those costs. Because
I knew that most print agents charge 20% not 10%, he stood to lose half of
his deductions. When I
mentioned this he further remembered that he hadn’t included his manager
fees as well. That $600
deduction jumped to almost $2000. Now
why a model has a manager I couldn’t tell you, but in the 15% tax
bracket, the difference in his refund for this item alone was $210!
This is indicative of the expertise we bring to our
business and what I believe you should expect from the preparer you go to.
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