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Old 02-15-2010, 10:47 PM   #21
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I think you will find that most enrolled agents are former IRS agents .
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Old 02-15-2010, 10:49 PM   #22
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Tax accountants have to be experts on everything, and it's pretty difficult to keep up with all the new changes as well as the old rules. (Spouse and I are still carrying over cap gains from the 1989 sale of a house.) I wouldn't be surprised to learn that most of the accountant's rate increases are going to pay their liability insurance premiums. OTOH my BIL, a tax CPA for stinkin' rich people, says that some years they raise their rates just to drive off the less-expensive customers so that they can earn even more from their high rollers.

But the $1400 is buying you more than stuffing numbers in blocks-- it's the confidence that someone else may be on the hook for mistakes, and that you don't have to suck up all of their knowledge to be able to fill out your forms.

But as has already been mentioned, it's not rocket science. Once you learn how to do it for yourself then you could continue to be an expert on just those aspects that you need to know-- an inch wide and a mile deep. IIRC, a financial magazine used to get a great annual article by having 25 tax accountants do their sample family's returns each year, and every year they'd get 25 different answers. So even if your work might not be "perfect", it could still be "good enough".

What you might really want is someone to teach you how to do your tax returns. I don't know where you'd find someone like that. But what you could do this year is pay the $1400 ("tuition at the School of Experience") and also do your own set of returns on tax software. Compare the two and see where you differed.

Quote:
Originally Posted by Amethyst View Post
Pension exclusion (husband has CSRS pension; some portion of it consists of already-taxed money that he paid in, and I cannot figure out what numbers to plug into the “simplified method” in order to calculate the portion that should be tax-free)
TurboTax Premiere will handle everything else on the list. As for this item, it's always asking us if we want to track the basis on our Roth IRAs. So you may be able to use it for your CSRS pension accounting.
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Old 02-15-2010, 11:17 PM   #23
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Any help is appreciated!
I don't know. But if all you need is a little direction and/or "moral support," the Internet seems an ideal solution to that end. I am not that familiar with all of the "tax advice" blogs there are but here is one I am familiar with:

June Walker: Tax & Financial Advisor to the Self-employed since 1979

(I read her because I like her style of writing and not so much for the tax advice. However, her advice does seem to be well-grounded and valuable.)
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Old 02-16-2010, 01:06 AM   #24
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I'm not sure if it has always been this way, or if it is different for CSRS (though I can't see why it would be), but when I retired on a FERS pension I received a personalized booklet from OPM entitled "Your Federal Retirement Benefits".

The booklet says,
Quote:
Your retirement benefit is subject to federal income tax. Because you already paid Federal income tax on your retirement contributions, you are entitled to receive an amount equal to these contributions as tax-free income. Under the IR Simplified General Rule, a portion of each monthly payment is tax-free, and represents the recovery of your previously taxed contributions. The remaining portion of each monthly payment is fully taxable. You continue to claim this tax-free amount until the total tax-free amounts claimed equal your retirement contributions. At that time, all of your benefit becomes taxable.
Then it specifies in dollars and cents how much of each monthly payment is tax-free. It also tells me in dollars and cents what my retirement contribution total was. Dividing the latter by the former, it looks like it will take me 21-22 years, until I am 83 or so before my pension is fully taxable (in other words the amount that isn't, is small).

So, probably your DH has something in his retirement paperwork like this, too, explaining everything. But if you can't find it, I am sure it is in the IRS publication. Also, there are a lot of federal retirees over at the FederalSoup.com message board that know the ins and outs of CSRS retirement and where to find definitive answers better than I do.
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Old 02-16-2010, 01:26 AM   #25
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If you opt to go the DIY route:
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Old 02-16-2010, 02:43 AM   #26
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I think those rates are in line with what we pay. Most of it is a deductible expense for us since we have a couple of businesses. I'm really happy with our CPA. She answers tax questions for me all year long and rarely charges extra except for tasks that require a lot of calculations. Personally, I gladly pay for the expertise for the taxes and advice throughout the year.
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Old 02-16-2010, 02:57 AM   #27
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I have always done my own taxes (34 years) which included a rental property for 13 years. I prepared both a federal and CA state return the year I sold my rental property (2004). Technically, I should have been filing CA returns every year (and I knew it) but the penalty for not filing was based on the tax owed and I never owed any taxes because the property was never profitable (until I sold it). I was always conservative and kept good records. No funny business.

I considered having a tax accountant do our return the year of the sale of the CA rental property until I saw the bill for a 45-minute phone consulation (about $300). And that was in the boonies of OH! That got me real motivated to slog through the TaxAct CA return and do lots of reading. I did make a small mistake (under $20) which CA corrected after the return was submitted. That was 5 years ago so I consider the matter closed.

I took H&R Block's 13-week course (twice, about 3 years apart) that prepares folks to work in their stores. It was helpful in building my confidence and teaching me how to do my not-so-simple personal return. The class was about $300 both times but I found enough additional deductions during the first class to pay for the classes a couple times over.

The hardest year will be the first year because you have to load all the historical information, i.e. where is all your depreciation. I have no doubt you can do it! My guess is you will also get a tremendous amount of satisfaction from doing them yourself. Good tax software makes it possible.

Doing a 2008 return yourself and comparing it to what the CPA prepared for you is what I would do. Do they provide you with all the background information that went into you tax return? If not, just ask for it. You paid dearly for it.

Good luck!

P.S. The Fairmark Forum is very, very helpful!
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Old 02-16-2010, 07:22 AM   #28
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I've done my taxes for years and many times by hand (no programs). This year will be complex again with living overseas (exemption on federal tax if live overseas more than 330 days), consulting business, military income (subject to all federal taxes). However, have had complex returns before with renting out house while living overseas and also selling said house after living in it - still had to pay capital gains on depreciation....and the state of CA - well, let's just say they have some crazy tax forms.

I consider it part of being a citizen. It allows me to find out exactly what my government is doing and how. Money is one of those subjects the government gets serious about and the tax code is the way you see how serious they are. Yes, it's a pain at times, however, it's also sometimes a pain to find out about all of the initiatives on a ballot - the language and pros and cons. I'm not retired yet, but do take the time to research these things.

I think the more complex situations are some of the farming set-asides, railroad pension (?), in CA, some of the actors and entertainment businesses have some funky rules (good lobbyists, perhaps). If things were more obscure as the above, I might pay someone else, but probably only after I'd tried to do it myself.

So, guess I can't help you with your issue except to pile on the majority bandwagon here and suggest you become a DIY.
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Old 02-16-2010, 09:08 AM   #29
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Amethyst - Your situation is not simple, but nothing you mentioned is really all that earth shattering (as others have noted as well). It seems that you are interested in learning how to do your own returns, but feel uncomfortable being on your own...

I think having your CPA "on call" to help you out while filling a return may be tough. It's unlikely he's intimately familiar with all of the nuances of the software you are using and will probably charge quite a bit to figure out how to do whatever software expects. If his practice is hopping he may not even want to be bothered with such a request.

My suggestion? Ask your CPA whether he is willing to schedule a paid consultation to go over your (printed copy of the final) return. This can be a simple consultation or full blown sign off -- make sure you're both clear in terms of what is expected. So, muddle through the return on your own - read all instructions, publications, ask questions (online or call IRS) and use last years return as guidance. Try to "trace" 2008 tax documentation (e.g., 1099s) through the 2008 return. Unless your tax situation changed, the same lines/boxes will be filled out as on the last years return. Check to see what's new this year (irs.gov usually has a summary) and whether any of it applies to you.

When you meet with your CPA you can walk him through the return. Tell him what and how you handled your return (e.g., how/why you ended up with $X tax exclusion for the pension). As a CPA he should have no problem following the trail of the tax documentation through the forms. Having a professional look over your work and confirm your assumptions could be yet another learning experience and may alleviate your discomfort ("I don't know what I am doing and all this may be wrong").

With this approach you are not saving as much $$ as possible this year, but I would write that off as a learning experience. And remember, once you have done it once, next time will be a breeze.

Edit - I am not familiar with TaxAct, does it provide an option to switch to the IRS form view? I have found that sometimes help/explanation available with software is confusing. When that happens I fall back to basic IRS forms and instructions/publications that come with it...
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Old 02-16-2010, 09:40 AM   #30
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If you opt to go the DIY route:
Fairmark Forum
I second this
I use fairmark on occasion when I have a very specific question.
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Old 02-16-2010, 10:05 AM   #31
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Edit - I am not familiar with TaxAct, does it provide an option to switch to the IRS form view? I have found that sometimes help/explanation available with software is confusing. When that happens I fall back to basic IRS forms and instructions/publications that come with it...
Yes, TaxAct does allow IRS forms view and it is very helpful at times.
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Old 02-16-2010, 05:38 PM   #32
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My suggestion? Ask your CPA whether he is willing to schedule a paid consultation to go over your (printed copy of the final) return.
In May or June, whenever he returns from the vacation he's starting on 16 April...
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Thanks for your thoughts and help
Old 02-20-2010, 03:32 PM   #33
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Thanks for your thoughts and help

Thank you, to everyone who took the trouble to respond, and to those who encouraged me to learn how to do the return myself. It was also interesting to hear from folks whose situation is much more complicated than ours.

My ultimate goal is what 2Cor521 described: Go to a CPA with the more arcane questions, and pay for informed answers.

For now, I decided to follow Nords's suggestion to pay $1400+ for a course in the "school of experience." (Aren't we all enrolled in that darn school all the time, anyway?) I dropped off the user-unfriendly, filled-out 2009 tax "organizer" at the CPA's office on Friday. Meanwhile, I finished my mock-up 2009 return in TaxAct and will compare my results when the professional return is done. Along those lines, the suggestion to re-do 2008's return appealed to me, since I learn by doing. Thanks for making me aware that the software for 2008 is still available on-line.

Thanks to all who sent me links to information and software programs. I am checking them out.

The suggestion to cut down on the number of 1099's makes sense, but there's an irony: Selling the securities generates even MORE 1099's!

Quote:
Originally Posted by Lakedog View Post
the pension exclusion is usually provided on the 1099R from OPM -- block 2a shows the taxable amount of the pension. .
On husband's 1099R, that block says UNKNOWN. I hope to figure it out by re-doing 2008's return.

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Your I doubt he or she would sign the return as preparer and back you up in the event of an audit.
I wouldn't expect him to sign a return that I prepared. As for backing us up, their engagement letter states that they charge an hourly fee for that....so we would be out even more money....still, I guess the firm would "make good" if the error turned out to be theirs.

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Originally Posted by Texas Proud View Post

I would not want to be your CPA... with you calling to interupt me while you input all this data into your program but when you get into a fix, call me and then I have to waste my time trying to figure out what the heck it is you are trying to tell me is wrong... not knowing anything about the program you are using... See, you are getting him out of his flow so you should pay him for it.
I agree, that would be a rude, ignorant way to treat another professional. I wouldn't put up with it and I'm sure no CPA would.

I also appreciated Deserat's thoughtful point - that there is almost a civic responsibility to understand how our taxes are computed:

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I consider it part of being a citizen. It allows me to find out exactly what my government is doing and how. Money is one of those subjects the government gets serious about and the tax code is the way you see how serious they are.
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Old 02-20-2010, 03:48 PM   #34
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On husband's 1099R, that block says UNKNOWN. I hope to figure it out by re-doing 2008's return.





Amethyst

You can call the OPM they will tell you the amount or since you are taking it to the CPA ask them what number they use .
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Old 02-20-2010, 07:02 PM   #35
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Ask your CPA to direct you to the location on your 2008 paperwork that shows you the taxable amount of your husband's 1099-R. It's already been calculated and documented so it shouldn't be an additional charge to just be directed where to look for the number.

Oops! Looks like someone already told you to do this.
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Old 02-20-2010, 07:09 PM   #36
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If the taxable amount is really unknown (sometimes it is not on 1099R), you can use the general simplified method on p. 26 of 1040 instructions here
http://www.irs.gov/pub/irs-pdf/i1040gi.pdf
to calculate it. It seems intimidating at first but if you just go line by line and answer the questions, it should lead you to the answer. Basically they use your age/life expectancy and allocate the after tax contributions equally over some time period.
Subtract the annual amount of that from the gross pension proceeds to determine the taxable income. If the pension was just started recently, you'd have to take a proportion of the annual amount.
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Old 02-21-2010, 09:08 AM   #37
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Interesting thread. I like the idea of "civic duty" in order to understand what the gov't is doing and how. US tax code seems very complicated to me but the software is amazing. I have never paid for tax advice or return prep. Maybe I should- but the fact is I love doing our tax returns. Really. I agree that I have more experience/knowledge than most in this regard and have what is almost a fetish for fanancial matters. But I can't wait to get the slips (many now on line) and input them to the software (called Quicktax in Canada). I keep our returns as simple and conservative as possible-never anything questionnable. Usually, get a pretty big refund due to alimony deduction.
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Old 02-21-2010, 09:49 AM   #38
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Each year we file returns in two states (Minnesota and Arizona) plus federal returns. We have multiple K-1s, rental property, and multiple 1099s. Our accountant charges about $600. So you might want to shop around.

Alternatively, I suggest a premier edition of tax preparation software. Get last year's too if possible and do last year's returns and see if it matches up with what you accountant did. Plus, it will make it easier to do this year's returns.
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