A Day in the Life

“Your client is here,” the receptionist says to me.

She’s a new client. I go up to greet her – let’s call her, oh, I don’t know, how about Felicia? She’s sitting in a chair up front, nervously pecking on her iPhone, a purse and a folder crammed with documents in her lap. She’s probably about forty, short hair, birdlike with a bundle of barely contained energy about her thin frame. I have a momentary bad feeling, but my gut’s been wrong before. I introduce myself and lead her back to my cubicle to do her tax returns.

“So how did 2018 treat you?” I ask as she sits down, one of my standard intro questions for a client, new or returning.

Felicia shrugs and emits what I think is a chuckle. “I have freedom now. I quit my job.”

Doesn’t sound like she voluntarily opted for freedom, but it’s hard to tell. After a few more questions she tells me she’s sick of commuting into the city every day. She also tells me that she never filed last year’s taxes either.

While chit chatting I remove all the documents from the folder she’s handed to me and separate them. About an equal number of 2018 and 2017 docs. A W-2 for each year. A 1099-G – unemployment – for 2017. No 1095s, which indicate health care coverage. My stomach dips a bit; this could be trouble. 2018 is the last year not having adequate health insurance might possibly impact your taxes. I get her driver’s license and start logging her into the software as a new client. Turns out she has two children and wants to claim Head of Household. HOH status is a new item on the Due Diligence checklist I have to run with just about every tax return. Which means the IRS will be examining Head of Household returns with a finer-than-usual fine-tooth comb this year.

“So, are you divorced?” I ask. As a tax preparer you have to ask probing and sometimes uncomfortable questions.

Felicia hems and haws a bit. “He’s in another state. I’ve always been claiming the children; it’s just the way we do it.”

Okay, fine. I’m not required to audit my clients. But I will put that in the Due Diligence notes in case it comes back to bite me in the off-season. Besides, if he’s in another state and they haven’t resided together for the past six months, tax law can consider her “unmarried.”

Then the bottom falls out, as I kinda knew it would at some point. I decide to do 2018 first, and the first thing I see on her W-2 is that no federal tax has been withheld. She made $80,000 during the course of the year, and no federal tax has been withheld. Zero. Right there and then I know she’s going to owe, and with her touting her new-found “freedom”, I know this encounter is not going to end pleasantly.

I point out the lack of withholding to her, and she is, naturally, baffled. Most people never ever look at their check during the course of the year. This is something I, for the life of me, cannot fathom. I can understand not filling out a W-4 correctly. The W-4 tells your company’s payroll provider how much tax to withhold on a federal and state level, and that form can be downright damn confusing. But to never look at your paycheck to see that not a single dollar of federal tax has been withheld, well, that puzzles me.

I explain that two things could have happened. One, the payroll company issuing the W-2 could have made a mistake (unlikely). Or, two, when she started the job, she indicated EXEMPT on her federal W-4 by mistake, so no federal tax was withheld (likely).

We waste fifteen minutes while she contacts her HR department and the person on the other end looks up her record and states that on October such-and-such of 2017 she checked the EXEMPT button in her payroll portal. While she’s doing this I look over her 2017 W-2 and silently breathe a sigh of relief: she had federal tax withheld for that year.

So Felicia’s not happy. I take her at her word that the children are under the father’s insurance – and again take notes in Due Diligence. To add to the indignity, she worked in New York and lives in New Jersey, so that will necessitate two state returns, and extra $50 charge. But I’m not even thinking of the fees for the tax prep yet. Once everything’s in for 2018 it looks like Felicia will owe $4200 to the IRS, $160 to New Jersey, and $45 to New York.

She is not doing a good job of fighting back tears.

But I try to brighten up her day. “Okay,” I say in a calm, reassuring voice. “Let’s take a look at 2017. Your situation was very different – maybe we can get some money back for you that can offset 2018.”

Felicia looks up, not convinced. I begin to input her 2017 docs and a new picture emerges. For one, she only made $18,000 in her New York job. Then, there was about $15,000 in unemployment. Both the W-2 and the 1099-G had federal taxes withheld, very good. Plus, she qualifies for EIC. EIC is Earned Income Credit, and it’s basically a money transfer procedure where people on the low-end of the income spectrum receive a refundable tax credit. “Refundable” means that, even if her tax liability goes down to zero, she can still “get back” additional money. Money for doing nothing except being a low earner. And because she has two children, two dependents, and she meets other criteria, she’ll get more.

Turns out that when I’m all finished, she is getting back a little over $4000 federal, and more than enough from the states to cover what she owes in 2018.

However, there are some other issues we now have to face.

The 2017 returns, with which she’ll use the refunds to pay for the 2018 tax liabilities, will have to be paper-filed. That could add several weeks or even months before she receives a check in the mail, as 2017 returns are generally processed after 2018 returns, and those with EIC and HOH status are vetted a little longer and under a stronger magnifying glass. If she gets her money by October I’d be amazed.

She seems to realize this, too, and wants to file an extension for 2018. But that really doesn’t make sense. She’ll still get a small penalty for not paying her liability, extension or no. So I want her to e-file 2018 and mail in the 2017 returns right away. The IRS is somewhat sympathetic – believe it or not – to those with a big, unexpected tax bill. All she needs to do is reach out to them and set up a payment plan. I can give her the number to call and even the page on their website which has all the details.

But I’m most concerned about the tax prep bill. I know she can’t pay. I don’t know how she’ll react.

It turns out she reacts in the worst way possible.

My company has a fairly rigid fee system set up. It’s based on the complexity of the return, starting from simple income for a single person (just a W-2), and the more items there are – dependents, home ownership, investment expense, education credits, small business – the higher the standard fee becomes. Each state is a fixed fee. But every year it changes. In 2017, fees were based on forms needed to file the return. For 2017, Felicia had a W-2 but also a 1099-G. There are forms to be filled out and included for the Child Tax Credit and for the Earned Income Credit. So it adds up more than the 2018 return.

The bill to complete her 2017 Federal, NJ, and NY tax returns is $450.

Her mouth drops in shock. “How can that be?” she exclaims.

Then she drops the dreaded, “They told me over the phone it would be no more than $250!”

Now the entire encounter, going on an hour now, has officially entered the I-DON’T-GET-PAID-ENOUGH-TO-HANDLE-THIS phase. The least popular part of my job is haggling over price. In fact, it’s hardly ever done. The company gives me little leeway regarding fees. A new client can get a $25 off coupon, but I don’t even mention that as I have a hunch it will only add fuel to the fire. I have a couple hundred dollars of discretionary discounting I can use, but I generally save that for family and friends.

“Who told you that?”

“Whoever I spoke to on the phone. I didn’t get a name.”

Ah. Naturally.

Without telling her, I realize that the fees to do the 2018 returns will be around $300. Not bad, comparatively speaking, but if I bring it up right now she’ll flip out.

“Okay,” I say, keeping my voice calm and hoping to keep her calm too. “Let me call my manager and see what we can do.” The dreaded LET-ME-CALL-MY-MANAGER phase. But it does relieve me of the responsibility for this. He’s actually a very good guy; wants to do the best by the client, yet has no problem letting the irrational ones walk.

I move to another cubicle and call him up. It takes a few minutes to get him on the phone as he’s at another branch. When he does get on I run down the scenario with him as quickly as possible. We chuckle at the “whoever I spoke to on the phone” part – he hears that line at least once a week. Like doctors or auto mechanics, we don’t diagnose problems over the phone – let alone quote prices.

After batting some ideas back and forth, he decides on this: We’ll only charge her for the federal returns and give her the state returns for free. This may cause an issue with 2018, as current-tax-year returns are all supposed to be e-filed, but we’ll deal with issue if and when it becomes one. Just the federals will bring the whole thing down to $500 from $750. Which will match the phantom $250 quote she got, assuming she’s not going to try to parlay two tax years into that figure.

I spend ten minutes explaining the arrangement in detail to her. This entails giving her the 2018 fees, which then engenders a five minute conversation on the different philosophy in pricing. I realize that the more time I spend discussing our pricing policies, the more I come off as a used car salesman in her eyes. I have to keep in mind that she is dealing with a bad personal situation, mistakes of her own making, so I try not to take it personally.

Then, the crowning moment, which I knew was coming all along:

“Can we take the fees out at the $4000 refund? I heard you guys can do that.”

Normally we can take our fees out of a client’s refund for a small bank fee of $30. That’s because a different bank is actually a middle man in this transaction, paying us our fees while working itself to take the fees paid to us out of the client’s refund. But the client doesn’t see it that way. She sees it as another way our hands are in her pocketbook.

The problem is she isn’t getting a refund on her 2018 return – only on her 2017 return, which will be paper-filed (i.e., mailed in) and not e-filed. I’m not sure the system will enable us to take fees out of a prior-year return. In fact, I’m fairly certain it won’t, but I make a show of telling her that I have to speak with the boss again (ugh) to see if it can be done.

After another fifteen minutes at another cubicle on the phone, after my manager consults one of the leads at the other branch, the answer comes back: No, it can’t be done.

“She doesn’t have any money; she doesn’t even have a job … what can I tell her?” I ask him.

His reply: “She has to give us something. We’re not in the charity business.”

I sigh in resignation, and head back to my cubicle. Felicia is bunched up in her chair, sniffling. I tell her the bad news, that our fees – reduced to $500 for two years’ worth of returns, six total – cannot be taken out of her 2017 refund.

Then poor crying Felicia instantaneously goes hostile on me. “This place is a joke! I can’t believe you quote prices over the phone and then don’t stick by them! What type of business do you people run?” and on and on and on, raising her voice higher and higher. I apologize, but after a while I let my eyes glaze over. She ends with, “I can’t just pay $500 out of my pocket! I’m not going to file then!”

“Okay,” I say. “Not a problem.”

She glares at me in disbelief. “I’m leaving!” she announces at a way-too-loud volume, and storms out past several other tax preparers with several other clients, and out the front door into the afternoon sun.

I rub my eyes. Two hours down the drain, and I made no money.

A day in the life …