As featured in The Wall Street Journal, Money Magazine, and more!
     

Podcast 102: Tax Preparation, Tom Dziubek

This article was written by in Podcast. 9 comments.


Consumerism Commentary Podcast host and producer Tom Dziubek returns this week, in the role of a guest. Tom has spent the past few months working for a financial services firm focusing on preparing and filing tax returns for clients. Today, Tom is joining me to speak about common and uncommon issues households experience with their taxes.

Tom will be returning as the podcast host and producer later this month.

Consumerism Commentary Podcast #102
The Squeaky Wheel: S04E24 / 127

DownloadSubscribe to RSSView in iTunes

Table of contents

[00:00] Introduction from Flexo
[00:39] Interview with tom Dziubek
[00:54] The path to financial services
[02:20] Keeping busy during tax season
[03:29] Tips for procrastinators
[05:14] Typical clients using tax services
[08:16] Getting a bigger refund, outsmarting the government
[13:13] Tax tips for people on Social Security
[14:54] Homebuyer and energy credits
[16:08] Representing clients with IRS audits
[17:05] Dealing with cancellation of debt
[19:15] Options for paying large tax bills
[20:08] After the tax deadline
]– [22:15] End

We always welcome feedback from listeners. If you have any comments for this episode or for any other, or if you have suggestions for future episodes, please leave us comments here or email us at podcast at this domain name.

Theme music by Mindcube.

Full transcript

Flexo: Welcome to the Consumerism Commentary Podcast for Sunday, April 3rd. I’m Flexo. It’s tax filing season and our guest today is Tom Dziubek who has been spending the past few months completing tax returns for clients.

[music]

Welcome to the Consumerism Commentary Podcast. I’m Flexo. My guest today is Tom Dziubek who has been taking a hiatus from his duties as producer and host of this podcast. Thanks for taking some time to speak today Tom.

Tom Dziubek: Hey, no problem Flexo. Good to be back.

Flexo: Tom, the last time we talked you spoke about your experiences working behind the scenes at a bank. I understand you’ve moved on from the bank. What are you doing these days?

Tom: We’re going to have a whole kind of recap of Tom’s career here. Well, as many of you know I worked at a major publishing firm for years. I worked in IT. I got laid off in 2008 and I was kind of working while I was looking for employment. Flexo had me graciously doing the podcast for Consumerism Commentary. Last year I found out I basically had no luck finding an IT job.

I was presented with an opportunity to do a complete career change and work at a financial firm. This is primarily doing taxes, tax preparation work. But the person they wanted me to replace had also done a lot of things with insurance and what not. I’m gradually getting myself up to speed with everything that this guy had done before. Fantastic opportunity and I’ve been spending the last few months doing taxes.

Flexo: So what kind of training have they put you through so far?

Tom: There is a pretty big financial firm out there who offers tax preparation classes. I took that class last October knowing I was going to need to take it to prepare taxes. That was pretty much the bulk of my training. I think it was about two months long, three days a week. Very interesting.

Flexo: And so how busy has it been there?

Tom: Oh, nightmarish. Well, you know it’s refreshing. You spend a year and a half or almost two years completely unemployed and you’re getting thrown into a work week of about 70 hours a week. Some days I’m coming in at 9:00 and working until 8:00. Then that’s pretty much I’m there every day. Even on days when we have reduced hours, down to about eight hours a week, I’m still there. Then on Sunday I come in for about four or five hours to get caught up on the stuff I couldn’t get done Monday through Saturday.

Flexo: And is it getting worse as we’re getting closer to the tax filing deadline this year?

Tom: It’s getting kind of steady. It’s been steadily busy since I would have to say mid-February. For me it’s just been hectic. People have appointments. They get on our calendars. Some people actually mail in taxes. Some people will drop them off if we can’t see them. So if I can’t see clients or if I have a break between clients then I grab me another drop-off. You know, grab me somebody else’s taxes and start doing them. So it’s been pretty busy. I’d have to say it’s been pretty steady.

Flexo: According to Turbo Tax, Philadelphia is the 16th most procrastinating city when it comes to taxes. And we’re near Philadelphia so I thought that was appropriate. I think Houston was the first and they’ve been the first for a while, but Philadelphia is pretty high on this list. Is that what you’ve seen a lot this year?

Tom: Our clients have been pretty good. I have to say this. I really stepped into a fantastic situation where the tax firm I work for, the financial services firm, has been pretty – they’ve been around for at least 20 or 30 years, so they have a steady group of clients. These people all seem to know what time to get on the schedule. People have been calling up since early January to get themselves on the schedule. I think that you are starting to get a few people who panic this time of the year, and we kind of take that into account.

What we do is if we know they’re going to be late, if we can’t get them on anybody’s schedule we just tell them to file an extension. Because as long as you can look at somebody’s history and we always have somebody’s history if they’ve done business with us before. We can tell whether or not they’re going to wind up owing or whether or not they’re going to get money back.

If you’re going to get money back there’s really nothing wrong with filing an extension because the government doesn’t care. They know that they’re going to have to give money back to you so they figure there’s no real harm in waiting a little longer.

Flexo: But if you owe money to the government…

Tom: Yeah, that’s a little – that’s one of the great kicks in the teeth with the federal government. Even if you owe money and you figure, “I can file an extension and owe it later,” guess what? You don’t. You still owe that money on April 18. It’s just that you had to fill out the paperwork later on.

Flexo: And that’s April 18th this year but it usually is April 15, right?

Tom: Right, usually it’s April 15th and there’s a – I believe that there’s a local holiday in D.C. this year on Friday the 15th which is why they’ve moved it to April 18th this year.

Flexo: Okay. So you were talking about your clients. They seem to be pretty proactive. How would you describe your typical client at this firm?

Tom: Well, you know, it’s a great slice of society. You pretty much see everything with your clients. The typical client I’ve seen I would have to say are middle class, small family. Usually people making about, I would say about $150,000 for AGI, adjusted gross income. So wages are roughly about that. But of course you still have a lot of people who are single, a lot of people who are filing head of household, single parents and things like that. Also quite a few senior citizens as well I get.

Flexo: Would you say that most people should come to a professional service like yours?

Tom: Yeah. I think that most people should. I’m not just saying that to be self-serving but there’s a lot of opportunities for people to get Turbo Tax or to file themselves right through the federal government. Of course, even if you file free through the federal government many people still have to file state income taxes as well. So you’d probably have to do both.

The one thing about going to a professional tax firm is that they know what questions to ask. They know what kind of breaks you can get, things that we can help you with if you have a particular situation. Things that if you’re actually just using Turbo Tax to fill it out yourself you may not have thought of.

Flexo: Right. Even though the software like that is pretty good at guiding you through and giving you all the possible things that could come up it still helps to speak to a professional who understands what your specific position is and what your specific needs are and be able to tailor their advice to you.

Tom: Well, let me give you an example to that. Husband and wife came in. They must have been about in their late 60’s or early 70’s. Both their kids were still living with them. I think they had both recently gone through divorces. I was asking questions. They brought their kid’s taxes in to do. And the kids are in their 40’s. I started asking some probing questions, blah, blah, blah, blah, blah. “So has anybody been paying out any alimony to anybody?” They both looked at each other and said, “Yeah, one of our sons has been paying alimony for like three or four years now.” I was like, “Really?” I’m looking back at his returns for 2009 and 2008. I was like, “I don’t see any alimony on here because you could actually write off alimony that you pay to your ex-wife.”

It turns out they went home and got the information about his ex-wife, how much he’d been paying to her, and I was able to save him some money because there was stuff that they didn’t know that they could write off.

Flexo: That’s great. My tax accountant was able to find quite a bit of money just based on the way I was filing as a business. So there’s definitely lots of opportunity that would not be present if you were to just go and file your taxes using online software.

Tom: Right.

Flexo: So the other day I was speaking to a reporter for TheStreet.com and Yahoo and she was putting together a story about suggestions for people who would like to get a bigger refund. Obviously people get refunds or they owe the government when they file their taxes. People who receive refunds are never quite happy with what they’re getting. They always want more. Right? So they’re putting this story together about how to get a bigger refund. What do you suggest for that?

Tom: Just like you said, most people want big refunds. But if you think about it all a big refund is, is that you’ve given more to the government than you’ve owed during the course of the year, and they’re just giving it back to you. So you’ve essentially used the IRS as a bank account that earns no interest.

Flexo: You’re basically giving the government an interest-free loan.

Tom: Exactly. That’s all you’re doing. It would make more sense to try to figure out how close you can get to zero, how much you can do to either get minimal – like less than $100 – back or maybe even a couple hundred dollars back, or even owing a couple hundred dollars. There’s no shame in that. If you’re in a position where you’re getting $5,000 to 6,000 back regularly find out a way, figure out your federal withholdings, whether or not you should be filing single-1, single-0, married-0, married-1. You can find that stuff on the internet. This way you can kind of track down and say, “Look, this is how much I’m giving to the government right now and how much I’m getting back. Maybe I should if I’m filing single-1, maybe I should file single-2.”

Take that extra money and if you look at the withholding table you can see how much the difference is. Take that and a lot of companies will let you go and split your direct deposit, if you have your paycheck direct deposited to your bank account. Split that extra amount of money and put it into a savings account. Create another savings account. Put it into a CD. Put it into something that bears interest. Make that money work for you. This way at the end of the year you can pretend that’s your refund.

Flexo: Yeah, and I think that really is the key, is being able to automate that. A lot of people look at those refunds and they understand that they’re giving the government an interest free loan but the rationale is that it’s kind of a forced savings because if that money were to appear in their paycheck every other week or twice a month, whatever their pay period happens to be, then they’re not going to save it. It’ll be part of their spending.

So a lot of people do look at this refund as if it were kind of a forced savings. Once they get the check in April or March, whenever they file their taxes they can just put that in the bank account. Of course also that relies on them to actually save that money and not to go spend it on a new audio surround system in their house or something like that.

Tom: Yeah. And you know, of course that is the optimistic view of society there as well too. I mean, there’s also another half where they say they want a bigger refund and what they’re really looking to do is to try to find a way to maximize their write-offs. To an extent the government will catch them. So that’s another aspect too. Let me go back to refunds too, because some people simply do want big refunds. One thing that you have to remember too about refunds is like I was saying, it really is just giving – it’s basically a determination of whether or not you paid the government enough money.

When you think about it, it is six and one half dozen the other. How do you want your money? Do you want it in your paycheck or do you want it at the end of the year. So if you do want a bigger refund, if you have no self control and you really do need to use the government as a bank, I recommend trying to withhold about – for the average client that I would see with roughly about $100,000-150,000 AGI, I’d say try to go single-0 in your paycheck. Withhold about 15%. Try to aim for that. Usually if you withhold 15% of your gross earnings in your paycheck you’re going to be okay.

Now, if you start getting into a higher tax bracket and you start making closer to $200,000, you start finding yourself in a range where you’re no longer being taxed at 15-25%. If you’re starting to drift up in the 33% tax bracket you need to withhold even more. It’s as simple as that. You’re just going to get hammered.

Flexo: So you would suggest just basically doing single-0 with an additional withholding amount?

Tom: Single-0, $50, 100, trying to find out what works best for you. And again, like I said, it’s six and one half dozen the other.

Flexo: So do you think that based on your conversations with clients, do you think people are trying to outsmart the government a little bit?

Tom: I think you get a little bit of both. I think you get a little bit of both. I think it’s kind of funny because you find some of the more – you do find that a lot of the more people that you would expect to have more of a, I don’t want to say pious outlook to society, sometimes it’s kind of shocking to find out that they’re really also trying to get a little more back from the government than you would expect them in their position to do. I won’t elaborate on that.

Flexo: I think that’s fair. What do people who are earning income from Social Security need to understand about their taxes?

Tom: Well social security is kind of a trick one. Social security, the way that that is handled is that the more — it’s kind of considered the way the big picture of your income is. If you have a lot of other pension money and a lot of other monies coming in from annuities and whatnot, and social security is just a small portion of what you get than the government will tax it to the maximum. They’ll tax it up to 85% because they know that it’s just supplemental income to you.

However, the less other income that you have and social security becomes more or basically the bulk of your income, then social security becomes less taxable to the point where if social security is your only source of income it’s not taxable. There’s no tax at all for it. So it’s one of those things, and sometimes when I give estimates to people they come in and they give me their taxes and we don’t do the taxes in front of them. I just kind of write everything down and we have people in the back who actually go and enter it into a computer.

When I give estimates to people I tell them it’s kind of tricky when they have social security. I say, “Look, it really depends on what’s changed in your profile.” I’ve had people write off losses. They’ve had a business and they would write off $3,000 the previous year for business losses and they wouldn’t have that the next year. Suddenly their social security is basically more taxable.

Flexo: Right.

Tom: So they were kind of upset about that because I give them one estimate and just because of the change of the rate in which social security was taxed my estimate was off. So it’s kind of tricky with that.

Flexo: Have there been a lot of questions this year about the home buyer credit?

Tom: Yes, a little bit. We saw more of the first time homebuyer last year. We got more of the energy credit. We’ve had a lot of that this year.

Flexo: Really? So what’s involved with the energy credit?

Tom: The energy credit, as long as you’ve made an energy efficient improvement to your house – windows, doors, things that match what you see on EnergyStar.gov, they have a list of everything that’s energy efficient. You can write that off and get up to 30% of your cost for having that installed.

Flexo: Is it up to the tax filer to determine whether their improvement will qualify or do you file for it and then…?

Tom: We try to do some probing questions just to make sure things are okay, that it does match. We try to get as much information as possible but you’re in kind of a dicey situation where you don’t want to also play like a real jerk because these are still your clients. So we ask questions. We tell them and give them basically the bottom line. We take it from there with whatever they decide to tell us. I don’t demand – we don’t usually demand receipts. If they have them, that’s good because we at least get an exact estimate off of them. In the end it really comes down to whatever you can prove.

Flexo: Have you had to deal with any audits yet and do you represent the clients?

Tom: Not yet I don’t. I fortunately have to say that this is my first year doing it. I haven’t had any audits yet. I hope not to have any audits. But, I mean, audits do happen. Most of the time the IRS will contact the person via mail and the client will call us up. We’ll kind of coach them through it.

Flexo: Okay.

Tom: You know, in many cases the government says, “You owe this.” We double check our work and if we feel that they have a ground to stand on we give them the reason why and sometimes it just kind of ends there. Other times we’ve had cases where somebody makes an error. It happens. Somebody types in a number wrong and we’ll just tell them to pay it and we’ll cover any kind of interest or whatever that was incurred by that. In other words, if somebody owes $100 and the government’s asking for $108 a lot of times we’ll just go and say, “Sure, no problem. Pay the money you owe and we’ll cover the difference because it was our fault.”

Flexo: So what’s one of the worst stories that you’ve had to go through so far this year?

Tom: People will give you different forms to do their taxes. 1099-INTs, 1099-DIVs, basically talking about your dividends and interest that you have to report to the government. The worst thing I’ve seen is the dreaded 1099-C, which is the cancellation of debt.

Flexo: It sounds like that would be a good thing.

Tom: It sounds like it would be a good thing but it really is, it’s just kind of similar to owing the government money on April 15 or April 18 and not being able to do an extension to delay it. An even bigger kick in the teeth is about forgiveness of debt. Once you have debt cancelled, and you can have debt cancelled multiple ways. It could be debt consolidation, you could find a credit card debt cancelled or written off, and even worse is with a home mortgage when you basically sell a house at a loss and the mortgage company says, “Screw it, we’re going to cancel $60,000 worth of debt.” It sounds like a fantastic thing. “Woo hoo, I no longer have this big debt.”

But guess what? The government considers that taxable income which means that let’s say you’ve made $50,000 over the course of the year. You withheld $7,500 to the government. This is essentially an entire year’s paycheck in some cases. I had one person that had to write off I believe it was $86,000 that was cancelled. $86,000 of cancelled debt. So imagine an $86,000 year-long earning that you never withheld anything to the government for. You’re going to get hammered.

This person wound up owing — I think in the end they wound up owing somewhere between $17,000 and 18,000. It was horrible because the case was they had a house and it was a secondary house that they sold. They took a huge loss for it and got the cancellation of debt. So it wasn’t bad enough that they sold the house at a huge loss, but now they had to pay taxes on this cancellation of debt. In some cases that can be forgiven, such as if it was your primary residence, if you were in foreclosure or if you were going through bankruptcy. But if you were in the cases where it was just an investment that went sour on you, you can be essentially screwed.

Flexo: So what options are available for someone who has a $17,000 tax bill that they weren’t expecting?

Tom: Well, I mean the IRS isn’t completely heartless. I mean, what you can do if you know you’re going to owe a lot of money you can pay the IRS some of it. Throw them $1,000. Throw them what you can afford. What they’ll do is they’ll come back to you and say, “Thank you for the payment. Here’s how much you owe us now.” You can even work out a payment plan with them.

So it’s not the end of the world in many cases. I mean, obviously some situations are going to be different but in many cases, and especially when you owe that much to the government and not – you don’t see it too often. Most people owe the government money $2,000, $3,000. Not uncommon. So in those cases you can work something out with the government and it shouldn’t really kill you.

Flexo: So Tom, in a few weeks tax season is going to be over and your workload, will that decrease?

Tom: Oh yeah, it should decrease. There are a couple other things I’ll be picking up. I’ll be picking up and learning life insurance and health insurance, doing things like that so that it’s not just one of those three month jobs. I need to sustain some other sort of income through the course of the year.

Flexo: Because this is a full financial services firm, right?

Tom: Right. I shouldn’t say full financials. It’s mostly personal in that we don’t really do any kind of corporations or anything. So it’s mostly personal. But, you know, during the course of the year there’s going to be amended returns. There’s going to be people who filed extensions. So you’ll have a little bit of that during the course of the year, but yeah, I’ll have a severe – I shouldn’t say severe reduction of hours but I’ll probably be there about 20 hours a week still.

Flexo: Okay. That’ll leave you more than enough time to come back and be the host of the Consumerism Commentary Podcast.

Tom: And I look forward to that.

Flexo: All right, well thanks a lot, Tom, for joining us.

Tom: No problem, Flexo. Good to be back.

Flexo: Absolutely. That was Tom Dziubek, host and producer of the Consumerism Commentary Podcast who’s been working some other jobs recently.

Be sure to look for more podcasts here hosted by Bryan J. Busch who’s been helping us out, and by Tom Dziubek once he returns. You can find more at consumerismcommentary.com. Thanks for joining us today for the Consumerism Commentary Podcast.

Updated May 3, 2011 and originally published April 3, 2011. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

Email Email Print Print
avatar
Points: ♦127,550
Rank: Platinum
About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 9 comments… read them below or add one }

avatar Financial Samurai

Welcome back Tom! I missed you man. Maybe you can help out and answer some of my taxes, as I haven’t finished mine yet! :)

I love doing my own taxes, because it is so eye-opening. Why don’t you think more people don’t do their taxes?

Best, Sam

Reply to this comment

avatar Financial Samurai

That’s awesome the 40 year old kids are living at home with their 60+ year old parents and that the parents were helping them file their taxes!

A slice of society indeed.

Tom, what do you think is the percentage of gross income donated to charity which starts getting fishy in your opinion? I wrote an article on my site discovering that the average is 2.5%-3.1% giving. Some say more than 3% is risky, others say 10%. What are your thoughts?

Thanks Tom!

Sam

Reply to this comment

avatar Tom Dziubek

Good to be (almost) back! Personally, I get a little wary when people go over 5,000 in charity, unless they’re making over $200,000 (which, at 2.5%, is right in your recommended range). I look at it this way…$5000 of charity in a year is hard to do unless you’re making several major, targeted donations. Even going to church weekly and giving $20 each time is only $1040 dollars. Throw in $1000 to the Red Cross for Japanese tsunami relief and maybe $100 to a three selected charities over the course of a year and that’s still only $2340 dollars which is…for most middle-class people…an enormous amount of money to give. I think it’s safe to say that most people give $25-$50 here and there and then maybe a little to their religion if they practice. That’s why I try to reel people in when they start putting out big numbers (although I usually don’t press to hard when it comes to religious donations).

Reply to this comment

avatar Financial Samurai

Tom, everything ia relative though right? $5,000 might sound like a lot, but if you make $500,000 a year, that’s just 1%.

Tell me this then, do you think the absolute dollar amount is more under scrutiny or the percentage of income amount?

Thx

Reply to this comment

avatar Tom Dziubek

I can’t really speak with experience here since this is year one for me doing this. However, with what I’ve been told, it’s definitely percentage-based.

Reply to this comment

avatar Financial Samurai

Gotcha. Have you seen any returns which had ridiculously high percentage of donations to gross income i.e. 25%+?

Reply to this comment

avatar Cejay ♦1,521 (Half-Dollar)

Tom, thank you for verring away from the religious aspect. If you looked at me and my husband’s tax return you would see about a 10 or 13% charituable contribution. We donate 10% to our church and other religious affiliations that we follow. As a matter of fact, when we had our taxes done this year, professionally since we paid off our house, and my student loan. The accountant made the comment that we needed to make sure that we kept all the returns and receipts handy for 7? years since we have one of the red flags for an audit. But everything is documented so I have no worry.

Reply to this comment

avatar wylerassociate ♦162 (Cent)

good to have you back on the podcast, tom. does anyone if the energy credit will be going away or if it will be around for the next few years?

Reply to this comment

avatar Tom Dziubek

It’s still alive for 2011 but I’m skeptical on the future of many credits in general. With all the talk of belt-tightening on the federal level, one easy way to make money is to simply stop giving it back. Eliminating credits is considerably less controversial than, say, cutting funding to a certain program.

Reply to this comment

Leave a Comment

Connect with Facebook

Note: Use your name or a unique handle, not the name of a website or business. No deep links or business URLs are allowed. Spam, including promotional linking to a company website, will be deleted. By submitting your comment you are agreeing to these terms and conditions.

Notify me of followup comments via e-mail. You can also subscribe without commenting.

Previous post:

Next post: