It is inevitable that technology will continue to move forward, giving us access to more information and allowing us to do more things by ourselves than ever before. This will affect everyone, though in many different ways. Personally, my profession has seen a shift with more people preparing their own taxes with the proliferation of do-it-yourself tax software.

Of course, it is both not surprising and a bit self-serving for me to say that I don’t think this is the greatest strategy for people to employ. It may also be a bit hypocritical, for I’m sure there are some (former?) travel agents who would tell me that I do not find the best deals when I book my own trips on the internet. Still, there is a recent story that shows the potential dangers of tackling the tax code alone.

This case concerns an insurance consultant who used software to prepare his returns. The IRS believed he claimed too many deductions. This led to the consultant saying he had evidence to prove some, while blaming his tax software for “luring him” into claiming others.

Now if you are actually interested in the details of the case, feel free to read the linked article from taxadviser.com.  In this space, however, I want to look at it from a larger view.
First, I don’t question that tax software is made by designers with good intentions. They do not want to produce a product that leads to people filing incorrect or fraudulent tax returns, for they would not remain in business long with that tactic.

Also, I think that this software can help many people with simple financial situations quickly and easily file a legal return. If your financial picture is not complicated, there are an easy series of questions that could be asked to fill out the necessary forms and have it be a less painful process than actually reading over the actual IRS forms and instructions by yourself and going at it completely alone.

As this article shows, however, not everyone has such an easy tax picture. And if you are not 100 percent sure on any question the software asks or on any deduction you’re claiming … well … let’s just note that the case in question involved a claim of a net operating loss of $185,673 that the IRS disallowed all but $142 of. That’s the type of mistake that can haunt someone for years. Now I don’t know if there was any willful, or at least optimistic, reading of what the tax software said, but this is not the type of mistake any credible tax preparer would have allowed.

I don’t think that the only danger in tax software is the possible claiming of deductions to which you are not entitled In fact, I think the biggest danger when filing a return is such a manner is that you will miss deductions for which you legally qualify. You see, no matter what questions the computer asks, it cannot understand your situation in the same way as another person, someone who can better understand you as an individual, and not just as some answers on a flowchart.

​Either way, allow this to be a cautionary tale, even if self-serving.

I know that I am one of the few people out there who actually doesn’t mind (and maybe even enjoys?) looking ahead to the next tax season, but I know that I am not the only person who could benefit from thinking about it.

Just think about how every tax season feels, with that persistent feeling of how much of a pain it is to gather all the necessary paperwork. Now I certainly understand that there are a number of forms you will not have for months, but there are some things that you can start gathering now, you know, before you toss some pertinent receipts in your next cleaning binge. I cannot possibly overemphasize the importance of good recordkeeping. Any tax audit can be a hassle, and most likely comes with some fear, but if you kept good records, retained all necessary documentation, and have your return prepared by someone trustworthy (you know someone like that, don’t you?), then you can simply prove that what you reported is correct, and soon forget that it ever felt like an issue.

Tax issues and audits become real frightening, however, when those things aren’t in order. I mean, you can convince yourself (and any tax software) that you handled everything correctly, but you are not going to be able to convince an IRS agent that your interpretation of the rules trumps the government’s view. Furthermore, even if you did have a correct understanding of how the numbers work, they can be thrown out if you cannot prove where your numbers came from. And if your numbers get thrown out, chances are that it will result in a higher tax bill.

So if you know that you do not have everything ordered in a way that will lessen your stress come tax time, this is the time to start doing so.  If you have a pile of receipts hanging around in an envelope somewhere, start going through them so you know you have the ones you need. Or if you haven’t been keeping them, and you know you should, well you at least still have about four months to start doing so. And if you’re not sure what to keep, keep anything you have a question about. You will always be happy to have saved too much than to have kept too little.

There is then the idea of what to do with the records you are keeping, though. Maybe you are keeping everything you should, but do not have any sort of bookkeeping system in place, and know that things would be easier if you already had concrete numbers to work with at the end of the year. Well, again, there are four months to set that up, which is more than enough time to get a system in place that will remove that stress.

Finally, many people have had changes in life or changes in income that will alter your tax picture. When that happens, it is worth taking the time to be sure you understand what that will mean to your final numbers so that you can plan for it.

​All of this comes back to planning and diligence, two areas that we pride ourselves in specializing in. So if you need any help with these, please don’t hesitate to contact us … while there is still time to make it really meaningful.
Warmly,

Nicole Odeh
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Over time in this column, I have frequently returned to writing about the way that different psychological impulses can push one into bad financial decisions. These are not really anyone’s fault, for they are things that are hard-wired into our brains. One of the best ways to combat this is by having outside help whose distance helps them see that situation in a different, and possibly more correct, view.

Earlier this month, such forces were part of an article in The Journal of Accountancy that said it was one of the key issues that CPAs should take away from the AICPA ENGAGE conference held in Las Vegas. This was actually six conferences that brought together many ideas in the finance and accounting spheres. I must have been onto something then.

​So I wanted to just write this quick piece as a hopeful reminder of how good it is to get out of one’s own head. I am sure we all know of some times when that has been positive for us, and we need to remember the way it can help us in our financial and business lives, as well.  Let it also be a warning that we cannot only ever seek one answer, or one viewpoint, and decide that it is the correct answer.

It seems this may be even more important to remember now outside the financial realm – respectfully listening to others rarely leads to a bad place, especially when we are open to receiving their message. The bad things happen when we refuse to change, refuse to move forward, and refuse to think we could be wrong. 

Do you ever find that as soon as you start thinking about something, you see it everywhere? You know, like how there never seems to be only one shark attack at a time? Well, empirical data says this isn’t true and is just a type of confirmation bias, but it still just happened to me.
It was just last week that I wrote about some cash-flow issues that affect all businesses. In that blog, I said that one reason for that happening was not getting paid on time (or as quickly as would be ideal) by customers. Well, since that time, I also read a recent article on cpapracticeadvisor.com that spoke to that issue.  When this type of coincidence happens, I think it is worth paying attention to, so I wanted to spend this week’s space looking at a few of the things brought up in that article.
The first thing I wanted to point out was how key communicating with customers is when it comes to solving these issues. Sometimes there is going to be a genuine dispute at the heart of why you aren’t getting paid. It is best to handle this as soon as possible if you want to get any of the money owed you. At other times, it may just be being overlooked or forgotten about. Here again, a plan for continued communication will help you get paid.
Something worth pointing out apart from that area, though, is invoicing as soon as work is complete. There is nothing wrong with charging for services or goods that have already been provided, so there is no need to wait on this task. The article also makes a salient point that the sooner you invoice the easier it is for the client to connect it to the job done. From a psychological point of view, it then serves you best to make that request for payment when your project is fresher in the customer’s mind.
It might also be worth thinking about the ways that you allow your customers to pay. Are you only accepting checks that they have to mail to you? Well, that’s going to take longer to get paid by its nature. But if you have some sort of payment portal where they can pay you electronically, be it through ACH, write transfers, electronic check, debit card, credit card … well, the more options provided, the easier it becomes for someone to get you your payment.
Also, if you are in a business that works on larger projects, it could be worth thinking about implementing some sort of installment plan. This may not work for everyone, or be something that ever business wants to do, but it’s possible that getting some amount of money for, let’s say, three months, would be more beneficial to you than waiting the same amount of time for the lump sum. (And of course, it is possible to add a convenience fee onto such an arrangement).
More than these actual nuts-and-bolts pieces when it comes to collecting, though, I would say that there is a more important part to making sure you get paid – the work you do. Providing quality goods and services are the best way to make sure you get your money. Everyone is willing to pay for something we find valuable. 
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​If you received a scholarship, fellowship or grant payment for a degree (whether an undergraduate or a graduate) at an educational institution to aid in the pursuit of your studies, it’s generally tax-free if you meet the following conditions:
• You're a candidate for a degree at an educational institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities; and
• The amounts you receive are used to pay for tuition and fees required for enrollment or attendance at the educational institution, or for fees, books, supplies, and equipment required for courses at the educational institution. However, you must include the following items in gross income:
• Amounts used for incidental expenses, such as room and board, travel, and optional equipment.
• Amounts received as payments for teaching, research, or other services required as a condition for receiving the scholarship or fellowship grant. However, you don't need to include in gross income any amounts you receive for services that are required by the National Health Service Corps Scholarship Program, Armed Forces Health Professions Scholarship and Financial Assistance Program, or certain comprehensive student-work-learning-service programs operated by a work college.
The Interactive Tax Assistant tool on IRS.gov can help you check for eligibility. If you also qualify for an education credit, you may be able to get a larger credit by choosing to include some or all of the scholarship, fellowship or grant in income. For more information, read Publication 970, Tax Benefits for Education