Save Taxes

The best and easiest way to avoid over-paying taxes is to hire a tax professional; EA, CPA or attorney. Many people will reason away the thought, thinking that the fee involved with hiring a tax professional will outweigh any tax savings. That is a possibility, but I can say that in the last twenty five years I've seen that be the case very few times.

I'm going to share just three quick examples of new clients I met with this year (no names or details of course).

New Client #1 - This gentleman had been retired for approximately ten years and had been reporting his retirement income to the State of Alabama and paying state income tax on it, roughly $800 per year. His retirement came from a Defined Benefit Plan which is not taxable by the state. We were able to go back and re-file his state returns and get $1,600 in refunds, plus we saved him $800 per year from now on. Unfortunately the statute of limitations prevented us from recovering approximately $3,600 he paid in previous years.

New Client #2 - This fellow had a letter from the IRS that said he owed $36,000. He was in shock when he came in. It turned out that he had done some "day trading" of stocks a couple of years ago, lost money on every trade and thought he didn't have to report it. The IRS was attempting to tax him on the gross sales proceeds of all those transactions. When we corrected his return and claimed his cost basis in the stocks that he had bought and sold, the IRS gave him a $750 refund and paid him interest to boot.

New Client #3 - A young couple that had been filing their own returns and doing a good job. However, we found that they had not been claiming a deduction for the tax on their car tags. It totaled about $400 each year. In addition, the wife had been doing volunteer work for a charity that involved out of pocket expenses and mileage on her car. The deduction came to approximately an additional $600. The result was federal and state tax savings of approximately $300. In this case the savings approximated our fee, but the husband was very excited about the fact that he didn't have to worry with doing it at home on the computer. The wife said he would spend an entire week and two weekends driving everyone in the house crazy.

These are just three recent examples.