Tax Freedom Day

Ironically enough, on April 16th there was a group of students tabling on the quad at American University, advocating for the abolition of taxes.

These students yelled out to me, "Do you HATE taxes?! We're advocating for the abolition of all taxes!!"

I took one of their post cards which shows the trend of our "Tax Freedom Day" for the past 40 years. The tax freedom day is the day when you start working for yourself, and stop working for the government. This year, Americans only had to work, on average, until April 13th for the federal government. Their wages for the rest of the year are theirs to keep. This method of thinking is alternative to reasoning that about one-third of each day's wages earned goes to the government. Another trend on the post card I received indicates that our tax freedom day, adjusted for the federal budget deficit, is a record high May 29th this year.

A short recap of my tax season:

• My longest day was 14.5 hours.
• My shortest day was 4.5 hours.
• My hardest worked stretch of time was 47 hours in 4 days.
• Sometimes people receive taxable payouts because someone they know has passed away. It is unbelievably awkward to try asking a client if their significant other is still alive.
• I received several tax forms from clients that had food on them. I'm not talking about coffee, either. I had a form with a smushed blueberry on the backside.
• After my last post, I conned Windows Vista into letting me illegitimately beat the Minesweeper basic level in just 9 seconds. My legit record is still 16 seconds.
• My waist expanded by 0.5" between my first day at work and my last.
• this is getting a little personal.....

All in all, I learned a lot and I'm glad to have written this blog to chronicle the adventure. I will continue my position at this firm through this summer, and will continue to write about my experiences. My role will be different for the summer months, however, because other accounting tasks begin to take greater precedence.

Your continued readership is much obliged.

April 15th

My first April 15th at a tax firm was pretty wild. The attitude was serious but relaxed. These feelings are somewhat contradictory, but allow me to explain.

Every member of the team has a few outstanding items, like returns and extensions, that absolutely must be finished by the end of the day. At the same time, excitement flows through the halls as everyone is about the complete their hardest-worked week of the entire year. Some people have vacations planned for the week after April 15th, and others are just happy to get back on a regular schedule.
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I completed extensions for most of the day, but at 4:00 PM is when my April 15th began to take off. Follow along:
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4:00 PM - Extensions finished, time to begin stuffing envelopes.
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4:30 PM - Envelopes are stuffed, ready to make Post Office run number one.
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4:40 PM - The post office nearest the firm is closing at 5:00 PM, so I will stuff my back-pack with hundreds of pieces of mail (it was raining) and scurry down the street.
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4:55 PM - Remarkably, there was no line at the post office, and the clerk was kind enough to "circle-stamp" all the envelopes right in front of me. The circle-stamp reads "April 15th" on it. Score one for the clients.
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5:05 PM - Back at the firm, reporting the good news (the mail made it). Time to rest for a moment as my hair dries out.
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5:08 PM - Cleared the minesweeper basic level in 16 seconds flat. See below.
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5:10 PM - Time to learn some new software before the next task arrives at my desk. I've decided to run the training tutorials in QuickBooks. Knowing this program will help in my current position later on.
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6:30 PM - Begin reading Form 1040 instructions. There are some things about the by-hand mathematics of taxes that I want to figure out. I'll only get through a few pages of this tome, but at least it's pretty understandable.
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7:15 PM - Things are beginning to wind down. The time has come to choose who will be making the late-night downtown post office run.
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The only post office in and around DC that was open until midnight this year was the one next to Union station, at 2 Massachusetts Ave, NE, Washington, DC. Other offices were open until 8:00 PM, but because of the economy, the USPS has made cuts. Normally, two members of the firm must make the late-night downtown post office run, but this year's journey was absolute horror because of the fact that everyone in a 50 mile radius was having to come to DC to mail their taxes given all the early closings elsewhere.
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8:00 PM - I and another junior member of the team have been chosen for the "honor" of going to the post office.
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9:00 PM - After some more reading and a cup of coffee, we leave for the post office.
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I will add that the early closing of post offices everywhere other than DC was not well publicized, and a completely reckless act on the part of the US Postal Service. The chaos that the USPS caused in downtown DC should be illegal. It was pouring rain, the cars were not moving ANYWHERE, and drunkards from the Irish pub across the street from the post office were dancing in the roadways.
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Two people make the late-night post office run in DC because one drives while the other gets out and takes the mail as close to the front doors of the office as possible. I was the driver. I waited briefly on F street for my partner to return from the delivery, and when I wanted to leave, I couldn't. Still in front of the pub, someone was dancing around near my rear bumper, and I couldn't back out. It. Was. Crazy.
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This, my first April 15th, was one to remember. Not like my first day of high school, where in my first class all the teacher gave us to do was pop bubble wrap.
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I am glad the tax season is over. School is beginning to heat up, with projects and exams coming quickly.

Extensions, Tax Planning, IRS Indebtedness

I have been swamped with extensions. Federal Form 4868 is my new best friend.

It is true that there are too many returns to finish all before April 15th, but some clients either want to go on extension or must go on extension.

Some clients can try to avoid paying all the tax they owe by the deadline, but the IRS is smart. Taking a look at this informational page, you can see that the penalties are stiff for both failing to file and failing to pay adequate tax in time. People can't just not pay tax and then expect to collect interest on whatever they owe while their extension gives them 6 months to think about what they're doing.

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On the other hand, some clients have yet to receive all their tax documents from sources of income or expense. It is possible to complete a tax return with only the information that is known at the time of filing, but then an amended return must be completed at a later date, once all the paperwork is in order and the return can be regenerated. It's easier just to "go on extension."

Extensions are really tricky though. Sometimes big pieces of the puzzle are missing and it can be very difficult to determine whether a client needs to write the government a check by April 15th just in case, or if the client has actually already paid enough tax through W-2 withholding.

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---Explanation of Form W-4---
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Withholding of tax from an employee's paycheck is something that Form W-4 helps people figure out each year. This "Employee’s Withholding Allowance Certificate" has a worksheet attached which asks questions about a person's living status (dependents, etc.). Based on the answers to these questions, a person can determine their number of exemptions. It is this number which helps a company determine the right amount of tax to withhold from an employee's paycheck. Because people have other sources of income besides their job and can have really huge deductions, the Form W-4 is not the solution to determining a total tax figure. Rather, tax planning professionals, like at the place where I work, help in determining what someone's projected tax liability looks like.

---Transition from W-4 to Estimated Tax Payments---

Some people have to make "estimated tax" payments based on what they think they'll owe the IRS at the end of the year. I would venture to say that at least the simply majority of high net-wealth clients make quarterly estimated tax payments.

I see these commercials on television all the time reaching out to people who are in debt to the IRS. They say, "Do you owe the IRS $10,000 or more? $50,000? $100,000 or even more???" ... NO, I don't owe the IRS a hundred-thousand dollars!!! I used to ask myself, 'how can there be people out there--like these seemingly average looking people on the television--who owe the IRS anything more than $10,000?' I used to legitimately wonder, but since working at the tax firm, it's become very clear to me at least one way in which someone can stack up IRS debt of n dollars and beyond. Read on...

Something I've noticed about the W-2s of people who make a LOT of money is that the company never withholds and remits nearly enough tax to the IRS. For example, a W-2 showing $1,000,000 in salary payments might only have withholding of federal income tax of $210,000, which isn't nearly enough, especially since the tax rate caps off at 35% for all income above $357,700 for 2008. Assuming 'married filing jointly' and deductions (expenses, taxes paid, charitable contributions, etc.) of $200,000, this big earner is still going to owe $251,575 in federal income tax.

The IRS will assess a penalty at the end of the year if this person really owes $41, 575 ($251,575 - $210,000). So, anticipating this underpayment of tax, the client should divide the estimated amount owed by 4 quarters, and submit a payment every 3 months, roughly, so that total tax liability and total tax paid come out as close to even as possible at year end. This is tax planning in its simplest form.

Imagine this though:

Joe the Plumber starts working in 2007 and earns $40,000. Then in 2008 he discovers a way to work 10 times as fast. All of a sudden, it's December 31st and Joe's made a ton of money. He didn't anticipate earning this much (because inspiration strikes like lightning and can't be anticipated), so he didn't make any estimated tax payments to the IRS throughout the year. Joe spends all his newly attained wealth before March 25th (an arbitrary date) when his tax accountant tells him he owes the IRS a huge amount.

THIS is how someone can suddenly owe the IRS an enormous sum of money. They don't have enough withheld to begin with, and then they spend what they've earned before realizing they owe lots of tax.

Epiphany:

Tax withholding is the only way the income taxation system in this country is able to function. If tax wasn't withheld, not enough people would have the discipline to set aside their estimated tax payable until year end.

Subtractions from Income

I've begun working on extensions! Many many extensions. The time has come that if there are returns that won't be finished in time to be reviewed properly, then they are to go on extension. I am using the computer system to make extension forms for Federal and State governments. The process is a little quirky to learn at first, but I think I have the hang of it now. It's simply a matter of getting used to the software, Prosystems fx.

In other news, I worked on a return that had a very obscure Maryland state deduction. After I put the monetary value of the deduction into the computerized form, I had to classify the deduction with a code, so that the state knows what the deduction is related to. When I say deduction, I mean what the state technically calls a "Subtraction from Income."

When I looked up the codes to use for different, special deductions, I noticed a whole bunch of strange things that people can subtract from their income in the state of Maryland. I've opted to list three of these:

1) Cost of conservation tillage equipment.

2) Value of farm products donated to a gleaning cooperative.

3) Purchase cost of manure spreading equipment.

Talk about random... My best guess would be that a particular lobbying group has worked very hard over the years to get these provisions put into the Maryland state tax code. To the majority of people though, these potential subtractions from taxable income seem quite useless, I imagine.

The work I am doing at the tax firm is interesting and generally not boring, but I am looking forward to the end of tax season. April 15th will mark the day when I get my Saturdays back. Because I've been working on Saturdays, my weekend is really only 1 day. As such, I have these three-day class/work cycles that seem to loop infinitely without giving me any time to take a breath.

P.S. Thanks, "Anonymous" and "Kiersten" for your comments! But seriously though, why on earth would anyone name their kid "Anonymous?"

Two Types of Clients

The workload of returns is beginning to pick up. My tasks now mainly entail entering data in the tax program, Pro Systems fx, for the supervisor, or actually completing returns myself. Mostly I am piecing through hundreds of documents at a time, trying to get things organized. Soon I'll be taught how to file extensions!

I've come to find that there are generally two kinds of tax return clients, with my preference being neither toward one nor the other. 1st) The client who turns in very few documents. 2nd) The client who turns in every piece of paper in their house.

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With the 1st type of client, the preparer has an easier time organizing and compiling the return, but s/he must wait a long time for the client to send in every last document. How I've learned to deal with clients like this: compile as much of the return as possible, and then make a list of missing items; contact the client with the long list of items and request that the documents be faxed/mailed in ASAP; as the documents arrive piece-mail, check them off the list; when every item on the list is checked off, then proceed to finish the return. This way, the preparer (me) only has to see the return twice, and the client is happier because I don't have to bill them as many hours.

If I put each document into the return as I receive it, then I likely have to analyze their whole case again, and that's a waste of time. So while this type of client can be less aggravating to deal with than the 2nd type, his/her return still has to take up space in my filing cabinet for several months. Likewise, the client remains on my mental WIP* list, which can seem to become overloaded at times.

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The 2nd type of client is the one who sends me their entire life on paper. These are the people who can rest assured that every single penny that's legally deductible will make it into their return. What they often don't realize is that when they send their accountant a bunch of good stuff lumped together with a bunch of crap, then the accountant has to sort through it. Sorting takes time. Time equals money. Do the math.

I sometimes get frustrated when a client sends in hundreds of prescription receipts without having counted them first and given me a subtotal. It means that I have to undertake the mundane task of counting them- something that years of accounting coursework is trumped by. The client's tax preparation bill will undoubtedly be higher, but this 2nd type of client can sleep easy at night knowing that they got all their deductions.

By the way, it bothers me when I have to count prescription receipts and it ends up being that the client takes the standard deduction because their itemized deductions weren't high enough.

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Either way, Client 1 or Client 2, both get the peace of mind that their taxes have been done correctly to the fullest extent the preparer was able, given what was turned in. My third grade teacher used to say "Cakes and turkeys get done, people get finished." I say "Cakes, turkeys, and tax returns get done, people get finished." If you peak at this Washington State University web page, you'll be led to believe that my third grade teacher may have incorrectly corrected her students. Now I'm stuck in this rut of finishing things, never simply 'doing' them.

The time has come to sort out which accounting classes I will take in the fall. Tax could be in the mix....

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I've stopped numbering my work days- the post titles were too mundane.

*WIP = Work in Process

Ninth, Tenth, Eleventh, Twelfth, Thirteenth Days of Work

Last week was an intense one. I worked 52 hours during my spring break so that I can take the next week off. I compiled a lot of returns and performed some data entry.

The company I work for provides all its employees with complimentary coffee. I met the person who owns the coffee company last week because he visited our office. I was just heading out to get a sandwich for lunch when this guy opted to take the elevator down with me. Before telling me that he was the coffee guy, he asked me how I like the coffee in the office.... ... I told him I thought it was wonderful! Then he told me who he was, and I was glad that I told him the truth. I found out later that our company would probably get a free box of coffee because of what I told this man in the elevator.

Eighth Day of Work

My supervisor handed me a large tome titled Internal Revenue Code, saying, "Here--take this home with you and read it at night before you go to sleep." 'Large' is an understatement for a book that took both arms to carry. The time has come to breath--nay, be the Internal Revenue Code. From here on out, the last thing I'll do before going to sleep each night, and the first thing I'll do upon waking each morning, will be to read the tax code of the United States.

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I spent 10 hours today leafing through page after page of personal documents and inputting their meaning into paper tax forms and tax software. After some thought, I've come to realize that in a given day at this job, I touch probably 2,000 sheets of paper. My hands actually dry out by the end of the day. I was a DJ in high school and I used to joke that I needed to wear gloves to work because the 'scratching' was burning my fingers. Now that I'm in an office environment, that necessity might actually materialize as the semester progresses. The irony.

The highlight of my day was when the managing partner of the firm came directly to me with his personal friend's trust return and asked me to complete it. The pressure was on! In the world of trust returns this was a fairly simple one, but accounting for investments is not easy for a beginner. Trying to calculate Foreign Gross Income was insanity. For someone who'd never calculated an FGI before, though, I figured it out all by myself without asking a soul. I was finished with the return in 75 minutes, had it printed, and delivered for final review, ready to be IRS e-filed.

I got a great sense of satisfaction from this task that I haven't felt in some time. When I work on individual returns, I can always wheel [while sitting in the office chair] over to my supervisor's desk and ask him anything. But, my supervisor had already left for the day when I was assigned the trust return. In a sense, trust was placed in me for this task. At the same time though, what better a way to test an intern's tax competency than to give him a return all his own to complete. This was a trust-building exercise, naturally a pun in and of itself. I had to trust my own instinct and the partner had to trust my limited knowledge base, which had hopefully expanded sufficiently by the time the return was assigned.

I didn't receive any negative feedback on my performance, which as I've come to discover in the tax world, means you did good. In sum, it feels good putting my brain to use to actually earn the money they pay me. I'm happy to be learning a lot.


P.S. I love accounting, don't get me wrong, but just because that first paragraph is written here does not mean that I'm necessarily making a serious commitment to living in the tax zip code.

Seventh Day of Work

After recovering from my affliction, I put in another long day- 12 hours. I find that at a certain time of day, say 4:00 PM on Saturdays, it gets much easier to do work because all the accountants with kids have already left. Where I'm at, that would be a large part of the firm. A benefit of interning in accounting is that I can generally work extra hours if I like. I am really efficient during the afternoon and evening, so I enjoy leaving a [surprise] heap of finished work on my supervisor's desk for review.

They've sure given me responsibility in a hurry at this firm- and I love it. There's never any downtime, and expectations of me are high. Expectations can be stressful, but this is what makes me an efficient worker.

I began today by exploring the issue of tax accounting related to the Madoff scandal. The stimulus bill of last summer (I believe) extended the Net Operating Loss (NOL) carryback period to 3 years, with the carryforward period remaining at 20 years. So people that lost money with Madoff can correct their prior year returns to recover taxes they paid on either cash flow-generating or phantom income that, in retrospect, wasn't real. I tried asking a fellow accountant to sum up the article I read into a nice, neat ball that is easy to understand. "What's the bottom line? What do we do for clients who are Madoff-victims?"

The answer I got was the following: "It's a gray area... Like most things in accounting, the answer is 'It depends.'" I spazzed. My Intermediate Accounting 1 professor, Sue Marcum, used to say that "It depends" is her favorite answer to all questions accounting-related. I agree.

Tax seems to me like one gigantic gray area. If everything in tax was black and white, then a great many of us would be out of jobs. Making money from the gray area is fine. What excites me, though, is understanding applicable parts of the gray area well enough to save clients more money than their tax preparation bill ends up being. In my opinion, both parties win with the US Treasury being the only loser. Poor treasury. I'm sure if I worked at Treasury I'd be eager to tax people senseless... pshh.. just kidding. Does the US government have feelings? If your tax burden is less because your accountant found either a loophole or a more favorable treatment of certain items, will the government feel sad that it wasn't able to collect more tax? I doubt it.

After the Madoff discussion, I moved on to the fun stuff: tax returns. I performed some small-scale data entry before learning about reporting foreign investment taxes. I was taught which Schedule B form to use in indicating foreign taxes paid on investment income. I also learned the placement of alimony/spousal payments. Hearing that child support payments are not tax deductible got me curious about the specific rules for family-related payments of this kind. When I got home, I spent a fair amount of time checking out Section 215 on the IRS website. This wasn't my first time visiting the IRS website for research purposes. Things I see at work get me curious and interested in particular tax matters, and so I'll usually go and research them myself. Experience is everything in this business, and I'm not going to get anywhere by sitting around. I'm taking an active role in my tax education because this is a serious discipline and I strive to excel in all that I do.

I finished the day with a long return and some categorizing of a client's business expenses.

I'm a meticulous guy, so the adding machine is a personal friend of mine. I wanted an adding machine with the ticker-tape and all as a birthday present when I was 7 years old. I thought the paper feeding was the neatest thing ever. I spent hour after hour over the next few years playing with that machine. I didn't have anything to add, either. I simply enjoyed calculating random numbers and figuring out the functions of the machine. My parents were skeptical of my initial desire for this machine, but they were definitely buying me the refill supplies soon after they gave it to me.

Sixth Day of Work

My sixth day of work was Saturday, the 21st of February. I have not updated in a few days for two reasons:

1) I worked 13 hours on Saturday.

2) I woke up Sunday at 2:00 PM to study for my upcoming accounting exam. My lunch consisted of cocoa puffs and a hot dog. I didn't know that the hot dog had expired some time ago, and as a result I experienced a "pleasant" onset of food poisoning symptoms that has yet to abate. I went to the Emergency Room today (Monday)...

Saturday was a long day at work. I worked on 6 tax returns and performed some clerical work. The clerical work consisted of going through a few check book registers and recording all the transactions in a spreadsheet. As for the tax returns, 3 of them were for college students.

Some clients insist on sending in the documents required to complete their return one at a time, so occasionally a statement or tax document will come in and need to be added to a client's return. I did this for one client, who received a huge stack of statements from his/her broker.

The other two returns were about the most "normal" returns that I've seen yet. No crazy numbers of mortgages or sources of income. Just typical families with typical incomes (job and interest). I sorted through the documents and wrote them into some blank "Pro Forma" forms that my supervisor could check. Eventually, I put these numbers into the tax program on the computer.

In my opinion, preparing a tax return requires two jobs: deciding where to put all the figures, and calculating the return. The computer is able to complete the second half, so we (tax accountants in general) are able to focus more of our energy on placing the figures in the most qualified places. The computer also allows us to create tax-planning scenarios which are a huge help when it comes to ensuring compliance for clients with businesses, for the next year.

Even as an intern at the tax firm, I still get Mobius-strip days. I get a pile of work sometimes that appears to have no beginning and no end. Every accountant has been there before. Nobody asked me to stay 13 hours on Saturday, but I take my job very seriously and sometimes things just need to get done.

Fifth Day of Work

My post titles could use some zazz...

I've begun to realize that I work on some really strange clients. I worked yesterday, Valentine's Day, for 8 hours. I did what I usually do, which was work on tax returns. I learn so much each day, though, because every person's situation is different.

Last week I worked on a return for someone who had 5 mortgages. To college students, getting a single mortgage in several years from now is enough to think about. But five mortgages--is that not a bit excessive?

Strangely enough, the next day of work brought a case which was just the opposite. The excessive-income client submitted documentation showing 8 (eight) sources of income. I wrote the word after the number to show you that "8" is no typo. I once had 2 sources of income... and I thought I had it good. When your two sources of income pay you $9 and $10 per hour, though, some of the magic gets lost. This client, assuredly, was no wage worker. In that "8" figure I haven't included income sources for interest, dividend, or other investment income, either.

I wonder if it's because clients like these have very strange financial situations that they employ the help of some seriously qualified accountants. I'm not referring to myself, yet. Some day, though...

I took Managerial Accounting (ACCT-241) at American University in Spring 2008 with Professor Sue Marcum. On the first day of class, she gave each student a mechanical pencil because a lot of students normally use pens for all their writing. She required the use of pencil on all tests and quizzes. As she was handing me a green pencil (I told her that pink was not my color), she noticed that the eraser had fallen out of said pencil. She quickly retreated her arm and said, "Oh, that one doesn't have an eraser. You're a future CPA- you need an eraser." It's true that I do a lot of erasing working in the accounting field.

That comment, though, made an impression on me. I'd thought about accounting as a profession at that point already, but this comment got me thinking, "yeah- maybe I can actually do this for a living."

I declared my Accounting specialization shortly thereafter. Thanks Prof. : )

The Accountant's Perspective

As I prepare tax returns, I need to look at all kinds of information about a client. I need to know everything from how much they spent on prescriptions during the year, to whether or not they purchased a hybrid car or solar panels. I must also have info about charitable contributions, income(s), and expenses.

As I work on each individual tax return, I begin to see into a client's life. I can't quite whisk through returns yet, so I have time to actually learn about the clients. I will likely never meet any of the clients whose tax returns I've worked on. Even so, I feel like I can piece together a client's entire life just from the papers in front of me. Sometimes I also develop an image in my mind of what a client looks like, based on their financial activities. If someone does a lot of stock trading-and losing-then this makes an impression on me. Likewise, if a client tries to trick me into double-deducting something, or performs some other, sly move, then this also leaves an impression. My impressions of these clients eventually mold into a shape in my mind which resembles them.

Eventually, I almost feel like I can assess whether or not a client is happy with life. Of course I'm not being paid for psychiatry work, but it's the long metro rides home that give me time to slowly piece things together.

What would you think about a client like this: Limited income, a hefty mortgage, very little interest income and no dividend income, and filing a single return when s/he filed a married-filing-joint return last year. All kinds of things go through my mind. A person's job even gives some indicators about their life in general.

Tax is interesting work, in this respect.

Fourth Day of Work

I left the building for lunch. Talk... about... HUGE. I ate lunch for the first time without looking at a tax return. I deserved it, though- keep reading.

Today was the day of double deductions! I was working on the return for a husband and wife couple, with each partner owning their own business. The pair submitted paperwork to the firm about all of their business's activities for the last year. Well, I had to sort through page after page of useless schedules in an attempt to find the few schedules of actual substance. I began to enter figures into the tax software, coding each with a "T" for taxpayer or an "S" for spouse (see note at end), when I noticed that many of the figures were the same for both partners' businesses. Not only that, there were some expenses that were claimed as one partner's business expense, and the other partner's personal expense. Talk about confusing!

Throw in a half-dozen mortgages, interest and dividends from dozens of accounts, a living trust, foreign investment taxes paid, charitable contributions, a half-dozen W-2s, and various 1099 forms that I didn't even know existed, and the result is quite obviously a GARGANTUAN MESS. So, the fact that there were duplications of many expenses that the clients wanted deducted just added to the already insane nature of this return. I think the client was expecting a single expense to be deducted in several places, but I wasn't fooled. There's no doubling up- you get it once and that's it!

A few more things truly made this the tax return from hell: the clients want all the original documents back once the return is filed, and the clients' business activities took place across multiple states. As icing on the cake, there were so many 1098 forms that I was unable to determine exactly which paired with each of the numerous properties...yet, at least.

Getting out of the office for lunch, in the middle of this natural disaster, was my daily slice of heaven. It was about 65 degrees F when I went for a sandwich. Later in the afternoon, I was almost lucky enough to spend time responding to correspondence from the IRS... but the task above consumed most of my day. Darn. : (

I will add that this particular husband/wife couple is UNBELIEVABLY LUCKY that I'm not being billed to clients yet. I'm still reporting my hours as "training," per my supervisor's instructions. I assure you, though, that the sheer amount of crap that had to be sorted through would've taken any CPA just as long as it took me.

Note: I code each partner of a joint return as the "Taxpayer" or the "Spouse" so that, even though the pair may be filing jointly, informational/phony "married filing separately" returns can be produced for the couple to see the tax implications of filing separately.

Kogod Case Competition, No Work

It's presently 12:35 AM and I working diligently with my Kogod Case Competition team on our presentation for this morning. I say this morning because we are schedule to present our solution to a panel of judges in roughly 9 hours. So far we've put about 20 hours work each into preparing for the competition. We'll likely have contributed another 10 by the time the entire competition is over.

What are we putting ourselves through this for, I wonder? Well, I really don't wonder. While there may be other things that I'd rather do on a Wednesday, Thursday, and Friday night, and finally, Saturday morning, I'm putting myself through this for the experience and its rewards. This is my third time competing in the Gartenhaus Financial Case Competition, and the cost-benefit ratio changes each time I compete. No matter what, 30+ hours will be put into preparation for the case. Starving my frontal lobe of rest by depriving myself of sleep for the entire night before the competition is a given. I do it, though, for the networking opportunities and the free lunch at the end. It's hard to feel a real sense of competition when I don't see any of my competitors during the actual competition moments.

We need coffee, our brains are beginning to mush, and.. I think we're over the hump. Once you get past the 1-2 o'clock "hump," it's much easier stay awake for the rest of the night. Hard working high school and college students know what I'm talking about.

It's time to practice presenting. This year's case is about an Upholstery company based in South Africa. The company is having some cash flow and management problems it seems, and we're attempting to creatively work through these issues. Unfortunately I'm going to have to miss work today (Saturday) because of the competition! This actually does upset me. After a day of hard work at the Tax firm I feel like I've really earned my money and gotten a great education in the process. It's such an intense job that requires the use of my brain at almost all moments to correctly perform. I'll miss not going, but I'll be glad to sleep when this competition is over.

Missing 8 hours this week isn't too big a deal, though, since I'll surely be working more than 20 when the heaviest parts of the tax season arrive. I'll likely head in 3 days per week during late March and early April, assuming there's enough for me to do. We'll see, and I'll surely keep you informed.

Back to work this Wednesday.

Third Day of Work

Today seemed to move so slow. I have to use a lot of brain power at my job, so it feels really tiring in a hurry. I'm not used to having to think so much because my previous jobs didn't require too much learning. Now, however, I am attempting to absorb an ocean of knowledge about Tax, and it's really quite a challenge.

I began the day by getting set up in the office's payroll and time keeping system. Though I'm not being billed to clients yet, I still must keep good track of my time so as to acclimate myself to normal practice. I keep detailed notes about what I do, who I do, and for how long I do it. When I say "who I do," of course, I'm referring to the client whose return I am working on.

I spent some time learning how to print out blank tax forms. With the blank forms, it's easy to take a person's file and go through each document, one-by-one, and input all the important figures into the appropriate boxes. As I was doing just that this morning, I would recheck my work, and pass along what I'd done to my supervisor who would correct my few errors. After the corrections were made, I could enter all the client's return information and figures into the computer program, which then computes everything and assembles the return. This process is easy enough for simple tax returns, but unfortunately, most of the returns we do where I work are incredibly complex. I think mainly we work for people who are really good at what they do, so they make a lot of money.. but what they do isn't accounting. Ergo, they don't have either the time or know-how to accurately complete their own return.

I ate some crackers with cream cheese, and some sliced red peppers and cucumbers for lunch. Lunch flew by quickly, the only part of the day that did so. After lunch was more learning from my supervisor. We reviewed deductions and their limitations. I learned where business deductions versus personal deductions belong.

Certain figures that clients provide, like amounts of charitable contributions, we just plug into their return and both parties (the accountant and the client) share the understanding that should the IRS come knocking, the client is responsible for proving what they've claimed. I've begun to learn what types of claims by clients cannot just be filled in at a client's whim, and which we actually require documentation for. For example, we cannot fill in a client's income information without having their W-2. Seriously, we can't just take your word for it... you've got to show us.

So all this learning was taking place, and my brain was starting to ooze from my ears! I was able to finish the day with a little clerical work, which took some of the edge off... even though it was only then when I began to drink the coffee. I really feel like I'm earning my money at this job. I can see why the accounting profession is potentially very lucrative. With all the thinking that goes on, the salaries just make sense. This isn't simple math thinking, this is complex reasoning and analysis that requires a pretty intelligent brain to begin with.

Second Day of Work

I arrived at my work building yesterday at 8:30 AM. Nobody from the firm mentioned that the building would be locked on Saturdays, however, and that a special key is required to gain entry. Luckily for me, someone from a different business located in the same building came to work a few minutes later, and let me into the building.

Nobody from the firm mentioned that the same special key would then also be required to operate the elevator or unlock doors in the fire escape. AKA I was stuck in the lobby of this building for a short while. Eventually a desk attendant of some kind was able to assist me, and I met my new supervisor in the elevator on my way up to the office.

My new supervisor, not the same person who runs the firm and who hired me, was born in the 1920s to the best of my knowledge. He has an office assistant who performs all of his letter-writing needs. Thus, it's the three of us who sit in one medium-sized office to do our work.

My supervisor says to me, "Don't trust anyone!" Sure... then he says "If you have a question, ask ME and don't talk to anyone else!" Well then... "You're allowed to make two kinds of mistakes when you work for me.. do you know what they are?" I replied "no," that I have no idea. He says "None, and none whatsoever." Finally he says, "you have to be perfect when you work for me, or really close to it."

It would seem these are the terms of my employment, and yet I like them. My new supervisor keeps things orderly, maintains meticulous records, and gets every job done efficiently. What's more, he encourages me to ask questions. Because I'm learning the ropes of this brand new "tax world," I'm more than welcome to interrupt him any time I like to ask questions. From what I've heard from other CPAs, accountants in general don't like to be bothered. I'd heard that older accountants especially are very reluctant to take time out of their busy schedule to teach younger employees new things. My supervisor, on the other hand, is the exact opposite, and I love it!

I want to learn as much as I can about the business I'm working in, and I think that things are going to work out very well between my supervisor and I.


I began the day by having a snack. Yesterday was the first Saturday of Tax Season that all personnel are expected to work. From now until April 15th, I and every other accountant at the firm will be in on Saturdays. Accordingly, each member of the team has signed up for a Saturday that they will bring breakfast for everyone else to snack on in the morning. So I ate a croissant.

Then I was given the task of printing off some "Pro Forma" forms using a computer system. These were basically blank tax forms that my supervisor and I would use to write in information about clients. I began to sort through a client's tax documents, and as I found important numbers, I would input them onto these blank Pro Formas. Afterward, my supervisor went through my Pro Formas line-by-line to ensure that I'd put things in the correct place, and to correct me where I hadn't. Although I didn't get this far, the final step will be to type these hand-written numbers into the computer's tax program, so that the return can then be compiled.

One might think that this is a simple process, but there are over 250 schedules and other IRS forms that can potentially be worked through, and some clients have incredibly sticky tax situations. When people work a job, own a business, have a trust, IRA, inheritance, etc, and live in a foreign country... holy boboli things can get messy really quick. It's not as easy as just punching numbers into the computer, either. As accountants, we have to look into how certain figures are contrived, to ensure that neither we nor the client are breaking the law.

I've found that we tend to be conservative in the tax world, for example we may be slow to include certain deductions on a Schedule A because of one reason or another. At the same time, though, if a client provides us with information that they assure us is factual, even though they do not submit supporting documents to verify the situation, we simply go with what the client wants. Naturally, however, the client is informed in writing that they must be able to provide proof of every figure quoted on their entire return to the IRS, should they be audited.

As the day moved along, my supervisor had to leave the office, and his letter-writing assistant left too. I was left to do research and reading. I spent some time trying to memorize tax forms, so that in the future I don't have to look very long for the place where a number goes. I also read the firm's "Quality Control Assurance" manual. That was interesting and provided some guidance on how to do my job, and the professional expectations that the workplace carries. Lastly, I ran through some tutorials on the computer to familiarize myself with the tax software that the company uses.

All-in-all, I wasn't too thrilled to be working on a Saturday.. but I'll get used to it soon enough, for I know that getting used to working 6 days per week during financial statement seasons, or tax season, will be a must for when I begin working in the accounting business full time.

I also tried the coffee in the office's kitchen for the first time.. french vanilla. Yum.

Coffee in the Workplace

I'm beginning to understand Wally from Dilbert. If you read Dilbert, then you'll know that Wally is a coffee addict. He seems to operate only on java.

I actually like my new job, and in no way do I think of it as futile. My accounting classes, on the other hand... I've had really great Accounting professors at American University thus far in my curriculum, however it's reading the accounting textbook and doing problems from it that I find.. mind-numbing. I have actually gotten into the habit now of not doing accounting homework unless I've drunk coffee beforehand.

My accounting text smells (wreaks?) of coffee because I'm always toting it to Starbucks to do work. When I drink a few cups of coffee, I begin to feel wired. It's as if my brain goes into overdrive and I'm able to really focus in on the accounting text. I can go off to "accounting land" once the black stuff starts pumping through my veins. Next thing I know, 3 hours have passed and my problem set is complete.

Caffeine never used to do much for me. Things are different now.

I don't think that I'll need this kind of stimulation at my office this semester. I ask enough questions that it's impossible to lose focus of what I'm doing. Additionally, the company keeps snacks and drinks in a small kitchen that are complimentary to employees. Talk about a morale booster. For one, free anything excites me; but secondly, I never have to leave the office in search of something to drink. Between free coffee and soda, of which I may consume a retail value of 1 dollar's worth every 8-hour shift I work, the company actually saves money because I'm always at my desk, working. Jobs I've held in the past didn't afford this luxury, and I've always wanted a job that did. Before, I would go out for a drink and take at least 15 minutes, sometimes much longer, to get back to the office.

I've realized that complimentary beverages for one's employees is a wonderful way to boost productivity and morale, and save the company money, rather than the other way around as the misperception perpetuates. This is another instance of where some companies can be nearsighted.. they may save money by not providing employees with complimentary drinks, but do they sure lose out big time in lost productivity and bloated wage expenses.

First Day of Work

Yesterday was my first day of work at the Accounting (Tax) firm. I arrived at 8:30 AM, a bit earlier than expected. There was a gigantic ice storm the night before and everything was running much slower. Not many people had showed up for work yet, but luckily one very nice CPA was able to give me the "grand tour" of my new workplace.

I had always assumed that I would show up to work and be greeted by some excellent employees, and some mediocre employees. However, after one day I've only encountered highly intelligent, well-qualified people. I suppose the benefit of having a small firm with employees that number in the dozens, rather than hundreds or thousands, is that managers can really take the time to hand-select people to join the team. Some times at large corporations it seems that job roles roll over and need filling, and so companies must hire lots of people, regardless of how "perfect" a fit they really are for the company.

It seems to me that a few character traits are essential in any employee: the capacity to perform one's job well, to ability be a team player, and to potential to excel in the previous two combined. It seems that so often companies are nearsighted in their hiring by hiring employees that only fit one or two of the above criteria to meet present corporate demand. However, it's the employee who meets all the above criteria that a company really wants.

After my first day, everyone I've met has fit all three criteria. Everyone is motivated, well qualified, and extremely knowledgeable. Learning tax services is not at all easy. There is so much information to learn, and the US Tax Code now contains more than 5 million pages, to the best of my knowledge. As obnoxious as this is, I can't imagine Accountants being successful without their computers and powerful software. I was showed how to use the program ProSystems fx Tax, amongst others. Let me say that the learning curve on these programs seems to be a bit steep because the target users for them are industry professionals who already have a working familiarity of the US taxation system. This is no TurboTax we're talking about. This is the real deal...hundreds of forms each with hundreds of boxes...and that's just for federal filing. Don't forget the state income tax returns. And let's not delve into Corporate returns yet, either.

I enjoyed my first day of work because I was able to gain a large amount of experience just in my first 8 hours on the job. I didn't have but 20 minutes down time during my entire 8 hour shift, and that was for lunch. I'm really working for my pay, and it's a good feeling. There was plenty of work for me to do, so I don't feel like I wasted a single minute. Speaking of minutes- we keep track of our time in small increments of minutes. I write down all my activities to the nearest minute for accountability purposes. Partly this makes sure that I'm not goofing off, but it also helps to determine how much time has been given to each client.

I am very lucky to be paid for this position, while I earn academic credit at the same time. I'm happy to be studying accounting during a time like this because it seems that accounting is a fairly resilient industry in times of economic hardship. People will always need doctors, lawyers, and accountants.

So far I've worked on individual tax returns. I am entering data into the computer system, and sorting through peoples' documents to get things in order. The office is beginning to go entirely paperless, so even though client folders float around the office, it's wonderful to have some digital freedom.

The epiphany of my day had to have been when somebody was describing corporate tax returns and said, "So in that case you just make an AJE to the AGI to then wrap the NI into the RE and put it here." I realized that I'm in the right profession when I understood exactly what was said. It was actually a sort of special feeling.. because although there are countless moments just like this one that are sure to come, I felt like I was sharing a special bond with the person who said this to me. I spend an hour per day studying Japanese, and yet I felt like I was fluent in a whole other language at that moment.

Blog for the American University Career Center and Kogod Internship

I have created this blog to write about my experience working at a Certified Public Accounting firm. While the firm provides a vast array of accounting and tax services, I will be working primarily on tax return preparation, IRS correspondence, and client satisfaction. I work two full days per week and will write periodic updates in this blog about my experience. I expect the experience to be quite positive and I hope you enjoy reading about it.

Best Regards,

Jeff Wilson