Board: Tax Strategies
[With much sadness, we note the passing of a long-time Fool, Phil Marti. He was a retired IRS examiner who devoted much of his life to helping people navigate the mazes of tax law and retirement. The following is an example of the kind of man he was. We will miss him greatly.]
To the tax wonk I directed here, check out the Volunteer Income Tax Assistance (VITA) program. It's the most rewarding thing I do.
Yesterday was Stimulus Saturday nationwide, and boy were they stimulated at our VITA site. Our signup list that the librarian keeps for us until we get there to set up for our 1:00 opening was full at 10:30 and about double full with hopefuls when we got there. We finally managed to leave about 2 hours after our scheduled closing.
I never even got a brownie. Our site manager brings goodies, but every time I was about to snarf one down I got called somewhere for something. By the time I had a moment to spare there weren't even any crumbs.
Among the highlights:
A couple in their 30's, he a mechanic and she a disabled homemaker. His 2005 refund got snatched for child support arrears, so he bumped his withholding allowances and stopped filing. After completing their 2006-07 returns, total balance due about $3,000 plus P&I, I had a stern talk with him about a more realistic W-4 and the need to file whether he can pay or not. Used my old IRS trick for delinquent filers of adding up all the P&I, figuring it as a percentage of tax due, and announcing, "This is worse than juice money!" The Mrs. inquired about the stimulus payment, and I told her that it would be $1,200 and it would be applied to their tax balance due. She whined so much about getting hers that I wanted to slap her, but I kept control and pointed out that if she preferred he could file MFS and have only a $600 payment (which would be applied to his overdue taxes) and she would get squat. I believe that pain in my tongue today is from holding it to keep from saying, "Lady, you picked him."
Quality reviewing the return of the younger half of a side-by-side mother/son team (two novice preparers). He, a college senior, qualifies as her dependent. He had education expenses but couldn't take a credit because she was claiming him as a dependent. She didn't look like she makes much money (most of our clients are what anyone would call poor), so I checked her return. She was at negative taxable income before considering personal exemptions. So I told her preparer to take him off as a dependent, thus allowing him to take the Lifetime Learning Credit, which would wipe out his tax and get him a refund of everything withheld. Nobody got credit for his personal exemption, but he still qualified her for HofH filing status and the EIC, so her bottom line didn't change. Net savings for the household was about $400, which isn't much to most of us, but meant a lot to them. The remaining problem was to get the software to compute the credit since he was (correctly) marked as "can be" claimed as a dependent. Since I didn't have time to try to figure out how to get the software to comply with the law I exercised my Certified Quality Reviewer magic powers and overrode.
Best of all was my last client, a 70-something lady whose husband dropped dead last November. Although judging from their income statements she was the primary breadwinner, it was the traditional for that era household where he handled all the finances. But she's got a lot of smarts and spirit. Much of my interaction with her, including her good-natured complaints about her overprotective daughter, reminded me of my life with my late parents during their decline. I was so pleased that I got many smiles and even a few chuckles out of her. In the process of doing their 2007 return I looked at what she'd been able to find regarding 2006. ("I just signed whatever he gave me.") It was a mess. I finally settled on, "I can't really tell from this, but George may have left you a gift that keeps on giving." I then made sure she has our sponsoring organization's year-round number in case she gets an inquiry from IRS.
It was a great day, and a timely reminder, especially since yesterday morning my thought was "I really don't wanna do this today," of why I do this.