Time to get a new tax guy?

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misterjohnny
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Time to get a new tax guy?

Post by misterjohnny » Tue Mar 10, 2020 1:53 pm

I've had the same tax guy for 24 years. I did my own taxes before marriage, but my wife was a partner in a medical practice and this guy did many of their taxes.
Fast forward to today and my wife is retired and I am soon to be. We have W2 income, 529 account expenditures, soon to be pension income, and the usual dividend/capital gains. No real estate income.

When meeting with the guy I told him I did a Back Door Roth in 2019 and he was confused. I told him what I did and he said he had never heard that term used for that action. Shouldn't a tax guy know that term?

HomeStretch
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Re: Time to get a new tax guy?

Post by HomeStretch » Tue Mar 10, 2020 1:59 pm

Yes, I would expect an expert tax person to be aware of a backdoor Roth (and to complete Form 8606 correctly).

Maybe you or spouse could be the “new tax guy”. Your tax situation seems straightforward. TurboTax Deluxe CD/download could handle it.

oldfatguy
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Re: Time to get a new tax guy?

Post by oldfatguy » Tue Mar 10, 2020 2:06 pm

misterjohnny wrote:
Tue Mar 10, 2020 1:53 pm
When meeting with the guy I told him I did a Back Door Roth in 2019 and he was confused. I told him what I did and he said he had never heard that term used for that action. Shouldn't a tax guy know that term?
No necessarily. It's not a term that is used in any IRS literature that I am aware of.

Cuzz35
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Re: Time to get a new tax guy?

Post by Cuzz35 » Tue Mar 10, 2020 2:24 pm

It probably depends. If this accountant doesn't deal alot with individual taxes than he may not know what this is. I'm pretty sure if I went to other departments at my firm and asked the managers if they knew what a backdoor Roth was, the success rate would be low. On the other hand, all the seniors and managers on my team know what that is because are focus is high net worth individuals.

To answer your question though, your return sounds pretty simple and I would say you don't need this guy, esp if he doesn't know what a back door roth is.

jebmke
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Re: Time to get a new tax guy?

Post by jebmke » Tue Mar 10, 2020 2:28 pm

"Back Door Roth" is not a term of art in tax preparation.

A qualified preparer should be knowledgeable on the two steps it takes to implement this and be able to prepare the relevant tax forms for filing, however.
When you discover that you are riding a dead horse, the best strategy is to dismount.

123
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Re: Time to get a new tax guy?

Post by 123 » Tue Mar 10, 2020 2:31 pm

I've been using my tax guy for over 20 years. He's low cost and easy to work with. Service is very fast and reliable. His name TurboTax.
The closest helping hand is at the end of your own arm.

J295
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Re: Time to get a new tax guy?

Post by J295 » Tue Mar 10, 2020 2:33 pm

I’d venture to say there are many well qualified CPAs who don’t know that term, and don’t see that strategy implemented by their clients. Of course, that’s just a guess by me, and by anyone responding as there’s no empirical data. If I liked him/her otherwise, I wouldn’t use this as a gotcha to switch.

jebmke
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Re: Time to get a new tax guy?

Post by jebmke » Tue Mar 10, 2020 2:41 pm

J295 wrote:
Tue Mar 10, 2020 2:33 pm
I’d venture to say there are many well qualified CPAs who don’t know that term, and don’t see that strategy implemented by their clients. Of course, that’s just a guess by me, and by anyone responding as there’s no empirical data. If I liked him/her otherwise, I wouldn’t use this as a gotcha to switch.
That's true but a qualified preparer of individual taxes should know how to process (a) a non-deductible Traditional IRA contribution and (b) a Roth conversion. These are fairly simple transactions and the IRS publications are quite clear on how to report these. A responsible preparer should be able to do a little research on each step if he/she has not been exposed to them regularly with the client and therefor may not have all the entries memorized.

I think the main problem is that the OP used a term that is more of an investing lingo term and not a tax term. But once the OP explained what he did, in my opinion, the preparer should have been able to deal with it.
When you discover that you are riding a dead horse, the best strategy is to dismount.

Topic Author
misterjohnny
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Re: Time to get a new tax guy?

Post by misterjohnny » Tue Mar 10, 2020 2:49 pm

123 wrote:
Tue Mar 10, 2020 2:31 pm
I've been using my tax guy for over 20 years. He's low cost and easy to work with. Service is very fast and reliable. His name TurboTax.
That's the rub that I didn't mention. He charges me $1000 to do my taxes, and he never advised me that I should be doing a backdoor Roth (or whatever the CPA's call it). Now I live in L.A. so everything is expensive, but I don't think I'm getting value.

He did advise me to start a DAF a few years ago, so that has helped me.

jebmke
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Re: Time to get a new tax guy?

Post by jebmke » Tue Mar 10, 2020 2:56 pm

Generally speaking, tax compliance people (preparers) are only mediocre at tax advice. There are some exceptions but that has been my experience on the individual side and especially on the corporate side.

I have found that the best tax advice comes from the legal profession - but lawyers who have specific training in taxation (masters in taxation). Much of tax advice is closely linked to estate planning so a law firm that can combine estate planning with tax advice is probably going to be a better solution for some.
When you discover that you are riding a dead horse, the best strategy is to dismount.

tibbitts
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Re: Time to get a new tax guy?

Post by tibbitts » Tue Mar 10, 2020 3:00 pm

misterjohnny wrote:
Tue Mar 10, 2020 2:49 pm
123 wrote:
Tue Mar 10, 2020 2:31 pm
I've been using my tax guy for over 20 years. He's low cost and easy to work with. Service is very fast and reliable. His name TurboTax.
That's the rub that I didn't mention. He charges me $1000 to do my taxes, and he never advised me that I should be doing a backdoor Roth (or whatever the CPA's call it). Now I live in L.A. so everything is expensive, but I don't think I'm getting value.

He did advise me to start a DAF a few years ago, so that has helped me.
I'm undecided on this. The term itself I wouldn't expect anyone to know. The concept though... I would think that would be something he'd be familiar with. On the other hand, if he deals with higher income people, most of them are probably focused on anything that helps them pay lower taxes today, rightly or wrongly, and maybe the amounts involved are just not that big a deal to them. Also until fairly recently I'm not sure the process was fully endorsed by the IRS, although I'm not an expert so maybe somebody else can comment on that.

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UpsetRaptor
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Re: Time to get a new tax guy?

Post by UpsetRaptor » Tue Mar 10, 2020 3:01 pm

Sounds like you should get a new tax guy, and he should be you. Your taxes don't sound complicated at all, not worth paying someone. You're on Bogleheads, you'll get better tax advice here than your typical run-of-the-mill CPA. Tax software makes it pretty easy for most people.

dbr
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Re: Time to get a new tax guy?

Post by dbr » Tue Mar 10, 2020 3:22 pm

misterjohnny wrote:
Tue Mar 10, 2020 1:53 pm
When meeting with the guy I told him I did a Back Door Roth in 2019 and he was confused. I told him what I did and he said he had never heard that term used for that action. Shouldn't a tax guy know that term?
The other terminology is "Roth Conversion." Was there any reason to believe he was not familiar with "that action" distinct from not being familiar with that term. The IRS appears to use the term "conversion." https://www.irs.gov/retirement-plans/re ... onversions Vanguard also uses the term "Roth Conversion" https://investor.vanguard.com/ira/roth-conversion

DaftInvestor
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Re: Time to get a new tax guy?

Post by DaftInvestor » Tue Mar 10, 2020 3:27 pm

Last time this came up several argued in both directions. The "Backdoor Roth" nomenclature may not be in a textbook nor in an IRA publication but I've seen the term used on many financial websites as well as publications such as Money (before it went belly up) and Kiplingers Personal finance. I wouldn't want someone doing my taxes that didn't know "common" terminology.
If I were you I would do your taxes yourself again - sounds like you've got a straightforward return - give TurboTax a shot.

seawolf21
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Re: Time to get a new tax guy?

Post by seawolf21 » Tue Mar 10, 2020 6:16 pm

jebmke wrote:
Tue Mar 10, 2020 2:56 pm
Generally speaking, tax compliance people (preparers) are only mediocre at tax advice. There are some exceptions but that has been my experience on the individual side and especially on the corporate side.

I have found that the best tax advice comes from the legal profession - but lawyers who have specific training in taxation (masters in taxation). Much of tax advice is closely linked to estate planning so a law firm that can combine estate planning with tax advice is probably going to be a better solution for some.
Agreed. There is a misconception on this board that CPA specialize in income tax; they don’t. Tax preparers also don’t necessarily specialize in income tax if they are merely overpriced data entry clerks for tax prep software.

Housedoc
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Re: Time to get a new tax guy?

Post by Housedoc » Tue Mar 10, 2020 6:22 pm

Take your data from the tax guy's work and enter into TurboTax online. I believe you can get well into the forms before having to pay. See if you are comfortable doing the work. Cancel out before completion. Next year get the CD version of Deluxe and save some cash. $1000 bucks to lay out and never getting to take your clothes off and have a bit of fun is obscene.

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Stinky
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Re: Time to get a new tax guy?

Post by Stinky » Wed Mar 11, 2020 6:41 am

UpsetRaptor wrote:
Tue Mar 10, 2020 3:01 pm
Sounds like you should get a new tax guy, and he should be you. Your taxes don't sound complicated at all, not worth paying someone. You're on Bogleheads, you'll get better tax advice here than your typical run-of-the-mill CPA. Tax software makes it pretty easy for most people.
Agree 100%.
It's a GREAT day to be alive - Travis Tritt

GeoffD
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Re: Time to get a new tax guy?

Post by GeoffD » Wed Mar 11, 2020 7:52 am

$1,000 for H&R Block level of service? Nope.

NJ-Irish
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Re: Time to get a new tax guy?

Post by NJ-Irish » Wed Mar 11, 2020 7:59 am

In the larger picture of common tax issues, I don’t think a backdoor Roth rollover is very common (even though it’s well known within this community).

It’s not that hard to do or to figure out. Send him a link and ask him to look into it. I wouldn’t throw out a long standing relationship over this.

Edit to say - if you want to start doing it yourself obviously feel free. But don’t make the point out of his knowledge of a single tax rule.

retiredjg
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Re: Time to get a new tax guy?

Post by retiredjg » Wed Mar 11, 2020 8:38 am

misterjohnny wrote:
Tue Mar 10, 2020 1:53 pm
When meeting with the guy I told him I did a Back Door Roth in 2019 and he was confused. I told him what I did and he said he had never heard that term used for that action. Shouldn't a tax guy know that term?
Many people here at Bogleheads' think that is completely unacceptable. However, we get this report every year. Without fail.

Apparently a lot of tax people are not familiar with this concept! :D

If that is the only short coming and the tax person is willing to listen and learn, it would not be a fatal flaw for me.

However, a lot of this depends on how competent you are at explaining the concept. Have you done it successfully for years or is this your first time? When you explained it, exactly what did you say?

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Sandtrap
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Re: Time to get a new tax guy?

Post by Sandtrap » Wed Mar 11, 2020 8:46 am

In my business and personal experience, and DW (former IRS), there are;
1
"tax return professionals" (CPA or not, follow the book, fill out the forms)
2
"tax professionals" (CPA or not, follow the book within legalities, advise to customers best $$$ advantage)
3
"tax gurus". (CPA or not, stays within allowable legalities, advises personal and business matters to maximum $$$ advantage and strategies)

Similar to Tiers of competency for; legal counsel, financial professionals, doctors, and plumbers. :confused

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dbr
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Re: Time to get a new tax guy?

Post by dbr » Wed Mar 11, 2020 9:23 am

retiredjg wrote:
Wed Mar 11, 2020 8:38 am
misterjohnny wrote:
Tue Mar 10, 2020 1:53 pm
When meeting with the guy I told him I did a Back Door Roth in 2019 and he was confused. I told him what I did and he said he had never heard that term used for that action. Shouldn't a tax guy know that term?
Many people here at Bogleheads' think that is completely unacceptable. However, we get this report every year. Without fail.

Apparently a lot of tax people are not familiar with this concept! :D

If that is the only short coming and the tax person is willing to listen and learn, it would not be a fatal flaw for me.

However, a lot of this depends on how competent you are at explaining the concept. Have you done it successfully for years or is this your first time? When you explained it, exactly what did you say?
Exactly, we still don't know if the CPA was unfamiliar with Roth Conversion as a transaction or only unfamiliar with the term "Backdoor." I imagine most tax specialists don't learn their trade by surfing the Internet.

retiredjg
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Re: Time to get a new tax guy?

Post by retiredjg » Wed Mar 11, 2020 9:38 am

dbr wrote:
Wed Mar 11, 2020 9:23 am
I imagine most tax specialists don't learn their trade by surfing the Internet.
At least, that's what we hope!

jebmke
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Re: Time to get a new tax guy?

Post by jebmke » Wed Mar 11, 2020 9:52 am

retiredjg wrote:
Wed Mar 11, 2020 9:38 am
dbr wrote:
Wed Mar 11, 2020 9:23 am
I imagine most tax specialists don't learn their trade by surfing the Internet.
At least, that's what we hope!
When I train my preparers at TaxAide I specifically warn them that they may not "Google" to get information on tax matters. They have approved resources, including various publications provided by the IRS and direct access to the IRS web site.

We teach the basics of a non-deductible contribution to a Traditional IRA and a conversion of a Traditional IRA to a Roth IRA. We don't expect them to memorize all the entries but they have resources with which they can properly prepare a return for someone who has done one or both of these transactions. Every counselor, even the beginners, are certified to prepare these entries. An experience preparer would check all their work as a second step in the process.
When you discover that you are riding a dead horse, the best strategy is to dismount.

DaftInvestor
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Re: Time to get a new tax guy?

Post by DaftInvestor » Wed Mar 11, 2020 9:58 am

dbr wrote:
Wed Mar 11, 2020 9:23 am
retiredjg wrote:
Wed Mar 11, 2020 8:38 am
misterjohnny wrote:
Tue Mar 10, 2020 1:53 pm
When meeting with the guy I told him I did a Back Door Roth in 2019 and he was confused. I told him what I did and he said he had never heard that term used for that action. Shouldn't a tax guy know that term?
Many people here at Bogleheads' think that is completely unacceptable. However, we get this report every year. Without fail.

Apparently a lot of tax people are not familiar with this concept! :D

If that is the only short coming and the tax person is willing to listen and learn, it would not be a fatal flaw for me.

However, a lot of this depends on how competent you are at explaining the concept. Have you done it successfully for years or is this your first time? When you explained it, exactly what did you say?
Exactly, we still don't know if the CPA was unfamiliar with Roth Conversion as a transaction or only unfamiliar with the term "Backdoor." I imagine most tax specialists don't learn their trade by surfing the Internet.
Anyone working with customers in any industry, however, should be familiar with key "layman" terms one of their customers is likely to use. "Backdoor IRA" is one such term. If you need to convert from a Layman term into a Tax-Expert term in order to explain your situation to a CPA or Tax Preparer you might as well do your own taxes.

Momus
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Re: Time to get a new tax guy?

Post by Momus » Wed Mar 11, 2020 10:06 am

I don't think cpa is helpful at all. Maybe you use them once, and once only after significant changes to your own tax situation, and then copy what they do every yr after. It's as simple as looking what they did last yr and match it on the tax software of your choice. If you can do jigsaw puzzle, you can do your own taxes.

dbr
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Re: Time to get a new tax guy?

Post by dbr » Wed Mar 11, 2020 10:08 am

DaftInvestor wrote:
Wed Mar 11, 2020 9:58 am
dbr wrote:
Wed Mar 11, 2020 9:23 am
retiredjg wrote:
Wed Mar 11, 2020 8:38 am
misterjohnny wrote:
Tue Mar 10, 2020 1:53 pm
When meeting with the guy I told him I did a Back Door Roth in 2019 and he was confused. I told him what I did and he said he had never heard that term used for that action. Shouldn't a tax guy know that term?
Many people here at Bogleheads' think that is completely unacceptable. However, we get this report every year. Without fail.

Apparently a lot of tax people are not familiar with this concept! :D

If that is the only short coming and the tax person is willing to listen and learn, it would not be a fatal flaw for me.

However, a lot of this depends on how competent you are at explaining the concept. Have you done it successfully for years or is this your first time? When you explained it, exactly what did you say?
Exactly, we still don't know if the CPA was unfamiliar with Roth Conversion as a transaction or only unfamiliar with the term "Backdoor." I imagine most tax specialists don't learn their trade by surfing the Internet.

Anyone working with customers in any industry, however, should be familiar with key "layman" terms one of their customers is likely to use. "Backdoor IRA" is one such term. If you need to convert from a Layman term into a Tax-Expert term in order to explain your situation to a CPA or Tax Preparer you might as well do your own taxes.
You have a point, but it still seems relevant what the case is here. I would not take my business away from someone who does not know a casual term, but I would definitely be concerned if the person were not familiar with the transaction and how handle the taxes on it.

Luckywon
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Re: Time to get a new tax guy?

Post by Luckywon » Wed Mar 11, 2020 10:16 am

My CPA has given generally great service over 25 years but has fallen short in:

Did not advise me to maximize my contributions to out pension plan. I leaned the hard way I needed to be asking our plan administrator about this.

Had very limited knowledge about the megabackdoor Roth, specifically was unaware about the rules for after-tax contributions to a 401k.

Has nowhere close to the knowledge of, for example forum members spiritrider or AlanS (and others here), with respect to the factors in play regarding what type of business entity and tax elections are best for me. Also shows knowledge deficit with respect to how pension plan contributions and business entity type/tax elections affect my 199A deduction.

Anyway I continue to use my CPA, and just do my best to figure out these areas by researching here and elsewhere and asking my solo 401k provider. I wish there was one professional I could use to handle all these things for me but it seems tax professionals are like doctors-there are none who know everything that may be pertinent to you.

dbr
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Re: Time to get a new tax guy?

Post by dbr » Wed Mar 11, 2020 10:35 am

Luckywon wrote:
Wed Mar 11, 2020 10:16 am
My CPA has given generally great service over 25 years but has fallen short in:

Did not advise me to maximize my contributions to out pension plan. I leaned the hard way I needed to be asking our plan administrator about this.

Had very limited knowledge about the megabackdoor Roth, specifically was unaware about the rules for after-tax contributions to a 401k.

Has nowhere close to the knowledge of, for example forum members spiritrider or AlanS (and others here), with respect to the factors in play regarding what type of business entity and tax elections are best for me. Also shows knowledge deficit with respect to how pension plan contributions and business entity type/tax elections affect my 199A deduction.

Anyway I continue to use my CPA, and just do my best to figure out these areas by researching here and elsewhere and asking my solo 401k provider. I wish there was one professional I could use to handle all these things for me but it seems tax professionals are like doctors-there are none who know everything that may be pertinent to you.
It is certainly true that hiring someone to prepare your tax return is not the same thing as hiring a tax advisor who will help you plan a most effective tax strategy, let alone financial planning such as the pension issue. I suspect the cost of trying to buy an effective service of that sort is prohibitive for most of us, which means we have to apply our own wits to the subject, as you point out.

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