Season 2, Episode 7: Tax Season Recap
We talk about how tax season went -- it went pretty well. We also talk about how there are clearly things that need to change in the future.
Welcome to another episode of As the Dinoson's Turn. We're outside in the bright sunshine.
SPEAKER_01It is so bright today.
SPEAKER_00If you're watching the video, you could probably see that. If you're listening to the audio, you can't see it, but we're on our patio. Is this the front patio or the back patio?
SPEAKER_01This is the front patio.
SPEAKER_00Front patio. That gets a lot of sunlight in the mornings when we're recording this. So it also the Portuguese sun gets hot.
SPEAKER_01It is very different than U.S. sun, and I don't understand why.
SPEAKER_00Yeah, I don't get it either, because if you look at a globe, so this is something that's right up my alley. Oh my god. If you look at a globe, Portugal is on the same line of latitude as Des Moines. Okay. Where we're at, at least in Portugal. Okay. So the sun behaves the same way. You would think. You would think, but the sun is much more powerful here. I don't get it.
SPEAKER_01It definitely is. And I have to say that one of the things that I've noticed and I already knew is that if you you need to wear sunscreen every day. Like no matter the time of year, even if it's cloudy, you think, I wear sunscreen every day.
SPEAKER_00Yeah, there must be like a hole in the ozone or something over Portugal. I don't get it.
SPEAKER_01It's the same thing in Spain, though. This is the sun in Spain has always been ultra powerful in comparison to, you know, the states. So that every time I've been there, that's why people come here, you know, enjoy all the sunshine and the beaches.
SPEAKER_00So I don't know. Oh well. I guess we've wrapped up tax season as we record this. It's April 16th, is what we're recording this.
SPEAKER_01We still have a couple on extension.
SPEAKER_00There's about 40 on extension. Oh, which was shit.
SPEAKER_01I had a couple.
SPEAKER_00Damn.
SPEAKER_01Oh well. That's okay.
SPEAKER_00Well, this was I I thought we could talk about tax season and how it went working remotely and how it went just in general, and your first tax season actually working in the field.
SPEAKER_01I have to say I liked it. Um, I like the data entry part of it. I like having a list. I like it when everything is there. I liked getting things done. Um I felt like I was on top of things, and then I was waiting on you to do your thing.
SPEAKER_00No, I thought it went well. It were we had a good system of you doing the data entry and then me reviewing, and we got through a lot more work than I thought we would.
SPEAKER_01Well, and it freed you up to do other things during that time which you wouldn't been able to do. I think that the things that the the people who are on extension, it's because we're waiting on things from them or they don't have everything pulled together. It's not because we couldn't get them done, which is nice. Right? And I think that it was it was doable. Like you actually took weekends. Like I went to book club, you know, during tax season, and everybody was like, Oh, we didn't expect to see you until like May, if then.
SPEAKER_00So But now it's like what's next with the business side of things, because you know, I I start looking at what is our average fee per tax return, and it's not even three hundred dollars, which is really pathetic. But yet it's in line with little old Iowa, which is really where we're based. I mean, yes, we live in Portugal, but we're still Iowa residents, our business is still licensed and everything in Iowa, and so you know, as far as our competition, especially in the small town where we are from, we're probably higher than most of our competition. But the national average for just a basic tax return is three hundred and twenty-three dollars.
SPEAKER_01Well, but what I love is that is not the national average in Portugal because you should be expecting to pay a Portuguese accountant to help you with your taxes. You just do it, it's part of the things you do, and it is between I'd say what we were quoted, what, 700 to 800 euro?
SPEAKER_00Yeah. And that's what it should be.
SPEAKER_01Yeah, I mean that's crazy. Oh my god, no, I can't even imagine.
SPEAKER_00Well, CPA firms in Des Moines probably charge 800. I have a friend in Virginia whose firm charges 1800 as their minimum fee. Oh, people pay it. So where were we before the dogs went crazy and we had to do some editing?
SPEAKER_01Um, the Virginia fee, which I find asinine, but whatever.
SPEAKER_00Well, it is asinine. I don't think we should charge eighteen hundred dollars. But like four hundred minimum, five hundred minimum seems pretty reasonable when you consider the fact that there's not a single there's hardly a single tax return that can just be completed. It's not like it used to be, even though that's how so many small operators do things, is it's just like the olden days where people give you their stuff, you churn out the tax return, charge them a hundred bucks or whatever, and off you go. It's like every return, it's probably ninety to ninety-five percent, literally. It's like, oh wait, there's this. And oh wait, you did this, so that affects this. And meeting with people, you think it's done, and then they're like, Oh, I also got this 1099. Do you need that? Oh yeah. Oh, we had a baby last April. Do you need to know that?
SPEAKER_01Oh, guess what? Here's a K1. Oh, I hate those things.
SPEAKER_00And suddenly you're thrown into having to do a bunch of other stuff on their return, and then it's like, well, what about this? And what about that? And someone has to file an Alabama tax return. And Alabama requires driver's license information. So you have a meeting, you get all the way through it, and then afterwards you discover, oh, we can't file this till we get your driver's license information. Then you have to get back in touch with them, get the information, get their signature, get it filed. Like nothing is ever easy. You can't just finish a tax return. And so it's not so much that you know, if you look at the hours worked, it's probably not that many hours, but it's it's intense. And the you know, charging a few hundred bucks is just not realistic.
SPEAKER_01Well, I think that the knowledge required and the complexity of living in today's modern world is just a lot, um, particularly for people who work for companies that are not like based it in in Iowa. If you're filing an Iowa tax return, sometimes they file those state returns, the state taxes correctly, sometimes they don't. Then it's like, wait a minute, what do we do? Um and I think that it's just it is it's very complicated. Um, the days where you show up with all your paperwork and you sit in front of somebody and they do your return and then you leave, those should be done. Yeah. Because that that's a misnomer. I think a lot of people expect it to be that way because it was like 20 years ago. It used to be. It can't be that way anymore because it's so complicated and there are so many checks and balances, and so much you have to know about tax law, and things change and they don't release everything that you need to know or for filing the returns until you're in the middle of tax season half the time. And so it's like, okay, then you scramble.
SPEAKER_00On managing the workflow, and I mean, yeah, we had more time to do other things and sometimes have weekends off or whatever, but it's still at times eighty plus hour work weeks. And I don't know. It's something I started asking myself several years ago, is why? And I'm not sure why. I think it used to be fine that it was i it's like a big scramble, but you know, it started the first week of February and the workload was heavy, but it was spread out, and now it's like a lot of people don't even get all of their forms until March fifteenth, March 20th. Uh some people were sending K1s on like April 10th.
SPEAKER_01Well, because they didn't receive them until then. And then the other piece of it is though that the IRS doesn't release the forms for you to be able to file until sometimes the end of February, beginning of March. And so it is very different than what I expected.
SPEAKER_00The the filing season is compressed now into like a four-week to six-week window that starts sometime in early March, effectively.
SPEAKER_01It does, but I also think that there are things we can do on our end differently, which means that we're gonna have to offer more year-round services, and that's what we've been talking about. Like people who have their own businesses or any of those things, some people are very good at doing bookkeeping, some people are not, and we need to be able to take those things over because if we do the bookkeeping in our own software and and do all of those things, and people still can access it through the portal and do all the things that they need to do, it then auto creates everything that they might need, and then it helps populate and put all of that data in correctly, and then we don't have to actually then say, here's the you know, sometimes it's just written on a piece of paper. Like, okay, so here's what I had in utilities, here's what I spent on this, here's what I spent on that, and then here's our total billing. And we're like, well, okay, I hope that that's right, you know. Um that that's also gonna be cracked down on at some point. Like, we're gonna be required at some point, I can see, because we have to do attachments to returns too. So I can see having to attach actually the a bookkeeping report or something for some businesses if they earn a certain amount of threshold, because that's what the government does. They want to verify. Ironically, though, if they had a system like they have here in Portugal, I think that would solve a lot of things. Everything's tied to your tax ID number.
SPEAKER_00But you know, the IRS uses technology that in some cases is literally from the 1980s. That's all so. They use the old what what's it called? The tape, oh, the the cartridge and the re tape, not real, but the old 1980s type of hard drive stuff. They still use that in some cases. Oh my god. Not for everything. They've modernized some things, but you know, the their technology is quite old. And so that I think is part of the reason why the the other thing that always gets me is the 1099 B forms for stock sales. The all the information is shown on the 1099 B. But if there is even one wash sale, you can't just summarize the dollar amount. You have to put every transaction in individually or attach the broker statement as a PDF, which is just ridiculous because all of those numbers on the form should already be in the IRS's system.
SPEAKER_01Yeah, I love that. But if they're in it, as we know, the different systems in the IRS don't talk to each other. So you're getting it to the department that actually needs it. That's true. It it is very different than what I was expecting, but I I love data entry. I like I really like it. I'm good with like mad with a 10-key, like ultra accurate. I'm feeling really good about that. And you know, I took on things and data entry on some things that I was surprised I would take on or even attempt because I could see, well, I'm at a holding pattern, I'm waiting for things to be put in. I'm like, oh, well, there's a farm return. Let me go ahead and try and put data in for this. Like the number of screens and then the screens behind those, and and it's like as there's screens behind every single point where you put information in, and it requires a lot more information than you would think. People assume that it's just putting in numbers, it's not. It's putting in all of the detail, every one of those forms that you get, we have to then take all of that information and then put it into a system in order to make that return happen. Every single piece of it. It and and that's what I find ironic because if we were able to upgrade systems like they have here, supposedly, right? Um, which we are going to be filing our first Portuguese tax return, um, but it's all collected into this one web page, supposedly.
SPEAKER_00Well, apparently I saw this on one of the expat forms. You can file your own Portuguese tax return, but it sounds like then you upload things into this portal and then you have to translate it.
SPEAKER_01Well, yeah, I mean you have to really be a native speaker, and it's it's the same thing. Like I I am much happier to pay somebody who already knows all that information.
SPEAKER_00And see, at the expat forms, you get people posting this stuff, and they all almost certainly are not native speakers. They're probably at the same level I am. Some of these people are. Yeah. So they're using Google Translate. I'm gonna do it myself.
SPEAKER_01Well, well, it's because this is the other thing. We're used to not having to pay the amount of money that a Portuguese CPA requires or a Portuguese accountant says this is what's required. So I think that that that's also like we're we don't it's it's it's a different it's a different philosophy because not only are you paying for them to do the work, you're paying for their knowledge and their training. Um, and I think that's the other piece. The sheer amount of knowledge that is in your head to complete these returns, and that you know, like this, like I'd say, hey, what about that? What about this? Like I would just have random thoughts, and you had answers for absolutely every single thing. Like you didn't have to say, Oh, I'm gonna, that's a good question, I'm gonna have to look it up. No, you know it all. And so I think that's also pieces of it.
SPEAKER_00And that gets uh back to why I would charge the same as some podunk operator in Indianola, Iowa, who charges $150? Why would I worry if my fee is triple or quadruple or five times what that person's charging? Because people should be paying for my knowledge, and it's kind of a lifelong thing of respecting my own knowledge and understanding that I know more than people think I know.
SPEAKER_01But I think the other piece of it is that if we do your tax return more than that, they have access to you all year long. You can add they can ask you questions, like it provides consulting, it does all kinds of additional information. And the number of times you have conversations with clients, the things that I didn't realize, you should never put money into an IRA or do anything with your 401k, or you know, purchase anything without talking about what those tax implications are so that you know.
SPEAKER_00Roth IRAs in particular, the number of times that I've had to tell people you can't put money into your Roth IRA, so now you have to take out everything that you put in, it's multiple times a year, every year.
SPEAKER_01That's also true.
SPEAKER_00So if you want a Roth IRA, I mean, maybe pool your money and make a contribution once a year once we know whether you can or can't even make a contribution. But the other thing that I've learned just is operationally, how big of a mess things were when I was doing it all myself. But then also how much better I was compared to most other tax prep firms. And you look at the work product of so many places and it's just a disaster area. It's like, who even are these people? And sometimes it's a big CPA firm that did it. So, you know, for all the problems I may have had sometimes with, you know, especially in our systems not updating things or being slow to send invoices, and you know, all that kind of back behind the scenes stuff was just a mess that you've helped clean up a lot, but yet it's still better than so many other places.
SPEAKER_01Well, and I think that's the other piece of it. I mean, we aren't using just the cheapest system either. We're using the system that does all of the things correctly that we know is worth the money, that also gives you access to all of the research materials and all of the other things that you might need, so that if you come across a question, you go directly to tax law and tax cases to make that happen. And and I think that that's not just like, oh, let me call my friend or let me reach out to the IRS for help in addition. Like, I mean, we've got we've got a lot of different systems. I am excited to get things whipped into shape over the next month or two so that all of the reports that I that we can run are actually running. Like we haven't even touched the reporting side. But it was great to actually work on, it's great to work on workflow. Um, I wish there were additional steps in the where is this in the process of the client project element, which we can identify and change. But I need to set up all those templates. But I have to say, now that I've done it and gone through it, I can start modifying those templates and getting them ready. And you know me, I love systems. So while systems are not your thing, you know, and you get to the point where everything is like completely overwhelming because you've, I mean, you're juggling so many balls. You're right, you've got four weeks sometimes at most to get anything in a return. Um, and not everything gets updated. I could make sure all of that got updated and that we got all of the information in.
SPEAKER_00So I've looked at cheaper software. A lot of solo operators use a particular brand of software that costs less than $2,000 a year. And on the surface, for us, yeah, we use ultra-tax, Thomson Reuters, and sometimes I gripe about how Tom, you know, Thomson Reuters raises their rates eight percent a year every year, except for last last year was a bad year where their online system was down a lot during taxis, and they d actually didn't raise rates, which shocked me. But um, I'm sure there will be uh a makeup for that coming this year. But um, I could save $12,000, $13,000 by switching to this cheaper software, but in investigating it, it would probably add 30 minutes of preparation time to every return. And if you actually do the math, if you're doing 150 returns, an extra 30 minutes is 75 hours.
SPEAKER_01Yeah, that's an extra week for one person working overtime. It's it's not it's not worth it. Um I think that the system, what we have, I think that now being able to say, you know, that I'm also learning the bookkeeping end of it. I'm teaching myself that now to deal with our own corporate bookkeeping, which is fun. Um, but now that's another thing that we can actually offer clients and and do so that they don't have to worry about it because if things aren't categorized correctly, you know, then you can't actually put them in on the return. Then you're doing manual overrides, and then it starts to get to the point where you how many times are we going to be flagged?
SPEAKER_00And I've always said that one of the worst things in the world in tax prep is doing entity returns like partnerships and S-Corps, where the bookkeeping is just a disaster and there's not really a proper system. And you're just kind of plugging numbers in and forcing the balance sheet to balance and and there's not any real concept of does this even reflect reality. And I think that that's what we're trying to get away from is is get a you know, but I think that business clients should all be required to be on some kind of bookkeeping system where either we do the bookkeeping for them or we have a review process for their do-it-yourself bookkeeping. So it's not just here's our crap that we're dumping in your lap in February.
SPEAKER_01That we then get to send back and then we wait six more weeks for. I think that that that's the other piece of it. So um definitely requirement of quarterly review. Um, also, you know, I think that making sure that we're paying like corporations and as corps and partnerships that you're paying in if you need to pay in. Like, but you can only do that if your bookkeeping is up to par and you know what your balances are at the end of every quarter. And so I think that it's like it's kind of a snowball. But I'm excited to actually be able to do those things. And I never thought I would be excited to be working on the accounting pieces of things. Um, but I I do have to say that I did find myself getting to the same kinds of systems and working myself in the same ways that I was when I was working towards burnout in my previous career in life, and so really having to say, okay, that is not what this is about. It is not doing all touching all 150 things you have to do today. It's working until you really feel like you actually can do it. Here's the other piece of it. You have to really be mentally focused and engaged. So if you are not, if like if you're tired, if you have done too many returns and you really just don't know what, like if the screen starts to blur, like if you've got your mind on something else, you can't be effective and do a good job. And that's where you start to make mistakes, and that's when you start to see things like, whoo, yeah, this was like somebody prepared this old return that we've got on a bad day. Or, you know, sometimes there's the opposite, too. You're like, oh, okay, yeah, that's exactly what we have. We're in line, it all works really well and it jives. But yeah, I think that I it was a good experience, it was an interesting experience. Um, you still worked your 80-hour weeks, and and we saw you, you lived in your office, and I would bring you your meals in the office and prop you up. And we did two weeks where you didn't do presentations in order to help account for additional times and all of those pieces. And I still feel like even this week and next week, we probably should have just kept those cleared out as well. But um, we'll see how all of that goes.
SPEAKER_00All right. I think that that wraps up this episode of As the Dinoson's turn talking about tax season. It was one of those rare episodes where we focused on one subject and just that subject. It's crazy, right? Well, join us again next time for another episode.