Taxing Times: Part Two

My biggest failing as a tax preparer was that some clients interpreted my responses to them as my being rude. For example, one gentleman was very angry because I would not include his mortgage payments as a deduction. (Clarity: mortgage payments have never been a deductable personal expense in Canada; perhaps he was confused by the Americans who allow mortgage interest as a deduction). Result: a bitter complaint to my boss about how rude and uncooperative I was. I ran into many such cases during my six years of income tax return preparation.

Child care expenses sometimes caused some conflicts. It has been the case in Canadian tax laws for as long as I can remember that there are two kinds of private child care providers: those who provide receipts and those who don't. The idea is that if someone is going to claim child care as an expense, someone else is going to have to declare it as income. It all has to balance out. To support this position, the government insists that child care receipts contain either the name of a professional company or the social insurance number of a private individual providing this service. I don't make the rules, but, judging by the reactions of some clients, you'd think I was some sort of arbitrary tyrant. More than a half dozen clients expressed outrage when I told them that social insurance numbers of their providers are required; some insisting that they have been making the claim for years and no one every asked for this information before. It really didn't matter what my personal views were (my job was to prepare accurate returns in any case), but my software would not process the claim without a valid social insurance number. Result: a flurry of complaints to my boss about how rude and uncooperative I was.

I learned to hate preparing returns for restaurant and bar servers. It never ceased to amaze how few of them actually made any tips and those who did made miniscule amounts. That didn't jive with my personal experience as a patron of such places—and I don't think I am the only person in North America to actually leave a tip for my server. But, it certainly appeared that way according to the stories that such employees told me at tax time. One young lady had worked for a short time as a dancer in an Ottawa strip joint and told me with a straight face that she earned only minimum wage and no tips whatsoever.  I couldn't help but think that not only must she been a terrible dancer, but she must have hideous and terrifying scars revealed when she takes off her clothes. In any case, I would tell my tip-less victims of the Quebec tax situation: the Quebec government decides how much such employees earned in tips  based on a percentage of their paid wages and the classification of the establishment. The rates ranged between 100% and 400% of their stated earnings. And I was facing people who insisted that they could not possibly have earned more than 10% of their hourly wage in tips. I could not accuse a client of lying and I was required to accept whatever they told me in such situations at face value, but I did feel obliged to give them a warning. The government could examine credit card and cash register receipts to get a more accurate assessment of someone's tips. When audited they'd be sure to try to lay the blame on me as the tax preparer, so I did try to get the message across that it was on them, not me. Results: many calls to my boss to complain about how rude and uncooperative I was.

Rent receipts! I could write a chapter in a book about the problems I encountered with rent receipts, but let's stick to one situation I ran into fairly frequently: parents issuing rent receipts to their teenage children. It can be a grey area, but, as with child care, if someone is making the deduction, then someone else has to declare the income. I'd usually run into this with teenage boys making their first tax return. They'd give me a piece of paper saying that their mother told them to give me this.  I'd see it was a receipt for rent and ask if their mother was planning to declare it as income. I'd usually get a stumbling muttered reply, mixed with surprise and an admission that no, she wasn't. I would then tell them that they couldn't claim it. They were usually too shy and confused to argue. But, I ran into one very ugly case. Older tax preparers had been playing fast and loose with tax rules for years because they were paid on a commission basis—the higher the refund the more they'd be paid. By the time I entered the scene, commissions were a thing of the past, so there was no more incentive to stretch a point in order to make a few more dollars. However, older tax preparers found change difficult to accept.

I was working alone in the office during the summer when faced with an angry set of parents accompanied by their thirteen year old daughter. The government had just rejected the daughter's submission of rent receipts on the grounds that the parents had not declared the resulting income and, besides, parents cannot charge a 13-year-old rent. The girl was handicapped and had a small disability income, which was the basis of the refund that the government now wanted returned to them. The mother was particularly incensed, accusing me of being some sort of monster for trying to take money from a handicapped thirteen-year-old (a number of clients could not distinguish between me, a tax preparer  and go-between, and the government, who set the rules and collected the money). I tried to explain that the daughter should not have been given the refund in the first place and that the government simply wanted back the money that she was not entitled to. My argument had no effect. The original return had been prepared by someone with many more years experience than I and so I must be wrong (even though I had nothing to do with the government's ruling and was simply trying to explain it to them).  The struggle went on for weeks until my boss asked me to write a summary of the case and the tax laws behind it. She then presented my write-up to another senior tax preparer who told her that my analysis was correct and that the original tax preparer and the parents were wrong. The parents had often complained loudly during this exercise that I was rude and uncooperative.

 I had an soft spot for single moms. (One was even relaxed enough with me to pop out a breast and feed her baby while we worked on her return.) Despite many people's perceptions, most of the ones I encountered were struggling in very difficult circumstances to protect and to raise their children as best they could. How or why they were in the situation they were in was irrelevant: they were living in a reality of here and now, not in the fantasies of some self-righteous and moralizing person who never had to make a difficult decision in their life. The problem, though, that some presented me with, was the involvement of a spouse—common law or otherwise. The thing is, under tax law, one is allowed to claim one dependent with a deduction equivalent to the personal deduction (the amount the government determines that you are allowed to earn tax free before any other deductions are considered. It is currently set at about $11,000.) Normally, the "dependent" is one's spouse—and anything that they earn is deducted from the spousal deduction. So, a spouse earning more than $11,000 is neutral as far as your own taxable income is concerned.

 Now, in the situation where there is no spouse, the dependent can be anyone else in your immediate family (the law is quite specific about the ages and relationships allowed). In most cases this is a child—and usually a child with no income. For a single parent, then, this is a considerable tax saving. The $11,000 deduction usually translates into a refund of about $2,000.  So, when faced with a young couple and child who would tell me with a straight face that they were "just friends"—even when the child was referring to the male as "Daddy"—I would have to question fairly closely and give them a subtle warning about the government cross-checking their addresses, which is something is does fairly often. I hated that part because I was treading on very sensitive ground. The question really boiled down to the sexual relationship between the couple—and I did not want to know. It meant so much money to them that they probably thought the "white lie" was worth it; while my job was to protect them from possible prosecution.

I was much happier when the mother and child were alone so that I didn't have to ask anything more personal than "Are you living with anyone?" For the most part I was happy that the mother received a healthy cheque to buy her child some warm clothing or purchase some other form of relief from the daily indignities of poverty. I was not happy when a mother would remark to her friend, "Good, now I can buy that I-pod." (I made it a habit, when doing returns for couples, to always hand any refund cheques to the woman. If they asked why, my standard answer was: "A woman knows what her family needs; a man just knows what he wants." Sometimes the male would get angry—and there'd be another call to my boss about how rude and uncooperative I was. Almost every women smiled knowingly at my remark.)

 One busy night a man arrived with his 16-year-old daughter, newborn on her lap. I prepared the girl's return while the father beamed happily. Her refund was only a token $150 sales tax credit for her and the baby. After all, she was not, and never had been, employed, and so there was nothing to base any other tax credits or deductions on. An hour or so after they left the father phoned to complain that I had cheated them out of a couple of thousand dollars. He said he had checked around and found out that there was an automatic tax refund for women with children and every woman he knew had received it. What kind of con game was I trying to pull? I tried to politely explain that there was no "automatic tax refund" and, in any case, his daughter had no income to base any refunds on. Sigh! Another complaint about how rude and uncooperative I was.

 And yes, I got more than my share of complaints about how someone's friend, in precisely the same income tax situation, had received a refund of a couple of thousand dollars from some other tax preparer, yet I had given her only a hundred or so. There is no answer for that one because it would violate client confidentiality to check out someone else's return to confirm or deny the claim. I could review the client's return and confirm that it had been prepared correctly and I could suggest they take it to some other tax preparer for review, but such situations usually meant another note about how rude and uncooperative I was in my boss's notebook.

 I had more than one client inform me indignantly that "the client is always right." In most cases, nothing could be further from the truth. The reason they were paying me to prepare their returns, instead of doing them themselves, was that I knew what needed to be done,  and what was acceptable and what wasn't. Seems a bit counterproductive to argue with the guy you are paying about whether or not you can deduct the cost of off-the-shelf medications. If you could, I would be the first to point it out as I always tried to give my clients the largest refund allowable under the law. After all, it was their money to begin with and they were entitled to every dime I could get for them. That was also part of my job description. But, telling people that they could not deduct $10 for a bottle of aspirin, even though they really needed it and their doctor said it was a good idea, was grounds for a call about how rude and uncooperative I was.

 But, what do you do when the client is insisting that you are dead? Seriously. That really happened to me. A senior tax preparer I had admired died suddenly the season before. A couple stared at me after they sat down in my cubicle and told me that they had heard I was dead. I denied it, but they persisted, "No. We heard it. People said that the old guy died." I told them that there was more than one old guy and that they were thinking of someone else. No, it was you, they insisted. Well, I'm pretty sure that I didn't die. They stayed to prepare their returns, but did not seem convinced. I really don't know, but, I would not be surprised to learn that another call about how rude and uncooperative I was made that evening.