My Life as a Volunteer Tax Preparer – Week 7
For the first time, my weekly experience in the volunteer tax preparer office was somewhat disappointing. Although I met some interesting people and completed 4 of 5 returns, there were none of the uplifting stories that I had become accustomed to hearing. Nevertheless, I think the stories may still be worth telling and learning from.
Exploiting the Volunteer
An Immigrant Citizen Forgets Where He Lives
I have two stories of note. First, there was the immigrant (now citizen) who came in with a bunch of numbers scratched on a piece of paper that he said represented business expenses he needed to deduct from some self-employment income. After a few questions, it became apparent that he had just pulled these numbers out of you-know-where and had no back-up documentation. I told him that I would not prepare his return on that basis and that he needed to go home and find his receipts, etc. and bring them back.
That’s when he told me that “in my country, we just don’t keep receipts and things like that.” I almost lost it. Instead, I calmly but firmly explained to him that he was in the United States now – a citizen even – and that he needed to play by our rules. I wasn’t interested in what happened in other countries. If the IRS asks for documentation and you don’t have it, all of your so-called deductions will be disallowed and you will probably incur a penalty.
He then told me that he had no documentation at all for $2,400 he had paid his niece to help him – she was paid in cash. I told him to get his niece to send him a bill or receipt for the payment. That’s when he told me that he did not want to do that because then she would have to pay taxes. Oh boy did I have trouble staying in my chair after that one. Paying taxes must be optional in the “old country.”
I did not complete his return. Unfazed, he whips out his daughter’s paperwork and asks me to prepare her return, in absentia. I did, just to get him out of there.
Exploitation of the Old and Confused
The other story made me sad and angry at the same time. This was a widowed 79 year old woman who had a small pension, a small Social Security benefit, and maybe $150K invested in a retirement account with one of those chain brokerages. I’m guessing that the money she has invested had come from her husband’s life insurance. She was a very confused woman. If I had only spent a few minutes with her, I would have suspected that she was either drunk or high. But she wasn’t. She was just plain “I’m old and worn out, life has been hard” kind of confused.
She showed me her year-end tax statement from the brokerage. Her broker had sold all of her equity investments in 2008, probably because one or the other of them became discouraged by the markets. She had large capital losses, much more than she could ever benefit from tax-wise.
But here is the problem. The sales were not completed in lump sums. Instead, there were hundreds of transactions spread over 3-4 months. Many of the transactions were repeated sales of the same mutual fund. It appeared that the broker – whom she referred to as her “financial advisor” – was churning the account for commissions.
When I asked her why there were so many different transactions in her account, she could not explain it. I told her that it confused me as well and that I was going to print her return so that she could take it and the brokerage statement to her “advisor” to review. I encouraged her to meet with her “advisor” and find out what strategy he had in mind for her. I did not want to openly accuse this broker of unethical conduct but I wanted to set the wheels in motion for her to do something on her own. I suggested that she might want to get a family member to help her. With her confusion, she needed an intervention of sorts by someone she could trust.
I suspect that there are a lot more cases like this one. Maybe the AARP should expand their volunteer Tax Aide program to include general financial counseling services to those who need it, like this poor woman. I would be happy to join such a program.
So that was my day in the volunteer office. A good learning experience, but not in a positive way like most of the others. But I will return next week and hope for something better.
Image credit: Estherase