In honour of the upcoming Income Tax filing deadlines in the U.S. and then Canada later this month, I wanted to share with you a small glimpse into the madness that is tax preparation. I have altered certain details and will omit certain information in order to maintain professional client confidence, but otherwise these are real lackwits in real situations that actually happened. I should point out that I no longer work as a tax preparer so I feel quite free to point and laugh at my former clients.
The first winner was a single woman, who I hadn't seen since the last time I prepared her return a year earlier. I was doing in-home pick-up so I reviewed her slips and documents carefully before I left. I noticed a slip for a significant RRSP withdrawal, let's say $40,000 (not the actual figure). I asked her if she cashed out an RRSP and she said yes. So far so good. I asked her if she noticed that the bank hadn't deducted any tax at the time of withdrawal, which they normally do. She said yes. Great. I asked her if she was prepared to pay the tax now with her tax return.
That's when the fun began.
"Oh I don't have to pay any tax."
"Why is that?" I asked innocently.
"Because the bank said I wouldn't have to."
I took a deep breath and tried not to scream.
"Did they give you a reason? Or some special paperwork?"
"Well, normally when you make a withdrawal from your RRSP, you have to pay the tax on it that you didn't pay when you contributed it."
"I know that. But the bank said I don't have to pay tax on it so I don't have to."
Another deep breath.
"And they gave you no indication whatsoever as to why?"
"Ok. Well the slips I have here indicate that you will owe tax. I don't know how much and I won't estimate, that would be unfair to you. I'll complete the return and let you know. Do you still have the money?"
"Great! That will make it much easier for you to pay the tax without being financially burdened."
"Well you're wrong I'm getting a tax refund this year. I'm not paying any tax."
She wouldn't budge. So I left. She was looking at a five figure tax bill. I had no idea how to get her to understand. Five minutes after I sat down and started sorting her slips, I got a phone call. It was the client.
"Hi, I just talked to the bank."
"Good?" I replied.
"They said you're wrong. They said I don't have to pay any tax so I want my refund."
"Did they give you a reason why?"
"No they just said to tell you to report it on one line and take it off on another."
I thought for a moment.
"The only way that could happen would be if it was a transfer, as in you recontributed the money BACK into different RRSP right away. Did you do that?"
"You said you still have the money."
"I do. It's in my RRSP."
"Did they give you a contribution slip?"
"Where is it?"
"May I ask why you didn't give it to me or mention it until now?"
Keep in mind I hadn't seen her or spoken to her in a year.
She said, "It's your job to know these things. You're the tax guy."
Yes, I'm psychic. I can read my clients minds and know what's on documents I've never seen, before I even know they exist. I am a wizard of great power. Fear me.
Tomorrow I'll post another lackwit, one far more interesting.
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