THOSE WERE THE DAYS

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Everynow and then a tax-related blog post, article or news item will take me back tomy early days in the tax business.
Arecent post by Professor Jim Maule on Income Averaging, referenced in Saturday’sBUZZ installment, did just that.  So Ithought I would rerun two posts from the past on the Golden Age of 1040s -
Those were the days, my friend -
* when a savvy tax preparer could"pull a rabbit out of a hat" and save a client literally thousands ofdollars in federal income tax with "Income Averaging" or"10-Year Averaging" (and in doing so be assured a client for life),
* when credit card interest, autoloan interest and personal loan interest, as well as our tax preparation fees,were fully deductible,
* when "Employee BusinessExpenses" were an adjustment to income and not an itemized deductionsubject to a 2% of AGI exclusion,
* when there was no such thing as anAdjusted Gross Income exclusion or threshold or the "phase-out" of adeduction or credit,
* before all the acronyms (PIG, PAL,ACRS, MACRS and so on),
* and when one-half of long-termcapital gain just disappeared from the tax return.
I started my career in February of1972, preparing 1971 tax returns, when a deduction was really worth somethingand everyone itemized. As we used to tell clients, "Uncle Sam willreimburse you for up to half of our fee!"
In 1971 the top tax rate was 70%.There was a "minimum tax", not yet alternative, and a "maximumtax" (i.e. the maximum tax on "earned income" was 50%). While wedid prepare a few maximum tax forms, I do not recall ever preparing a minimumtax form. The Alternative Minimum Tax did not begin to affect out clients untilthe 2nd half of the 1990s.
I went to work for James P Gill, myuncle's tax preparer, during my first year of college, with no experiencepreparing tax returns. I had never prepared a tax return before, not even my own!My education consisted solely of the freshman semester of "Accounting101".
I learned the business the absolutebest way possible - by actually preparing returns. On my first day of work Iwas given a briefcase containing a client's current year "stuff" anda copy of the previous year's return and told to "jump in and swim".If I had a question I would ask Jim, blessed with the patience of a Saint (atrait I soon learned was essential for a tax preparer), who would stop what hewas doing to explain the answer to me.
I worked in a true"storefront" office on the fringe of Journal Square, Jersey City'sequivalent of Times Square (made famous in the "Jersey Bounce", which"started at Journal Square"), where we dealt with what Jim affectionatelyreferred to as "the great unwashed masses" on a daily basis.
There were no computers in thosedays. During my first few years we did not even have a copy machine in theoffice. Returns were prepared by hand on 3-page carbonized forms purchased fromAccountant's Supply House. To this day I still prepare all my 1040s manually -in 35 tax seasons I have never used tax preparation software to prepare areturn.
As I started out in the taxpreparation business the matching of 1099s to 1040s had just begun. I remembera client who came into the office during my first or second year with ahumungous print-out from the IRS listing by source all the interest anddividends that he had failed to report on his previous year's 1040.
Back then a tax preparer was trulyin many ways also a "father confessor". One day a widow came into theoffice dressed in her black mourning outfit and waited to see Jim. Once in the"inner sanctum" she confessed that while her husband was alive shefiled a joint return with him, prepared by our office, claiming only hisincome, and she also filed a single return, elsewhere, under her own SocialSecurity number to report a small pension she received in her maiden name. Inthose days only the Social Security number of the husband was required to be enteredon the return - and not that of the spouse. After giving her"absolution" Jim commenced to fix the situation.
During my early years you were alsonot required to list the Social Security number for dependents claimed on yourreturn. One year a married client, let's call him John and call his wife Mary,left his "stuff" off at the office, which included a handwrittensheet listing, among other deductions, "dependents" John, Mary, Pauland George. The college student who prepared the return that year (not me)listed as dependents John, Mary, Paul and George. The client received therefund requested on the return without question.
The next year John came in andstayed while I prepared the return. I asked if he was still claiming his fourkids, John, Mary, Paul and George, and he told me that he only had two children- Paul and George! The John and Mary he had listed on the sheet the previousyear was apparently he and his wife. It appears that the student who hadprepared the earlier return had forgotten our first, and most important, ruleof tax preparation - always review the prior year's return when preparing thecurrent 1040.
At the recent IRS Tax Forum it wasreported that in the first year you were required to list a Social Securitynumber for all of your dependents about 5 Million dependents disappeared fromtax returns.
Over the years, due to our proximityto New York City, we prepared the returns of some "semi-famous"taxpayers. One year in the late 1970s we prepared the 1040 for the then captainof the New York Giants football team, who was partner in a local restaurantwith one of our long-time clients. This was well before the days whenprofessional athletes all had multi-million dollar contracts, but I do recallbeing surprised that his W-2 was only $100,000+. FYI, this person was one ofthe rare clients, I can count them on the fingers of one hand, who"stiffed" Jim over the years.
When the drummer for the originaloff-Broadway production of ONE MO' TIME became sick and a local union musician,whose return we prepared, took his place we welcomed as new clients most of themembers of the cast, who came up to New York from New Orleans where the showhad originated. It was the first year we added the Louisiana state income taxreturn to our repertoire. I remember having complimentary tickets for the showupstairs at the Village Gate and going backstage after the performance todeliver finished returns. We also did the tax returns for the road company.
Our clients were extremely loyal. Ifthey moved out of state they would continue to mail their tax returns to us. Wehad one client who had retired to the Netherlands and still had us prepare her1040!
Some clients were also compulsivelyconsistent, coming in to have their returns done on the same day each year.Back when Abe Lincoln had his own separate legal holiday February 12th was abusy day for us, especially with teachers. We also had our share of clients whowould wait until the very last day of each tax season, generally April 15th, tocome in. When we saw Wally Weinmann, usually the last person on the last day,we knew that it was over! We even had a tv repairman who was always a year anda day late - he would come in on April 16th of 1975, for example, to have his1973, not 1974, tax return prepared!
Of course in the "good olddays" we never filed an extension. We finished all the returns on April15th - even if we had to stay up until 3 am to do so!
A lot has changed since those days.Reagan completely rewrote the tax code with the Tax Reform Act of 1986, doingaway with a lot of the loopholes and deductions we had used to work magic. Jimdecided to retire when he turned 75 and handed his practice and office over tome. He would come in to help during the last weeks of the season until hepassed away three years later.
As you may know, I now work out of ahome office and no longer take on new clients. While I do not miss dealing withthe "great unwashed masses" I do miss the "good old days".Every now and then a long-time client, faced with a large balance due to"Sam", will ask if we can Income Average and I think back to the dayswhen we could "pull a rabbit out of a hat".
And of course, most of all I missthe days when come April 15th it was truly over - and we didn't have to spend thenext six months dealing with GD extensions!
TomorrowI will tell you about MY FIRST 1040.
TTFN