Provided by Drake Software

2D or not 2D, That is the Question



It is true that the Social Security Administration (SSA) released standards this year for printing 2D barcodes on Forms W-2 and W-3. It is also true that the IRS released alternative versions of Forms W-2 and W-3 to support the 2D barcode. So why might you receive a W-2 from a taxpayer with no 2D barcode? Here are 2 reasons why:

1. The only copy of Form W-2 that was specifically revised by the IRS to support a 2D barcode was Copy A, the copy designated for the SSA. There were no specific guidelines released to address 2D barcode placement on the other copies (1, 2, B, C and D) of Form W-2.

2. Printing 2D barcodes on Form W-2 is not mandatory for 2010. Therefore, it is possible that companies are waiting until it is mandatory to support them, which will likely be 2011.

In the Drake Write-Up program, we do support printing 2D barcodes on 2010 Forms W-2 and W-3. In addition, due to IRS guidelines being somewhat flexible in the dimensions of copies furnished to employees, we also developed alternative versions of Form W-2 Copy B(employee’s federal tax return) and Copy C(employee’s records) to support printing a 2D barcode.

When 2011 rolls around, I suspect industry will push for IRS to publish specific guidelines related to 2D barcode placement on the other copies of Form W-2, so have your scanners ready.

To see a demonstration of the Scanner click here.

Posted by Brian Stork
VP of Application Development
Drake Software

Let My PTIN Go



I’ve spoken with several preparers the last few months who have experienced some degree of difficulty in obtaining or registering their PTIN. Some called in a panic last week because their application was still “pending”, and tax season was about to start.

The IRS issued notice 2011-11, which will allow certain tax preparers who have applied to register or obtain a PTIN, to file tax returns using either their old PTIN or their SSN until they receive a response on their application. The notice indicates that these preparers will receive instructions from the on-line application process on how to proceed.

For preparers who have filed a paper application (W-12) with a payment, this will constitute a good faith effort to comply with the requirement.

Tax preparers who receive a new PTIN during tax season should immediately begin to use the new PTIN.

IRS Notice 2011-11 has been released, and can be accessed by clicking here.
Internal Revenue Bulletin 2001-7 should be released soon and provide additional details of the clemency.

Posted by John Sapp
Drake Software

A Dream Comes Full Circle



Lolita S. Himes, ATP, is right where she wants to be, but it took some time to get there.

Himes’s story begins when she was a high-school student in West Virginia. She enjoyed serving others and was good with numbers, so it made sense that her dream was to someday become an accountant.

 A dream deferred

 But Himes’s dream was put on hold. She went to work for the phone company right out of high school, and five years later, she was transferred to South Florida. There she met Jim, who worked for the same company, and would soon become her husband. As a wife, a stepmother to Jim’s four children, and a successful middle manager with the telephone company, Himes let go of her accounting dreams.

 “I liked the job at the telephone company,” she says. As an engineer there, she “didn’t really think about [other career goals] during that hectic time.”

 But Himes did continue to do the family’s taxes each year; “I didn’t want to let somebody else do my taxes!” she says with a laugh.

 Greener pastures

 In 1987, the couple retired from the phone company and looked, literally, for greener pastures.

“When Jim was growing up,” Himes explains, “they always had a farm. We wanted to see what we could do with farming.” She laughs. “And we wanted to get out of South Florida!”

 In 1988, the couple moved to North Florida, to a small community about 100 miles west of Jacksonville. There they started what would become Red Roof Acres, an 87-acre farm where Jim has raised cows and grown hay ever since.

 Owning a farm brought new challenges to Himes when it was time to prepare their taxes. “I had never done a Schedule C business return, or a Schedule F, or any of those,” she says. Before the farm, they “had both been just wage earners. I had only done W-2s.”

 Himes didn’t even consider finding a professional, though; she was determined to remain the family’s tax preparer. But she needed to gain some tax knowledge—fast.

Learning the business 

Himes began by signing up for an introductory tax course from a national tax-preparation firm. The following year, she went to work for that firm, where she continued to learn the tax business, both by taking courses and by gaining practical experience. During this time, Himes also took on several bookkeeping clients of her own.

Lolita Himes was hardly aware of it at the time, but her dream of becoming an accountant was slowly coming back to life.

One day, after putting in her hours at the tax-prep firm, Himes came home and told her husband, “You know, I can do this.”

“I was being paid a commission at the time,” she explains, “and I suddenly thought, ‘Hey, I can do this on my own, and I can make more money.’”

She was already doing bookkeeping jobs at home, working out of a back bedroom. In 1995, that “office” also became a tax-prep office, and Himes prepared 35 tax returns that first year. In 1997, Red Roof Services was born, providing tax-prep and bookkeeping services for an ever-growing clientele.

Professional success 

Expansion came quickly. In 1998, after a tax preparer in the area moved and referred all of her clients to Himes, Red Roof Services, named for the distinctive roof on the couple’s home, needed more space. “We had a big garage,” says Himes. “We took the garage door out, put in storefront windows, dropped the ceiling, cut a doorway between the spare bedroom and made it into an office.”

Today, Red Roof Services operates out of that 800–square-foot office, using five computers and annually preparing more than 600 tax returns for individuals, partnerships, and corporations. Himes also has 45 to 50 monthly bookkeeping clients.

Himes takes her responsibility as a tax preparer, and her obligation to understand and know how to apply tax law, seriously. She earned her accredited tax professional (ATP) status through the Institute of Tax Consultants, where she is a member of the board of regents. She’s also secretary of the American Society of Tax Professionals (ASTP) and is a member of the National Association of Tax Preparers, the National Society of Tax Professionals, and the National Society of Accountants. She regularly attends conferences and workshops, including the fall conference of ASTP and the IRS Tax Forum in Orlando.

“If I’m not current with tax laws,” says Himes, “I’m not preparing an accurate tax return.” Himes emphasizes the importance of having correct, up-to-date tax knowledge. “I know where the information is supposed to go. That’s important in knowing how to prepare a return, even with today’s software.” A Drake customer for 10 years, Himes says, “there are times when I’ll go into Drake and say, ‘OK, I know what the answer’s supposed to be.” What have I not answered right in order to get that answer?’”

“I call Drake support very little because I look things up first,” continues Himes. “If you don’t know how to do a return by hand, or if you don’t know about tax prep and instead depend on the program to do your work for you, you won’t always get the right answer. A tax program is only as good as what you put in to it.”

 Client satisfaction is the key

 John and Terri Strayer, owners of John’s Lawn Equipment and Pro Arms, a retail firearms store, have been with Red Roof since 1994. The practice does all the Strayers’ bookkeeping and prepares their business and personal tax returns.

Himes’s ability to explain things clearly is important to the Strayers. “If we have a question,” Terri says, “Lolita explains it in a way we can understand.” Terri adds, “If there’s a question on new law, she explains it to our satisfaction.”

 John concurs, remembering that their previous accountants were not such good communicators. “A lot of the terminology they used, and the information we got, required someone to interpret it … Lolita can talk that jargon to someone else, but with us she explains the information in layman’s terms so we know what’s going on and what we need to do or not do.”

 The Strayers also appreciate Himes’s accuracy. “Everything has to be right,” says John, “and that’s a requirement for us, too. The last thing in the world we need is issues with the IRS.”

 “Lolita gives great service, and we’ve been very satisfied,” concludes John. “She’s taken care of us for 16 years, and we wouldn’t think of changing.”

 While her clients value her trustworthiness, professionalism, and commitment to accuracy, Himes also works hard to maintain a personal touch with them. For example, in addition to sending Christmas cards to her clients, she sends them birthday cards, with a batch of cards going out every weekend. She uses Drake’s client birthday report and mailing labels to get the job done.

 Even if she’s away from home, she says, “I mail the cards from wherever I am.” She once mailed cards from Franklin, NC, where she was attending a Drake Update School.

 Other customers, those who are closer to the couple, get special gifts during the holidays. “Some of my clients know they’re going to get jelly and cakes for Christmas,” she says. Himes works on these gifts long before Christmas: “Just this weekend (in August),” she says, “we made 31 jars of jelly!”

 Drake: Himes’s final answer

When Himes first began using a computer for tax preparation, she used a nationally marketed product but didn’t like the low level of support. She shopped around for a couple of years, using several different products before settling on Drake.

“I had first looked at Drake in 1998,” she says, admitting that she wasn’t impressed at first. “But over a two-year period, their product moved forward tremendously.” The 2000 product, she says, “was a much, much better program.” She made the switch then, and she hasn’t looked back since: “I’m happy with Drake and all the features of their program. I’ll stay with them.”

Among her favorite Drake features is the new Personal Client Manager: “I like that feature because you can get who you want without having to type anything in. Plus, it tells you everything: when a return was accepted, the transmission date, the acknowledgement date—everything.”

Like many of Drake’s clients, Himes also values the quick, knowledgeable support the company provides.

“We went to Windows 7 recently,” she says. “I have dial-up, and while we were able to get dial-up Internet on the computer, we couldn’t get it from inside Drake. So I called Support. My tech guy talked to the girl in Support, and she told us exactly what we needed to do—something about the firewall. My tech guy was even impressed with the knowledge this person had! It took about three minutes, and—boom-boom-boom—the problem was fixed!”

“I haven’t called support much,” she adds, “but I’ve always had good help with it.”

A dream comes full circle 

Lolita Himes has come a long way from the early years, when she worked out of that back bedroom. Back then, her ad campaign consisted of brochures, flyers tucked into windshield wipers, and coffee mugs handed out to local restaurants. She now depends on word of mouth only and is happy with the current size of her clientele.

She’s come even further since her high-school days in West Virginia, where she dreamed of becoming an accountant. Little did she know then that her dream would take such a long, circuitous route—or that, with motivation, persistence, hard work, and commitment to those she serves, the dream would eventually become reality.