March 17, 1958

Victor Romano is a mythical man.

He’s a man invented by this column and impersonated by one of my staff.

We gave him an occupation: Insurance salesman; a wife, Mary; a child,
and a family income last year of $7,635.23 ($57,644.70 USD 2007)
–$874.70 ($6,374.55 USD 2007) of it withheld by his employers for federal income tax.

We supplied him with government W-2 forms and a set of statistics and
facts to show what he earned and spent during the year 1957.

Then, last week, we sent him out into the street.

His instructions were to visit some of the hundreds of "income tax
experts" who blossom up along with the poppies in Southern California
every spring.

Romano was to let these "experts" decide how much he owed the
government, or how much the government owed him, in tax payments for
1957.

He visited more than a dozen of them, seeking them out from behind "Tax
Expert" signs in barbershops, markets, otherwise empty stores and real
estate offices.

He talked to each one, explaining his personal finances and asking how much it would cost to have his forms prepared.

The answers ranged from $10 to $50 to one "expert" who said he’d do it for 12% of Romano’s refund.

Another man set a flat fee of $25 ($182.19 USD 2007) and said:

"Tell me how much you want back. I can juggle these figures pretty easy."

We checked out some of these "experts." Among them were men who, by
regular profession, worked as jewelers, soda jerks, plumbers and
electricians. They’re fine, legitimate businesses–but they hardly
qualify an individual as an authority on the complicated subject of
income tax.

Finally, Romano settled on two of them to prepare his tax.

The first was a man in downtown Los Angeles. His office was
impressive–with solid desks, not card tables, and even an adding
machine and a telephone.

He said he was an accountant and bookkeeper, year-round.

His price: $21 ($153.04 USD 2007).

And for it he determined that the Romano family still owed the United States government $98.07 ($714.70 USD 2007).

Romano’s second visit was to a man in the San Fernando Valley. He
worked in an empty store with a few makeshift desks and card tables
spread around it.

Being a tax expert, the man admitted, was strictly seasonal work for him.

The price outside said $5 ($36.44 USD 2007), but the expert waited
until after filling out the form to tell Romano that a "complicated
return like yours" would cost $16 ($116.60 USD 2007).

But it was a bargain because–with the same set of figures given the
first "expert"–he managed to get Romano a $101.93 ($742.84 USD 2007)
refund.

To reach the final figure, he made an error in simple addition on the
very first page of Form 1040, he inserted one non-allowable claim for
$400, but made up for it by cheating Romano on various other entries.

Romano’s next move was to take his facts, figures and W-2 forms to an
established accounting firm which does a lot of work in personal income
taxes. The firm advertises a triple-check system.

Price for the service was $38 ($276.93 USD 2007).

The accountant assigned to Romano came up with a few dozen questions
which neither of the first two "experts" thought to ask. He also took
certain deductions which the other apparently were unaware of. Others
he disallowed.

And his conclusion was that Romano was eligible for a refund of $302.66 ($2,205.70 USD 2007).

The difference between Expert No. 1 and the accounting firm came to $400.73 ($2,920.40 USD 2007).

That’s a lot of extra pocket money for a man and wife living on an
annual income of $7,635. It’s also a pretty confusing state of affairs
for a taxpayer to be in.

Romano didn’t want to cheat his debt-ridden Uncle. Nor was he particularly anxious to lose his hard-earned money by overpaying.

So he called the local office of the Internal Revenue Service. He explained the problem.

Would they be willing to go over his forms to determine his accurate tax bill?

They said they would.

They did. And their conclusion was that Victor Romano legally deserved a refund of $112.69 ($821.25 USD 2007).

Tomorrow we’ll see how the accounting firm battles Uncle Sam for the
$189.97 difference in their two returns. We’ll study the four income
tax forms of Victor Romano more closely. And we’ll learn the methods of
the "experts" who cheat the taxpayer–through laxness, ignorance and
carelessness.