Insights Into Tax Preparation Frauds

Tips for Choosing a Tax Preparer

If you’re expecting a tax refund, you may be eager to file your taxes as soon as possible so you can pay off debt, build an emergency or other savings account or shop for any number of previously unaffordable consumer goods.

However, rushing into a relationship with the first tax preparer you find could be a big mistake. The IRS recommends choosing a tax return preparer carefully, since no matter who prepares your taxes, you’re still ultimately responsible for all the information on your tax return.

Understand tax preparer qualifications

According to the Better Business Bureau (BBB), there are around 700,000 non-credentialed tax preparers in the U.S. Many states don’t require tax preparers to pass an exam or obtain a license. While non-credentialed tax preparers may be top-notch preparers, they have limited representation rights and can’t represent you in court or regarding appeals or collection matters

Search by qualifications

If you need a tax preparer with specific qualifications such as enrolled agent, attorney, Certified Public Accountant or enrolled retirement plan agent, search the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications

Interview tax preparers

Make sure a tax preparer has an active preparer tax identification number (PTIN) through the IRS and check whether the person meets state requirements. Then interview the tax preparer thoroughly. Ask about fees, availability and what kinds of records the tax preparer will need.

How to Choose the Right Tax Preparer

It is that magical time of the year again and if you are looking for someone to prepare your taxes, there are many factors to consider including expertise and pricing. We are all unique and there is no one size fits all.

Find out what their tax background and experience is. What is their training? What are their qualifications and credentials? How long have they been preparing tax returns? Also, some tax preparers are not a certified public accountants (CPA) and don’t have a formal credential but yet may be competent. Ask questions to find out what makes them qualified to prepare tax returns.

Find out if the tax preparer has experience with the type of return that you must file. Tax returns are not all the same and range from 1040-EZ to various involved schedules. Tax preparers may focus on a certain type of return but may also have sufficient knowledge in many areas.  However, if your return is specialized, you will want to find a tax preparer who has a lot of experience with that type of return. . Ask about their experience with individual returns vs. corporate returns. In my experience, tax preparers who specialize in corporate tax returns, which tend to be more expensive, charge a higher minimum fee. This is something to keep in mind if you are only looking for personal tax return preparation.

Ensure that the tax preparer is familiar with the requirements of the states and localities that you must file in. For example, if you live in one state but work in another, there may be filing requirements to consider. Also, you may have a business that has sales in different states, own property in another state or have relocated to a different state during the year.

Know in advance what records, documents and other information that the tax preparer will require of you. This could save you time and money. A competent tax preparer will ask for many different documents and be able to explain what you will need to provide for special circumstances you may have. Personally, I like it when a tax preparer offers a thorough checklist to review, which would enable a thorough tax preparer to make sure nothing has been missed, such as long-term care insurance premium deductions, investment fees or student loan payments.

How to Find a Tax Preparer for Your Business

Don’t wait until the end of the year to hire a tax preparer. You can find and begin working with someone on your business taxes at any time. This article provides some tips on finding a tax preparer who will do good work for you.

CPAs vs. Tax Preparers

Business owners should understand that not all tax preparers are CPAs, and not all CPAs do tax preparation work. While you don’t necessarily need to hire a CPA to do your taxes (there are many competent non-CPA professional tax preparers), you do need to consider what other kinds of services you might need, like choosing accounting software, setting it up and getting trained, data entry tasks, and review of records for tax evaluation.

Licensing Requirements for CPA’s

The licensing requirements for CPAs vary from state to state as do the minimum and ongoing educational requirements. All U.S. CPAs have to pass a uniform examination, but the educational requirements to get (and stay) licensed are decided by the individual states. And CPAs may not be required to keep up to date on tax laws every year, so being a CPA doesn’t guarantee that the individual knows any more about taxes than when he or she originally passed the CPA exam.

What an Enrolled Agent Does for Business Taxes

An enrolled agent is a person who has either passed a standardized test that covers all parts of the tax code or who has at least 5 years’ experience working for the IRS in a qualifying position. EAs are required to have 72 hours of continuing education every 3 years with a minimum of 16 hours every year. Like CPAs, they have to take an ethics course. Unlike CPAs (who can take accounting, management, technology, and personal development courses), EAs have to take all their courses in the area of Federal taxation.

Selecting a CPA for Business Taxes

First, decide what kind of services you need. You may determine that you want someone to help with tax planning, to find someone who can help figure out the best ways for you to structure employee benefit plans and retirement programs to get the maximum tax savings.

How to Choose a Tax Preparer

Every year, United States taxpayers must file their income tax forms before the April 15th deadline.  For many people, major life changes, business ownership, or simply a lack of knowledge about the ever-changing tax laws make finding a trustworthy tax preparer a good idea. That said, not all tax preparers have the same level of experience and training

Which Type of Tax Preparer is Right for You?

First, it’s important to understand the different types of tax preparer and their qualifications. Only enrolled agents, certified public accounts and attorneys may represent their clients to the IRS on matters such as audits, collection issues, and appeals.

Enrolled Agent (EA): An EA is a tax preparer that has been approved by the IRS to represent taxpayers. An EA must either have prior qualifying employment with the IRS or pass an intensive two-day exam on federal taxation and complete a background check. To maintain EA status, they must complete a specified number of credit hours each year of continuing education in accounting methods and tax regulations. An EA may work independently or as part of a firm and may specialize in specific areas of tax law.

Certified Public Accountants (CPA): CPAs have a college degree (or the equivalent in work experience). They are licensed after passing a state professional qualifying exam. They are highly skilled in accounting. This makes them good candidates for complex tax planning and preparation if they are experienced in handling tax matters and enrolled in continuing education programs that keep them abreast of the constant changes to tax laws. If your return is quite complex, a CPA may be your best choice for tax preparation, but keep in mind they will charge much more than basic tax preparers.

Attorneys: Tax often attorneys charge the highest fees as tax preparers. For taxpayers looking to legally shelter part of their income, or for those who need specialized advice on municipal bonds, estate planning, and the like, hiring a tax attorney is a good option

Questions That Can Help You Choose a Tax Preparer

If you’re like most people, you’d rather go with a pro during tax season: More than 83 million people pay someone to help prepare their federal tax return, according to IRS data. That shouldn’t come as a surprise: With so many rules to know, forms to fill out and formulas to follow, it’s easy to make a mistake if you go it alone.

But when it comes to finding a good tax preparer, how can you be sure you’re making the right choice? Referrals are a great place to start, but it’s still important to do your due diligence. Make sure you’re asking the right questions — and getting the right answers. Here’s what to ask a tax professional before you decide to hire them

DO YOU HAVE A PREPARER TAX IDENTIFICATION NUMBER?

This is the first question you should ask any tax professional. Any person who charges a fee to prepare taxes for others must register with the IRS and receive a preparer tax identification number (PTIN). In addition to signing your completed tax return, the tax preparer is required by law to enter this number on any return he or she prepares.

WHAT ARE YOUR REPRESENTATION RIGHTS?

Tax preparers fall into one of two main representation categories. Those who carry “unlimited representation rights” can represent clients on any matters, ranging from audits to collection issues to appeals. Those who carry “limited representation rights” can only intervene on behalf of people whose returns they prepared and signed, and under specific circumstances.

According to the IRS, tax professionals with unlimited representation rights include attorneys, certified public accountants (CPAs) and enrolled agents (tax preparers who have passed a three-part IRS enrollment exam). While an enrolled agent (EA) is not an employee or representative of the IRS, he or she can act on a taxpayer’s behalf when it comes to dealing with the IRS. In order to retain their licenses, enrolled agents must complete a minimum of 72 hours of continuing education every three years.