More of “Things your tax pro may not tell you”
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“You wouldn’t believe it.”
Complaints about tax preparers, including allegations of inaccuracies and returns that weren’t filed on time, are up 80% in the past five years, says the Council of Better Business Bureaus. But when it comes to the Internal Revenue Service policing problem preparers, “the lifeguard is still asleep.”
Less than 1.5% of returns get audited, and while that may pacify nervous taxpayers, audits are the primary way to catch bad tax pros. The GAO found that a year after it reported poor preparers by name to the IRS, the agency had failed to audit a single one. Professional organizations, such as the American Institute of Certified Public Accountants and the National Association of Enrolled Agents, pack even less of a wallop because they often wait for the IRS to act. Then the institute will strip membership and report bad accountants to the relevant state-licensing group.
Finding this information is a two-step process. If your CPA is an AICPA member, you can find out if he’s been disciplined by the institute by checking on the AICPA website. You can retrieve details by putting his name in the site’s search box. If your CPA has been disciplined, it’s important to note the reasons why, “There is a whole range of situations where the (institute) would discipline a member.” Those could include not returning client records, disclosing confidential client information and not exercising due care in preparing a tax return. To find out if a CPA’s license has been revoked, you should check with your state board of accountancy.
“What are your qualifications?”
Concerned about unethical, unlicensed tax preparers and what has been called “sharks in the water.” “Anyone can call himself a tax preparer.” Many have. At one point as many as 600,000 tax preparers were unregulated, according to the National Taxpayer Advocate, the taxpayer assistance wing of the IRS. Some set up shop in a local real-estate office, but many work for the big chains.
This all changed with the IRS RTRP program. If your preparer doesn’t have an PTIN, they are not allowed, by law, to prepare your return for profit. (This includes any CPA, EA, Attorney, RTRP anyone who prepares) by the end of this year (2012) All non-CPA’s, EA’s, or Attorneys will have had to pass a competency test. A minimum competency test is now live and by the end of 2013, all preparers will have to pass the test in order to prepare tax returns for compensation. The new RTRP (Registered Tax Return Preparers) will also have an annual continuing education requirement of 15 hours. All the hours will be tax related.RTRP - Ask your Representative why it is that CPA’s, and Attorneys are exempt from these requirements. I say this because As it stands now, They are not and will not be tested concerning tax issues nor will they need to take CPE related to tax matters like an EA or RTRP.
“If it’s February, you’re late.”
A savvy tax pro may be able to cut your tax bill or juice your refund. But don’t expect to find one come mid February. From that point through April, tax pros are generally too busy to talk to new clients. So if you don’t already have a preparer lined up, by the time you actually have your W-2s in hand, you’re probably not going to get good service.
This means you should be talking to tax preparers in October, November or even as late as early January. They’ll have time to answer questions, look over your old returns and suggest changes. Not only that, but talking to a tax pro in the fall means you still have time to plan. If you wait until you have all your W-2s, you’ve locked in all your income for the year. But in the fall a good preparer can help you figure out ways to manipulate your income by increasing your 401(k) contributions, deferring a bonus until the new year or taking taxable losses.
Wait until spring and a professional can help you make small decisions, like whether to itemize or think about different deductions, but you’ve lost most of your flexibility.
“Taxes, whatever — let me see what else I can sell you.”
The real money in tax prep has nothing to do with 1040 forms and W-2s. For the big-chain preparers, as well as your local accountant, the register really lights up only when they persuade you to take a loan, open a retirement account or buy insurance. Chances are you don’t need what they’re selling, but the sales pitch may blur the issue. GAO staffers reported that when they visited the big-chain tax preparers, loans were described as “options” or “bank products”; on one visit a customer was asked to sign a loan application without being told what it was. RAL means Refund Anticipation Loan.
Worse, these extras can do you more harm than good: More than 80% of those who opened an “Express IRA” at H&R Block, for example, paid more in fees than they earned in interest, according to a lawsuit filed by the New York attorney general. (H&R Block says most Express IRA accounts opened between 2001 and 2005 have yielded “positive net tax savings benefits and interest earnings,” even as the company “has lost money operating this program.”)
CPAs, too, are in the sales game, ever since the AICPA allowed members to sell insurance products. When commissions can be $20,000, it’s easy to get greedy.
“If I screw up, I’ll pay up.”
Worried about an audit? H&R Block and Jackson Hewitt are happy to ease your mind — for a price. Both offer the option of buying a geared-up guarantee that promises to cover any back taxes you owe, plus interest, fees and penalties.
Here’s what they don’t say: You don’t need the extra protection. If it turns out you owe back taxes, the big chains’ basic (read: free) guarantee already covers fines, penalties and interest. Many CPAs and EAs and RTRP will do the same; they often have insurance for that very purpose. Just be sure to ask about it before one does your return. But what about the back taxes?
True, they could amount to a bigger expense than the fines and penalties, which may be why some chains can sell that extra guarantee. But H&R Block and Jackson Hewitt will cover you only up to $5,000 and exclude the most complicated returns. If you’re tempted, know there may be an unintended consequence: If someone pays your taxes, the IRS considers that taxable income.
In other words if you buy the guarantee, and H&R Block ends up paying your back taxes, expect to get a 1099 next January.
“Tax preparation is an art, not a science.”
Recent law changes (EIC to name one) tightened penalties for tax preparers who play fast and loose with the tax code, taking far-fetched positions because they know 99% of returns never get audited. That said, for anyone with a complicated or unusual financial life, there’s still lots of wiggle room, I’ve never heard “It’s about 10% black, 10% white, and everything else is in the middle.”
Chances are good you have room to maneuver if you have income in a category the tax code treats flexibly — you’re self-employed, for example, or own rental property. Ditto if you’ve earned big capital gains or incurred high or unusual medical expenses. In short, if you’re attaching a schedule to your return, a good tax preparer will pay for himself.
Now, that may mean raising a red flag with the IRS, and a good preparer should explain if he’s taking risky positions. If you can’t stomach the specter of an audit, you’ll want a pro to travel on the side of caution.
Think twice before paying someone to look for loopholes if your income picture is relatively simple. If you’ve got one W-2, you don’t need someone fancy, there’s not a lot we can do for you.
“You’d be better off.”
Maybe you’re hiring a tax preparer because you’ve got better things to do with your weekend or numbers make you dizzy — more power to you. But if you’re hiring a pro because you think he’s smarter than you, think again. On average, tax preparers make more mistakes, and costlier ones, than John Q. Taxpayer does.
According to a study of IRS data, 56% of professionally prepared returns showed significant errors, compared with 47% of those done by the taxpayer. And audited taxpayers who used preparers owed an average of $363, while those who filed themselves owed $185.
Of course, tax preparers often see more-difficult returns, which could lead to more errors.
For a family with one W-2, mortgage interest and a couple of kids, TurboTax is just fine. If, on the other hand, you’re attaching a schedule for self-employment income or capital losses, consider getting help. And even then, if a return is made complicated by a one-time event — say, the birth of a child or the acquisition of a rental property — you might need only one year’s worth of advice. If nothing changes, you should be able to copy it from year to year, so long as you keep up with tax law changes to your situation.
“You should shop around.”
There’s no standard price for doing taxes. Some preparers charge by the hour, others by the form; either way the cost depends on where you live, the complexity of your situation and the qualifications of your tax pro. Consider: The average H&R Block customer pays about $150; a CPA may charge 15 times that.
People rely too much on word of mouth; they don’t shop prices. If they did, they might be surprised. A licensed local pro may not cost much more than a national chain.
I charge by the form, and a simple return could cost just under $150.00 – not much more than what you might pay at a big chain.
Even among franchises, prices vary. The return that cost $90 to prepare at one big store cost more than three times that at another, according to a GAO study. To be fair, it may be hard to know what your return will cost before the preparer actually spends time on it. Ask for estimates using last year’s return — that’ll give you a point of comparison to find the best price.
Shop around.
Related articles
- Using the Title “Registered Tax Return Preparer”?!
- Help Me Prepare My Taxes
- A Cpa For Taxes-does It Make A Difference?
- Preparer Registration Wastes Time and Money – Guest Post by Joe Kristan
A Week in Perspective
New PTIN System Set in Motion by IRS – On Tuesday, the IRS officially implemented its new Preparer Tax Identification Number (PTIN) system. From now on, all tax preparers will have to be issued PTIN (even if they already have one) in order to be qualified to prepare and submit tax returns for their clients in 2011. This included all paid classes of tax preparers including CPAs, enrolled agents and tax attorneys. This is in line with the IRS initiative to properly register and regulate the thousands of tax preparers in the country.
Tax Professionals Must Now Pay The IRS For The Right to Prepare Tax Returns PTIN’s Are Now For Sale – Well, now a tax professional must buy the right to prepare a tax return. I suppose this isn’t any different from having to pay a fee every year to renew my CPA license. Just one more thing to add to my overhead costs.
Problems with PTIN Online System? Don’t Wait to Register – Tax preparers heads up, according to the new IRS rules, you have until January 1, 2011 to register for your PTIN (preparers tax identification number). I’m getting a little concerned about the IRS’s ability to GET IT DONE by the January 1, 2011 due date.
Online PTIN Application Now Available, But… – The IRS released the final regulations for the new PTIN process for tax professionals. There’s an FAQ available, too.
Don’t you feel more competent already?
Is it reasonable for Congress to demand “Plain Talk” from the IRS? – Bottom line: if we Americans want a tax code that we can understand, we need to demand it directly from Congress. This is my favorite post this week.
Don’t Let a Rule of Thumb Rule Your Wallet – Rules of thumb are great little guidelines when you’re talking to large groups of people. A perfect example is the “rule” that you should have “1.5 times your annual salary by age 35″ described in the recent retirement checklist from CNNMoney. If you’re in that age group, you can read that rule of thumb and quickly compare your current retirement savings to get a general idea of what kind of shape you’re. If you have $5,000 and you make $35,000 a year, you might be panicked enough to start beefing up your retirement savings. If you’ve make $35,000 a year and you’ve got $100,000 socked away, you’ll probably feel that you’re ahead of the game. There’s just one problem…
Varying cost of living – it depends on the lifestyle you aspire to.
Taxes on garage sale earnings – The federal tax laws provide for IRS collection of tax on capital gains. So, notes IRS Publication 525, “if you sold an item you owned for personal use, such as a car, refrigerator, furniture, stereo, jewelry, or silverware, your gain is taxable as a capital gain.”
But who’s ever had a capital gain on an exercise bicycle, old toys or an out-of-style suit sold at a garage sale?
Now we know what happened or is happing with Monica L. over at Confessions of a CPA. She landed a job. Nicely done Monica. She explains in her post First Days.
Tax-Exempt Tips For Oct. 15 Due Date –
BlogRoll Beans – September 28th edition.
Cure for the Financially Overwhelmed - Do you experience any of these symptoms when thinking about your personal finances: Budget dizziness, Debt fever, Sweaty emergency fund palms, Late fee hair pulling, Banking knots in your stomach, Retirement savings rash. If you experience any of these symptoms when you think about your finances, I am not a doctor but I believe you have what is called financial overwhelmedness.
Tax cut timing could be costly
Bye, Bye Paper – The IRS has announced that they will no longer be sending tax packages to individuals or businesses. Later in the year, they will send a card to taxpayers (ind and business) who prepared their own paper return last year notifying them of the change and telling them how to obtain the forms they need.
Tax Help News: Seven Deadly Sins of Tax Resolution Every Taxpayer Needs to Know
Tax Foundation Releases Two Reports Focusing on High-Income Taxpayers – The Tax Foundation has released two reports focusing on the expiration of the Bush-era tax cuts and high-income taxpayers: one examining top marginal effective tax rates by state, and another profiling demographic characteristics among top earners.
Should the IRS Give Taxpayers an Itemized Receipt? – What is provided to a taxpayer with a $5,400 tax bill? Nothing. For many Americans, the amount they pay in taxes is larger than any purchase they make during the year, but studies show they know almost nothing about where that money goes to.
US Savings Bonds – What Are Savings Bonds and How do They Work?
The Importance of Cash Flow Management – One of the most important aspects of managing your personal economy is understanding where your money is coming from, and where it is going. You should also know when all of this is happening. Cash flow management in your personal finances is important, since it keeps you from overdrawing your account and helps you plan ahead for larger expenses. When you know how money flows through your personal economy, you are in control.
What is the Difference Between HSA and FSA Accounts?
Use Flexible Spending Account Balance by End of Year – If your health insurance plan provides a Flexible Spending Account or FSA option I highly recommend you use it. You are getting a tax break for every dollar you put into the account. If you use those dollars toward eligible healthcare expenses then you never pay taxes on that money.
Yes, you read that correctly.
The Soft Skills You Need to Get Hired There are Old School tactics and there are New School tactics for every facet of job seeking. One key to your success today is knowing how to capitalize on your soft skills. Wondering what your “soft skills” are? Read on!
H&R Share Prices Expected to Drop due to IRS Action – H&R Share Prices Expected to Drop Due to IRS Action. In the next tax year, the IRS has declared they will no longer supply tax preparers the ‘debt indicator’ of a taxpayer. The debt indicator is a code the IRS has provided every year to tax preparers that indicate the amount of tax refunds the taxpayer is entitled to receive. The debt indicator information supplied by the IRS would include any amounts of child support, back taxes and other debts that would reduce the amount of refunds.
Making Work Pay Credit not likely to be extended – Congress’ effort to stimulate the economy included pushing through a series of tax breaks in 2009. The centerpiece of the legislation was the Making Work Pay Credit, which was intended to provide tax relief for working and middle class families. It may not last beyond this year. The idea was to allow more taxpayers to have cash in their pocket during the year, as opposed to at tax time, by adjusting the amount of earned income withholding.
Tax Reform Discussions in 2011? – “Rep. Levin seeks early action on tax reform next year” reports that the House Ways & Means Committee chair wants to have lots of tax reform hearings in 2011. He says: “We’re serious about looking at our tax code.” The Hill also reports Congressman Levin saying that reform needs to happen in a non-election year.
Something about tax cuts from The Onion – Follow her link it is a must read for sure.
ARE WE BEING RUN BY ARSEHOLES? – THE DAILY SHOW had a bit that asked the question “Are We Being Run By Arseholes?”. The answer they came up with was an obvious “Yes”.
Tax breaks in the new small business bill
Small Business Jobs Act of 2010 – On September 27, 2010 (Monday), President Obama signed an additional economic stimulus bill – the Small Business Jobs Act of 2010 (H.R. 5297).
Small Business Jobs Act of 2010 Into Law – What it Means for You
HR 5297 Small Business Jobs Act of 2010 Outline of Tax Stuff – This is wonderful. Thanks Stacie.
Buying Long-Term Care Insurance To Save For The High Cost of Assisted Living – There’s a great deal of talk today about the “graying of America.” Thanks to advances in medical technology, many people are now living 20 or more years beyond normal retirement age. However, quite a few of these people must deal with poor health during those years. And, the increased longevity, coupled with expanded health care needs, can place enormous social and financial strain on these individuals and their loved ones.
A week about What is a Series LLC and more. Be sure to check out the whole week of post over at Diane Kennedy’s US Tax Aide blog.
An great answer to a frequent question Ask the taxgirl: Reporting Income Not on a W-2
Also today another round up A Post Wall Roundup.
The blogroll works now Thanks Joe.
Currency – A New Financial Site for Young Adults – Currency offers great content, featuring writing from over 25 leading personal finance writers (including yours truly!) from various backgrounds, including journalists from major publications, best-selling authors, and a variety of bloggers from different genres such as personal finance, career advice, travel, lifestyle, and related topics. The articles are written in a fun and informative manner, featuring a more personal and conversational approach than you will find at most financial websites.
In a blogging friend scurry to get his clients extensions done, he posted yesterday A TAX FIX, directing you to his other writing gig as he hasn’t been posting at TWTP in his effort to “GIT-R-DONE”
Three Quickbooks Shortcuts to Save You Time!
Homemade Gift Series #3: Caramel Apple Jam – So what exactly do you do with eight and a half pounds of apples? You make something with them, of course.
Choosing a Payroll Provider —
There comes a time in every small business owner’s life when they start thinking about moving payroll from their living room computer into the hands of a hired professional.
View L & R Tax Preparation Payroll Video
Shopping for a payroll professional, as well as anything else, requires a little research.
Having just moved my company largely online with on line everything (including payroll) I thought I should put some information out for everyone. So, here are some key questions everyone should ask themselves before choosing a payroll provider.
Before you commit to a payroll provider, ask these questions.
1. What type of payroll provider service will address my needs best?
With traditional payroll services, you phone in, e-mail or fax your payroll information every pay period. These methods require you to establish a set time every pay period for you to submit your payroll. Traditional services also calculate taxes and other deductions and offer various payment methods for employees.
Online payroll has been available for nearly a decade. This service usually allows you to enter payroll hours from one Web site and will make all payroll tax calculations and deductions. Paycheck stubs and W-2s are available for employers and employees on a secure Web site, and direct deposit is usually included. Some, can and will file and pay payroll taxes on your behalf. (L & R Tax preparation now offers this service)
Payroll software, like online payroll, allows you to enter payroll information at your convenience and will perform necessary calculations. However, you are responsible for debiting your bank account, printing checks or arranging for direct deposit and handling IRS penalties and notices.
2. What are the biggest concerns about outsourcing payroll?
Most people agree that payroll would be an easy if it weren’t for payroll taxes, withholdings and other calculations such as 401k, or accrued leave time. If you don’t want to stay on top of strict IRS rules and regulations, choose a payroll service that will do the work for you.
Additionally, if you’re considering software or a phone/email/fax solution to process payroll, make sure they offer direct deposit. You’ll save your employees time, and you won’t have to be in on payday to hand out checks.
Although you probably won’t think of it immediately, online access for pay stubs and payroll records can save hours of tedious work. If an employee has ever asked you to provide the last six months worth of pay stubs for mortgage purposes, you know the advantages of offering employees self-service payroll accounts.
3. What if something goes wrong?
If it’s important for you to be able to speak with someone on the phone when you have a question about payroll, ask if they offer live, U.S.-based customer support. And if you’re one to work on Saturdays, you’ll want to make sure someone will be available to assist you then.
Phone support can be a lifesaver if you receive IRS penalties and notices. It’s not uncommon for businesses to receive these penalties or notices in error. If you don’t want to be on the phone directly with the IRS resolving the issue, make sure your payroll service has tax experts who will work with the IRS on your behalf.
Fitting in time for a call about a small payroll question is not on most small business owners’ lists of top priorities. Make sure your payroll service offers a comprehensive, easy-to-use online help database.
4. How does outsourcing my payroll help me stay in compliance?
Many services calculate payroll and provide direct deposits but don’t handle payroll tax deposits or filings. They may say they assist with those tasks, but if you want the most inconvenient and riskiest part of payroll off your plate, make sure your provider will deposit and file federal, state and local payroll taxes on your behalf.
If payroll taxes are the riskiest part of payroll, new hire reporting is the second. In a recent poll, 95 percent of business owners were not aware that federal and state law mandates that all new hires be reported to the state in an appropriate amount of time. To alleviate worries about compliance, select a payroll provider that reports new hires automatically.
Some payroll services offer more than payroll compliance. For example, your business must post the appropriate labor law posters. If you don’t want to worry about costly fines, ask a potential provider about labor law posters and poster updates.
5. Is it worth it?
Regardless of the method you choose — phoning-in, e-mailing, faxing, or entering payroll online or into software —outsourcing payroll is always faster and more reliable than doing it by hand. Homemade spreadsheets are useful, but a transposed number or erroneous formula can translate into a payroll nightmare as you try to rectify an employee’s pay and amend taxes.
If there’s one thing you can always count on changing, it’s tax laws. And they don’t always change at the beginning of the year. Outsourced payroll, even payroll software, spares you the burden of keeping up-to-date with ever-changing tax tables.
Some closing thoughts.
Outsourced payroll is the same as other outsourced services: You can’t put a price on more time to grow your business and service for your clients. That’s not to say the most expensive payroll service will provide you with the most free time. For example, traditional payroll services are usually the most expensive, yet they require you to set aside time during normal business hours to fax or phone in payroll. Likewise, the cheapest provider may save you money but will likely leave you scratching your head trying to decode payroll tax and compliance laws.
Look for the provider that meets your specific needs. Don’t pay for a service that charges for extras you won’t use. Likewise, don’t try to save money by selecting a service that meets just most of your needs. You want a service that handles all your needs. When you find the right payroll service, the benefits will justify the cost
Electronic Filing Mandate
The IRS has been making changes to the Electronic Filing Mandate that originated in H.R. 3548 as predicted when it first came out.
At this point in time they are saying for this next tax season they “anticipate” asking requiring preparers who do 100 or more returns to file electronically and then lower that threshold to 10 for the next filing season. They are doing this because they expect low volume preparers may need more time to get signed up and familiar with the process. They will also be looking at a waiver process so if there is an extreme hardship for a tax preparing firm they may obtain extra time to get into compliance. They are also stating that taxpayers may need some convincing so if a tax client wishes to opt out there may be a way to do so.
As you can tell there is a lot of “supposes” and “may be’s” in this statement……the IRS isn’t completely finished with what they are planning for this next tax season. As I hear more, I’ll make sure to update you.
A little Professionalism, if you please.
Earlier this past week I noticed a post(1) from a blogging colleague. I mention this as although his said intentions were set and designed to inform taxpayers, I found not only a few things wrong with the post, but also felt like the post was an attack. The attack was not to just a good blogging friend and colleague, but to other such professionals as well. Moreover, I am not just referring to tax professionals.
Please, let me explain better.
There has been an ongoing, somewhat group, discussion about the pending and upcoming regulation of tax preparers. In the post referenced above it is clear that the subject is surrounding this topic.
It is clearly pointed out “Although these tax preparers may in some cases be quite competent. . . in the author’s own right, he continues with “. . . the fact is (the highlight is mine) they are unregulated and not answerable to a direct regulatory authority or held to an objectively determined set of standards.”
I argue this. I argued this point a while back and do so still today.
I have written many posts, and a series of posts and guest post, covering the topic at hand, hiring a competent professional preparer. (2) However, taxpayers, we are finding, still manage to find those preparers who, well for the sake of not having a longer post than necessary, are plain unworthy.
However, let us back up a bit. First, to be clear, what/who that is being discussed, is what the IRS classifies as an “unenrolled tax preparer”. (Defined below)
Now then, let us correct the highlighted statement above. It says clearly, “. . . they are unregulated and not answerable to a direct regulatory authority or held to an objectively determined set of standards.”
Yes they are.
Let me say that more informatively, quoting from IRS Publication 470 Limited Practice Without Enrollment:
First lets understand what IRS Publication 470 is:
“The purpose of this revenue procedure is to prescribe the standards of conduct, the scope of authority, and the circumstances and conditions under which an individual preparer of tax returns may exercise, without enrollment, the privilege of limited practice as a taxpayer’s representative before the Internal Revenue Service, pursuant to section 10.7(a)(7) of Treasury Department Circular No. 230”
Okay as I read the above, IRS pub 470, and revenue procedure 81-38 has a purpose. This purpose – to “prescribe the standards of conduct, the scope of authority, and the circumstances and conditions under which an individual preparer of tax returns may exercise, without enrollment” By all rights, that should end the argument there, but no, let’s keep going.
For a moment lets go back to our highlight, is says unenrolled preparers are unregulated. Since definitions are important –by way of Merriam-Webster Dictionary
Regulated means:
1 a : to govern or direct according to rule
b (1) : to bring under the control of law or constituted authority (2) : to make regulations for or 2 : to bring order, method, or uniformity to
So unregulated would be the opposite of the above quote box, accurate?
If I put this all together, I see that according to this IRS publication, Unenrolled prepares are regulated by the IRS as prescribed within Publication 470. Therefore, to say they are not is, well, not accurate.
Surely, we can all agree that the IRS is a regulatory authority. Humm, I would think yes.
Thus, one may conclude that the IRS is the regulatory authority over all unenrolled preparers. Yes?
“Sec. 3. Applicability.01 This revenue procedure, issued pursuant to section 10.7(a)(7) of Circular 230, applies to all unenrolled individual preparers of returns who seek to represent taxpayers, within the United States, before examining officers in the Examination Division of an Office of a District Director of Internal Revenue or in the Office of International Operations.”
Clearly, this publication applies to all unenrolled preparers.
“.02 This revenue procedure does not apply to attorneys, certified public accountants, or agents who are enrolled to practice before the Internal Revenue Service. The rules governing the practice of such persons before the Service are contained in the provisions of Circular 230.”
Clearly this publication does not apply to attorneys, certified public accountants, or agents who are enrolled to practice before the IRS.
So now we know what this publication is for and who it is for.
Okay, so if you turn to page 2 of this publication, Section 7 is titled, Ethics and conduct. But wait according the post (1) unenrolled preparers have no such guidance.
Sec. 7. Ethics and Conduct .01 An unenrolled preparer shall act in such manner as not to commit any act of disreputable conduct. Disreputable conduct includes, but is not limited to, the items contained in section 10.51 of Circular 230.
Wow, unenrolled prepares are held to the same ethics and standards of conduct as all those who are regulated by Circular 230 Regulations Governing the Practice of Attorneys, Certified Public Accountants, Enrolled Agents, Enrolled Actuaries, Enrolled Retirement Plan Agents, and Appraisers before the Internal Revenue Service.
My point here? Well, the post that questions unenrolled prepares does so with the premise that unenrolled preparers are not “held to an objectively determined set of standards.”
Although IRS Publication 470 Limited Practice Without Enrollment is out dated and needs to be updated, the premise of what it states is clear, within this publication are the rules and guidelines for which unenrolled preparers are being held to an objectively determined set of standards.
And within that document, if one is truly in the know about IRS rules and regulations, they know unenrolled prepares are held to the same high standards in Circular 230 as those for whom it was written for, prepares of tax returns.
When I first read the post, I asked the author, “Are you Serious?” The response: “I am dead serious. What part of what I wrote do you disagree with?” Well, I think above I covered much of what I disagree with. He continued with “What is your definition of a “profession?” Now in the post, he defines this for us by way of Merriam-Webster Dictionary:
1 a : of, relating to, or characteristic of a profession b : engaged in one of the learned professions c (1) : characterized by or conforming to the technical or ethical standards of a profession (2) : exhibiting a courteous, conscientious, and generally businesslike manner in the workplace.
Lets add his other definition:
Investor Words.Com defines profession as, – An occupation, especially one which requires an advanced education.
A profession is indeed an occupation. A professional then would be one who held an advanced knowledge of his/her profession. Yes?
Now here is where he and I will bump heads so to speak. Could the forklift operator of 30 plus years be a professional, because he does his/her job, proficiently? He/she may have been trained, yet he/she may have many years of experience doing this job. If experience were the best teacher, would not years of doing the same thing repeatedly, at some point, make him/her a professional fork truck operator?
My colleague says no. “The reason for this is simple and obvious: No impartial third party regulatory body has determined his core competence.” Really? What of the dancer, the actor, or musician and comic? So what of the landscaper? What of the carpet cleaner? Are they truly not professionals because no “impartial third party regulatory body has determined there core competence”? Not the same thing? I beg to differ, it is. These are all professions, and they all are called professionals.
By what he is saying, Paul McCartney is not a professional. Disagree? Then please point out for us what impartial third party regulatory body has determined his core competence in music. Remember he says “impartial”
Going back to Merriam-Webster Dictionary:
impartial – not partial or biased : treating or affecting all equally
Sadly, I fear my colleague sees only white-collar professions, by the definitions that are posted on his site.
Yet my biggest problem of all, this post drags a good friend and colleague, down to mist of the idiots. He will not see this and that is fine.
My grandmother is very much as he is, really the only difference in the two, is she is over 90. I have to wonder then if he, like her, believes that one should not wear black all the time.
She told me once that professionals do not wear black all the time, in her mind only convicts and truck drivers wear black all the time. That very same year Jeff Goldblum (a professional actor), in an article voiced that he always wears black.
Hummm that story should be for another time.
Anyway, I felt obligated to share the post with my friend. In turn he wrote “I AM A PROFESSIONAL!”
And in good debate-like a lawyer form, this post was written Professionalism: The Cafone’s Rebuttal.
For which I asked him, “Was this really necessary?” referring to did he really truly feel he needed to continue the professional insult to our colleague, my friend.
The reply:
\”Bruce, I suppose nothing I write is \”necessary.\” But I thought it was appropriate given the recent proposals by the IRS to regulate unlicensed tax preparers.
And in response to your email, I didn’t personally attack anyone. You and Robert, more than anyone else should want IRS regulation of preparers so you can differentiate yourself from all the shmucks’ out there who call themselves tax pros. I never once said or implied that Robert or you are NOT excellent tax preparers. After reading your blogs, I’d refer clients to you myself.rt, more than anyone else should want IRS regulation of preparers so you can differentiate yourself from all the shmucks out there who call themselves tax pros. I never once said or implied that Robert or you are NOT excellent tax preparers. After reading your blogs, I’d refer clients to you myself.\”
I politely thanked him for any referrals sent my way and left it at that other to let him know I would be writing this post. (This can be seen on my facebook page)
Before I was able to get this post out, two more post were published. Profession Defined is a post that in a clearer manner, explains or defines the word “profession”. Then this, Beware the Unlicensed Preparer.
Sadly, I found this in poor taste. Believe what you will about “the unregulated or unenrolled preparer”.
Try this:
I challenge any attorney, tax or otherwise, CPA, EA, or what have you, whom are clearly defined in Circular 230 and not living in California, Oregon, Maryland and New York (After 01/01/2010), or other such States – show me your license to prepare tax returns.
Well?
Humm.
I wonder, if you are following the words being said;
“IRS Commissioner Doug Shulman says the agency is working on a series of recommendations that are meant to increase taxpayer compliance and improve the work of tax preparers. Those recommendations may include a call for all paid tax preparers to be licensed in the hopes of “reducing mistakes and combating fraud.”
That includes everyone, CPAs, Attorneys, EAs, and unenrolled preparers alike. Then at that point, those who will be licensed will be all of it. Meaning, the unenrolled preparer is going to be added to the list of folks who “are” allowed to represent taxpayers100%.
Or is that why some of you are so defensive and abrasive to those who are unenrolled? Your pissed because not only will you, the Tax Attorney, or you, the CPA, or you, the EA may have to get a license (maybe, the ground rules are still not set), but you’ll no longer have the market on representation of taxpayers before the IRS.
News flash, monopolies are illegal. Taxpayers need to know the truth about the misconceptions within those ranks. Others are just as / can be as capable of taking the tax classes being held at those reputable universities. Earning CPE in taxation, and as pointed out, ethics.
Aside from the required CPE that Attorneys and CPAs are required to take, there are only a few true differences between what they can do and what an unenrolled preparer cannot.
I would also point out that the Attorney isn’t required to take CPE in taxation. The CPA isn’t required to have taxation CPE. The only ones in the IRS group of specialist that are required to take CPE in taxation are, EA’s.
For those of you in those ranks whom I have or may have or may later offend, I am not a part of your click, been there done that, unimpressed.
Don’t like it?
FO!
Learn to be civil.
(2) Choosing a preparer – this link will take you to post that appear here (this blog) covering this. There are 24 in all.
Reference material:
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Publication 4019 page two. It is not a list per say but will show plainly the “differences” of form 2848 and form 8821.
Definitions:
- unenrolled tax preparers – An individual who prepares and signs a tax return as the preparer, or who prepares a tax return but is not required to sign the tax return.
- Practice before the Internal Revenue Service – comprehends all matters connected with a presentation to the Internal Revenue Service or any of its officers or employees relating to a taxpayer’s rights, privileges, or liabilities under laws or regulations administered by the Internal Revenue Service. Such presentations include, but are not limited to, preparing and filing documents, corresponding and communicating with the Internal Revenue Service, rendering written advice with respect to any entity, transaction plan or arrangement, or other plan or arrangement having a potential for tax avoidance or evasion, and representing a client at conferences, hearings and meetings.
21 Questions you MUST Ask to Choose the RIGHT Professional to manage your Taxes
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by Nick Hodges
The Internet super-highway opens up marvelous opportunities for you to harvest tax advice and information from some of the greatest minds at reasonable prices from anywhere in the world. But it also emphasizes a crucial question: How do you know whom to trust? Sharing your intimate, personal financial information with a stranger is problematic at best.
Here are 21 questions to help anyone choose a tax and/or a financial professional you can trust.
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Physical office. Do they have a physical office that you can visit? Even if you never have to meet them face-to-face, the professional integrity required of a firm conducting a bona fide business should be considered.
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Reachable contact person. Is there an actual person who will be ultimately responsible to take care of you and your financial world?
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Valid licensure. Does their home state licensing board affirm that the tax professional you would like to use has an active license in good standing?
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Clean history. If the tax professional is also a registered investment advisor, does their state or the SEC affirm that they have a clean history?
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Age of business. How long have they been in business? If they are too new, they may not have the experience necessary for your unique situation. If they are nearing retirement, they may not have the interest to stay current with the changing regulations.
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Size of practice. Are they a sole-practitioner? Or do they have an entire team of professionals to help serve you? If you are dealing with just one practitioner, what do you do if something happens to them? Do you know who will help you if the IRS decides to coming knocking at your door?
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Experience of a professional, how big is too big? Will you have access to the senior professionals in the firm, or are you working with firms so big you are just getting the inexperienced junior preparers? Those who work at large, international corporations often have the opportunity to use large, international accounting firms, and pay thousands of dollars just to be ignored by inexperienced junior preparers. Larger is not always the better choice.
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Reputation of firm. Does the firm specialize in keeping and building long-term relationships with their clients? Do you know what are their clients are saying about them?
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Related services. Does the firm offer other services to help you so you can get the “one-stop financial shopping” you need? If so, what are they offering? How do they help you understand which services you really need?
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Name recognition. Are they nationally-known in their industry? Do they teach other tax professionals? – The best way to really know something is to teach it to other professionals.
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Online presence. Do they have a website?
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Ongoing support. Can they continue to help you after you return to the US?
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Entrepreneurial support. What if you start a business? Can they continue to help you?
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Tax forms. Do they know the proper use and filing of forms. More importantly, can they explain them to you in simple enough terms to help you really understand the tax challenges of your situation?
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Fees charged. Are they charging too little for you to receive the quality, professional service your situation requires?
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Quote for service. Are they charging too much (sometimes thousands of dollars), or do they hesitate to give you an upfront quote?
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Personal interaction. Will a live person speak to you before they take your money?
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Tax organization. Will they provide you with a specialized tax organizer to help you gather all the information you are going to need?
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Tax law updates. Do they send out a newsletter to keep you updated on tax law changes?
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Information sharing. Will your personal, private information be shared with outsiders or shipped out of the country for processing?
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Comprehensive coverage. Do they offer to go beyond just getting the numbers right, to working with you to get the answers right for your entire financial world?
Take the time to thoroughly interview the tax professionals you are considering to help you manage your taxes.
This simple step, interviewing a tax professional, could save you from creating sticky situations in the filing and management of your taxes.
Nick Hodges,
President of NCH Wealth Advisors
The above post was edited. I did so in order for this guest post to be relevant to all taxpayers looking for a tax professional. For more very relevant information please see my post Find a Tax Preparer that is right for you, Should I do my own taxes. . ., Choosing a tax preparer. . ., More on “finding a pro”. . .
Also check out my series on the subject that starts with Mistakes Made. . .
I’m Back with “Who is”
Okay, things have settled and for the most part organized. Taking up this blogging thing again as before; Monday, Wednesday, Friday, with a recap of the past week on Sunday’s. I have missed being active regularly and I have been missed, but things are going strong again.
For my readers who have hung with me thank you. I apologize in advance for the repost below but given everything, I find it necessary.
So much talk about hiring a tax professional and so much debate about who is a professional I want this out again.
The biggest point I want to make is that just because someone is a CPA, doesn’t automatically make them a tax professional.
Tax professionals are hard to find because as you may have heard, there is no accreditation from the AICPA (American Institute of Certified Public Accountants) that says “Tax Professional”.
Hope you enjoy my return to active blogging.
Repost of Who is. . .
As a tax preparer I am often asked what is the difference between a tax attorney, an accountant/CPA, a bookkeeper, an Enrolled Agent, and a tax preparer.
A Tax Attorney is not the same as an accountant. The accountant can work with the financial issues and has a general knowledge of tax laws; however a tax attorney is a specialist in all aspects of tax law. Although they often work closely together, they are two complete different services. Typically large and even small businesses will meet with a tax attorney once every quarter or once a year to ensure that they are making the best possible business choices with regards to investments and tax issues. Since the taxation laws change constantly, this is an important step.
A Bookkeeper is responsible for keeping accurate, up-to-date business records for proper cash flow management, balance sheet preparation, and developing expansion and investment plans. A bookkeeper also assists in filing tax returns with updated tax records. Accurate bookkeeping is a legal requirement and should be kept well within the standards that are set by local and federal tax agencies. A bookkeeper accurately records all of the financial transactions. It is the responsibility of bookkeeper to note all monetary transactions that are received and paid out. The records also include outstanding balances that the company owes to other parties and others who owe to the business. Business bookkeeping takes a lot of time and cannot be done in a hurry. At small businesses, bookkeepers also double as company accountants. Perhaps bookkeepers have the biggest responsibilities in the company as business planning, payroll management, and tax return preparations are dependent on accurate bookkeeping. Bookkeepers often do not have the qualifications or certifications of accountants, but the responsibility is not any less. Bookkeepers that have a great deal of experience can market themselves as accountants or managers. For that, they also need to supplement their profession with certificate courses, seminar attendance, and on-job training. All types of businesses require bookkeepers who are experienced in their specific business functions.
Accountants keep track of a company’s money. The company’s managers and people outside the company read their reports. Managers look at the accountants’ reports to see how well their companies are doing. There are four kinds of accountants:
Public accountants work for public accounting companies. They do accounting, auditing, tax, and consulting work. Some have their own businesses. They do many different kinds of accounting for people outside the company.
Management accountants keep track of the money spent and made by the companies for which they work.
Accountants generally work a standard 40-hour week, but some work 50 hours a week or more. Tax accountants often work long hours during the tax season, from January to April. Most accountants have a college degree in accounting. Public accountants have to take a special test as well, resulting in a certification. Public accountants also must have a special license from the State in which they live. Accountants are generally good mathematicians, and have good analytical skills.
An Enrolled Agent (EA) is a federally-authorized tax practitioner who has technical expertise in the field of taxation and who is empowered by the U.S. Department of the Treasury to represent taxpayers before all administrative levels of the Internal Revenue Service for audits, collections, and appeals. “Enrolled” means to be licensed to practice by the federal government, and “Agent” means authorized to appear in the place of the taxpayer at the IRS. Only Enrolled Agents, attorneys, and CPAs may represent taxpayers before the IRS. The Enrolled Agent profession dates back to 1884 when, after questionable claims had been presented for Civil War losses, Congress acted to regulate persons who represented citizens in their dealings with the U.S. Treasury Department.
A professional Tax Preparer is an individual who prepares tax returns. A professional tax preparer can be a Tax Attorney, an Accountant/CPA, a Bookkeeper, an Enrolled Agent, or anyone who professionally prepares tax returns for clients. Most return preparers are professional, honest and provide excellent service to their clients.
So there you have it.
How do you choose the right one to prepare your taxes? There is no one factor to use in determining this. I suggest you read the IRS Tips for Choosing a Tax Preparer. Or my website page Finding a Qualified Tax Preparer. I would also hope you to read 5 Biggest Mistakes most taxpayers make when choosing a tax professional!
Prepare your taxes on-line With L & R Tax Preparation
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