Righteousness in Designation?
Friday I was interviewed and retained by a new client. This particular client has several issues that actually can fall in line with a great debate we have all been following.
First, a little background:
A young newly wedded (three years) couple has their tax return done by “pros” as they are not among those who follow the taxing world. We will call them Pat and Jody Taxpayer. Having just started their own Business they left HeRBert (the group who prepared their returns) for what to them was perceived as a tax professional. They retained a CPA to handle some general bookkeeping and complete tax returns.
Good choice?
Of course it is, “All but the militantly nefarious and hopelessly deluded concede that CPAs are experts at keeping books and records. There simply is no higher accounting “designation.” then CPA.
The CPA (Certified Public Accountant) maintained records by gaining access to Pat & Jody’s bank account using the online statements. The first tax season for this CPA came around and she completed the 2007 tax return. Another year passed, and she completed the 2008 return.
Several months ago, the IRS notified the Taxpayers that the 2007 return was under investigation. Seven lines on two different Schedule Cs were in Question.
Considering a CPA had prepared this return there should be no worries.
So how did I get this return?
When the time came for the audit with the “Tax Compliance Officer”, the CPA, had manufactured information to provide the IRS to validate two of the seven lines in question and did not show up to guide the Taxpayers through the 3 ½ hour long ordeal. Needless to say, the IRS found no substantial proof or validation for seven lines in question. P & J now are holding a bill from the IRS for over $10,000.00.
Not only are the taxpayers confused about what happened, but the “Compliance Officer” also looked at their 2008 return, they are about to undergo another audit.
“Because good accounting skills are a critical part of good tax preparation, CPAs are uniquely qualified to be tax preparers.”
So where is this CPA? Avoiding Pat and Jody.
This is a most uniquely “qualified” tax preparer?
I reviewed 2006 (again prepared by HeRBert – a fast food chain preparation service), 2007 and 2008 returns. (again, these two returns were prepared by the same “CPA”)
- 2006 had 6 errors resulting in a $213 refund to Pat and Judy (I can say this because I have already amended this return)
- 2007 has 21 errors - three missing forms (associated with errors) and if that wasn’t bad enough, 5 of the errors are mathematical.
“Good tax preparation is about numbers. It’s about keeping good books and records.
In short, it’s about good accounting.
In fact, what is a tax return if it’s not an accounting?”
Hummmmm
if anyone needs a definition to “accounting” I have a link to the right for Merriam-Webster Dictionary or you can click this.
Good thing it doesn’t suggest an ability to add or subtract.
Same for Accountant.
- 2008, well is just wrong. I say this because nothing changed from 2007 through 2008.
- 2007 consisted of
- 1040 Long Form
- 2 Schedule Cs
What the 2008 return consisted of was a 1040A – Short Form, nothing more.
My conclusion is this CPA stands proudly among those who are truly CPA tax professionals. You real CPAs who are tax pros, give her credibility she assuredly doesn’t need.
As for Jody and Pat, luckily they found a tax professional. I will help them through the amended returns, the audit up coming, and any and all IRS intervention that may come their way. If you wish to stay updated on their situation, I will create a blog page giving more detail information and will keep it updated.
However not all of you will see it this way. Why? Well, I am no longer a CPA. I am not an EA, nor am I an Attorney. What does this make me? I am an unenrolled preparer.
Unenrolled preparers, by definition, have no recognized credentials and are bound by no professional standards
And what are the unique qualifications of an unenrolled preparer?
Would someone please tell me?
Anyone?
The silence is deafening.
That’s because the answer is “none . . . nada . . . zero . . . zilch.”
The silence sir, is deafening because you are on your computer. But now, please, open your eyes fully, adjust your glasses, I want you to hear me plainly.
An unenrolled preparer is a unique person. Like a Lawyer, a CPA, or Doctor or any other profession, you are going to have unqualified hacks. My Credentials are useless in the taxing industry.
Or did you miss it?
The AICPA told a CPA/Tax Professional “We do not offer a credential in taxation. In general, our approach has been not to develop credential programs around areas for which the public already believes CPAs to ‘own’. In addition, we do not endorse a particular tax credential.”
An unenrolled preparer sees how others take advantage of the miss-conceptions of the designation and learns tax rules and regs to help people through what can be a very taxing time (no pun intended).
I question your thinking when you say a man with over 35 years in the tax preparation industry has no credibility. I only have 23 so I must not have any either?
Hummmm, let’s look at my background a bit:
a) A Masters in Accounting
b) Formally employed by this countries (at the time) Largest Accounting firms
c) Formally a CPA
d) 23 years preparing returns for taxpayers
Of the four listed in my mind, only qualifies me to call myself a tax professional. I can assure you it isn’t one of the top three.
“There simply is no higher accounting designation.”
Thus, if the Internal Revenue Code imposes an affirmative duty on taxpayers to maintain good books and records, doesn’t that alone explain why CPAs are uniquely qualified to prepare tax returns and why many CPAs are drawn to the field of tax preparation?
Of course it does.”
You Pompous arrogant ass. Is your head so high in the sky that you are not getting enough oxygen?
True enough, the IRC does affirm duty to taxpayers to maintain good and accurate records. Alone that tells me (a former CPA) should seek advice from a CPA on how to keep those records not how or where to put them on a tax return.
It is my opinion that a good majority of the CPAs that are drawn to taxation and preparation do so for the money.
(Not to get off subject, but are you actually a licensed Tax Attorney, and a CPA? I know a few Lawyers and I’ll have to ask, to be sure, but I think like the AICP, there is nothing out there for Lawyers to hold actual “tax” credentials. If I am wrong please correct me, do you have some designation that says you’re a Tax Lawyer? If so, what is it?
As for not being bound by professional standards, I find it hard to understand why I have to point out to a designated pro that we (The Unenrolled prepares) are bound by the same rules in Circular 230 as you are. Maybe you should read it some time.
A while back, I post Who is: a post that defines different titles. If you want to see the entire post please click on the link Who is: Below is a brief recap:
A Tax Attorney - 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.
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.
Accountants – keep track of a company’s money.
Enrolled Agent – 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.
Tax Preparer – an individual who prepares tax returns.
Other post from the “taxguy” blog that may be related to the taxpayer issue mentioned in this post.
Choosing the Right Representative
5 Worst Things You Can Do if You Get an IRS Collection Notice a Guest post from Peter Pappas. . .
How to Avoid IRS Penalties and Interest
Picking A CPA With Too Much. . .
Find a Tax Preparer that is right for you
When opening your mail in January and February, you probably will receive a lot of documents with descriptions and/or warnings about this information being “Important Income Tax Information!” Soon you will have to decide how to deal with last year’s income tax situation.
So, do you try to prepare and file your own income tax returns, or are you thinking about hiring a tax professional?
If you are thinking about hiring a tax professional ask yourself “why would or do I need a tax preparer”. If you feel that you need a preparer there are four basic needs for tax preparation services:
1. speed,
2. accuracy,
3. creating a customized tax strategy, and
4. managing a complex tax situation with accuracy and professionalism.
Everyone wants their tax returns to be accurate. All tax professionals, even those at national franchises, should guarantee the accuracy of their work.
If you have a particularly complicated tax situation, you should seek a tax professional with substantial experience to help you.
If having your taxes done quickly is most important, you’ll probably go to one of the nationwide tax franchises. Although I don’t recommend this, the employees at these companies are trained to get your taxes done quickly. Every year I hear from new clients and non-clients who are/were dissatisfied at the level of accuracy and professionalism encountered there.
Tax laws can be complicated and usually change from year to year, so it’s important to find a preparer who has the knowledge and experience to prepare your returns correctly. A lot of states do not require tax preparers to be licensed; however, many preparers are licensed, certified, and belong to professional organizations that require a certain level of education. Find one of those.
Also, services vary considerably from preparer to preparer, so you’ll also want to find one who offers the services you need.
Before you hire a preparer, call around to a couple of tax offices and take the time to ask these questions:
What kind of formal tax training do you have?
Do you hold any professional licenses or designations, such as certified public accountant (CPA)?
Do you belong to any professional organizations?
Do you take continuing professional education classes each year?
How long have you been preparing tax returns?
Have you ever done a tax return dealing with my situation?
Are you open for business year-round?
Have you ever been disciplined by any government authority for malpractice?
Are you authorized to and will you represent me in an audit or collection matter with the IRS or state Department of Revenue if necessary?
How much do you charge, and how do you calculate your fees?
Ask what their price range is. Prices for tax preparation will vary depending on how complex your tax return is. Some professionals charge by the hour, or by how many tax forms you need to fill out, or even a flat fee for all work.
Ask about any guarantees the tax preparer offers. The tax preparer should be willing to guarantee the accuracy of the returns, be willing to amend the tax return if there was a mistake in the tax prep, and be willing and able to assist you in an IRS audit.
Also, be careful of tax preparers who claim to know “the secrets” of obtaining unusually large refunds. Most preparers charge rates based on their time or the complexity of your return, and you should avoid anyone whose fees are based on a percentage of your refund. (This practice is illegal.) Incase questions arise after your return has been filed, find out if, and where, your tax preparer can be contacted in future weeks or months.
Never sign a blank tax form for any preparer.
Remember that you are ultimately responsible for your tax return, so be sure to choose your tax preparer carefully. If you want to find competent, licensed tax professional I suggest you visit The IRS web site Authorized IRS e-file Providers for Individuals then/or go to Search the NATP Member Directory, then call around and ask questions.
Friends and family can be of additional assistance.
What You’ll Need:
◊ All your current year tax documents
◊ Photo identification
◊ Social Security cards for yourself and your dependents
◊ Checkbook for direct deposit of your refund/direct debit for any amount due
◊ Copy of last year’s tax return
Tip: Little known fact is that local CPAs and EAs and other Tax professionals charge only slightly more than a franchise service and will provide much more personalized service.
Tip: Be sure to ask if your preparer is an enrolled agent (EA), CPA, or has received advanced tax training.
Tip: All tax professionals specialize. Find a CPA or EA who has the experience, knowledge, and skills you are looking for.
Tip: Some franchises will try to sell you an enhanced guarantee to cover additional taxes and penalties in case of an audit. This is practically a guaranteed profit for the franchise.
Some more Tips:
¤ A CPA is a professional accountant licensed by the state. Best for corporate accounting, tax audits, and business consulting.
¤ An Enrolled Agent is a tax professional licensed by the IRS. Best for complex tax issues, tax audits, and responding to tax collectors.
¤ A Tax Preparer may be registered by the state. Best for straightforward tax returns.
¤ The national Tax Franchises are H&R Block, Jackson Hewitt, and Liberty Tax. With offices nationwide. Often fast, courteous, and convenient. But some employees will be less trained than others. Be sure to ask for a senior-level tax preparer.
Expect to pay from $150 to $450, depending on how complicated your tax return is.
Re post – Avoid a Tax Audit with these tips
Being audited really isn’t the worst thing in the world if you are totally honest when filing your taxes. Should you be audited and it is found that you have made an honest mistake, don’t panic. You might be penalized with affordable fines or merely told to correct the mistake. The IRS rarely burns those who practice honesty and caution when filing their taxes. By following the below advice, however, you may never have to find out for yourself.
1-Hire a Trusted professional
Some of us prefer to do our taxes without help and that is fine when things are uncomplicated. Services like TurboTax allow many of us to file taxes in under an hour without a problem. However, those who are self-employed often have a lot of paperwork to deal with. Hiring an accountant, bookkeeper or tax preparer can help you to prevent any mistakes.
2-File Every Year, No Matter What
Can’t pay your taxes in full this year? That is okay! The IRS will work with you through an extension plan. One of the biggest mistakes made by the self-employed when April rolls around is not filing because they can’t pay what they owe. Always file, no matter what. Contact the IRS about your money situation and they will let you pay out the taxes. This results in some penalties, but that is far better than the alternative.
3-Report Your Full Income
One of the reasons why the IRS watches entrepreneurs so closely is because it is easier for them to underreport their income. If you are a freelancer who occasionally takes small gigs with no paper trail, don’t think you can neglect this income when filing your taxes. Finding inconsistencies is what the IRS does best and they will eventually catch up to you.
4-Don’t Get Too Creative With Deductions
There are usually two types of income tax filers who are self-employed:
1) those who are too scared to make deductions because they don’t want to be audited
2) and those who deduct everything under the sun with reckless abandon.
Don’t be either person! You should be able to make deductions, as they are there for your benefit. However, you need to make sure you legitimately qualify for each one.
5-Document Everything
One of the best ways to prevent mistakes is by having all necessary paperwork handy when you file. This is also your best defense against penalties should the IRS ever come knocking on your door. You see, a lot of deductions really can be a red flag to the IRS. If you can back up each one, however, you are perfectly within your right to claim those tax breaks. Back up everything and keep those documents in a safe, organized place.
If this wasn’t any help then look for my post Wednesday July 9th, “Audit Insurance”
Tracking Car expenses. . .
Well, technically, any gas, parking, tolls that are under $75.00, you don’t need a receipt to back up each claim. Meaning if you claim $140.00 in gas and you filled up four times you won’t need the receipts to back that up in an audit. Personally I just find it easier to keep all my receipts so that I have an easy way to get my totals.
Mileage should be tracked on a daily basis – the same way you record in your calendar where you went, who you went to see and why. In fact you could easily do this all in one step. When you write down where, who, and why, also write down the mileage. On your tax return when you claim a deduction for auto expense there are two questions that being able to check “yes” to, is of major importance for a well prepared return:
1. Do you have evidence to support business use?
2. Is the evidence written?
In all seriousness the whole process might take you 5 minutes a day to properly document everything that might be necessary. Get a small planner, when you get in your car write down the mileage, where you are going, why, (personal or business), and who you met. When you get there real quick write down your mileage again.
There are a great number of spread sheets out there on the net that you can find and use. Or take the above information and create your own with the information that best fits your situation. For those of you into techy gadgets, there are a lot of those out there that will do the job (and then some).
I use a spread sheet of my own design that I re-enter into a running spread sheet using excel. In it I track where I go, start and end mileage, who I visited (if I went to see a client), and why I went there.
In earlier years as a preparer I never really understood the “why” part until during an audit I saw several normally acceptable expenses refused by the IRS because the taxpayer went someplace that might have been for “personal reason” Meaning if you go to Target to buy a new whatever for the office, in your journal or whatever you track your car expenses with make sure and write that down. Just going to Target might mean you went to get gum, and that more than likely wouldn’t count as a deduction.
Need more info? You can check out the IRS page for Publication 463, ask me or contact your tax preparer.
The more information you have the better you are if an audit comes your way.
This is a re-post from 08/27/08
Audit Advodance
Being audited really isn’t the worst thing in the world if you are totally honest when filing your taxes. Should you be audited and it is found that you have made an honest mistake, don’t panic. You might be penalized with affordable fines or merely told to correct the mistake. The IRS rarely burns those who practice honesty and caution when filing their taxes. By following the below advice, however, you may never have to find out for yourself.
1-Hire a Trusted professional
Some of us prefer to do our taxes without help and that is fine when things are uncomplicated. Services like TurboTax allow many of us to file taxes in under an hour without a problem. However, those who are self-employed often have a lot of paperwork to deal with. Hiring an accountant, bookkeeper or tax preparer can help you to prevent any mistakes.
2-File Every Year, No Matter What
Can’t pay your taxes in full this year? That is okay! The IRS will work with you through an extension plan. One of the biggest mistakes made by the self-employed when April rolls around is not filing because they can’t pay what they owe. Always file, no matter what. Contact the IRS about your money situation and they will let you pay out the taxes. This results in some penalties, but that is far better than the alternative.
3-Report Your Full Income
One of the reasons why the IRS watches entrepreneurs so closely is because it is easier for them to under report their income. If you are a freelancer who occasionally takes small gigs with no paper trail, don’t think you can neglect this income when filing your taxes. Finding inconsistencies is what the IRS does best and they will eventually catch up to you.
4-Don’t Get Too Creative With Deductions
There are usually two types of income tax filers who are self-employed:
1) those who are too scared to make deductions because they don’t want to be audited and
2) those who deduct everything under the sun with reckless abandon.
Don’t be either person! You should be able to make deductions, as they are there for your benefit. However, you need to make sure you legitimately qualify for each one.
5-Document Everything
One of the best ways to prevent mistakes is by having all necessary paperwork handy when you file. This is also your best defense against penalties should the IRS ever come knocking on your door. You see, a lot of deductions really can be a red flag to the IRS. If you can back up each one, however, you are perfectly within your right to claim those tax breaks. Back up everything and keep those documents in a safe, organized place.
If this wasn’t any help then look for my post Wednesday July 9th, ”Audit Insurance”
This is a re-post from 07/07/08
Your Rights as a Taxpayer
Don’t hold your breath waiting for the IRS to tell you this, but your rights go way beyond just “the right to remain silent!” There are rights which you should be prepared to put to use if the need ever arises. These rights can assure you that you will never become a tax collection statistic. Here are some of your most important rights.
1. The Right to Say “NO” to a Tax Auditor. Does the idea of saying “NO” to an IRS auditor terrify you? It shouldn’t. The tax auditor never has any final authority over you in an audit. However as much as the auditor may huff and puff, you have the right to challenge his or her decision. When you do, the IRS’s own statistics tell you, you will win your case about 64% of the time.
2. The Right to Eliminate Penalties. A common problem you may face is IRS penalties. The IRS has a penalty for every day of the week. In fact, they have penalties for every hour of every day of the week. There are over 150 different penalties contained in the tax law, and the IRS can find one to hit you with at every turn.
The good news is each penalty is subject to cancellation. The IRS generally “forgets” to tell you this (surprise, surprise 
). All penalties can be canceled when you can show you acted reasonably and in good faith and not out of an effort to deceive or mislead the IRS. In most cases, a simple letter of explanation setting out all the appropriate facts will do the job.
3. The Right to a “Correspondence” Audit. Do you dread the thought of facing the IRS in an audit? Do you crumble under pressure of when faced by an authority figure? Are you afraid you’ll say something stupid or incorrect to an auditor? The advice is simple. Don’t go to the audit!
I’m not telling you to hop the first plane to the Bahamas, but I am saying you have the right to a correspondence audit. That is nothing more than conducting your audit through the mail. You avoid the stress :sweat: of a face-to-face meeting, the hassle, inconvenience and expense of taking time off work and the possibility you will say something that can be misconstrued by the agent. The correspondence audit involves submitting copies of your documentation to the agent via mail, together with letters of explanation on any legitimate question.
4. The Right to an “Installment” Agreement. Things can get ugly fast when you owe the IRS money. Their notices make it clear they want the money now—and all of it. Unfortunately, they don’t always explain your right to an installment agreement.
Get a copy of IRS Form 433-A, the Financial Statement. Complete it fully and accurately and submit it to the collection agent. The 433-A lists your income and expenses, assets and liabilities. From the statement, you can negotiate a reasonable installment payment based upon your ability to pay. Unfortunately, the IRS now charges a “user fee” on installment plans. But, paying the fee is better than having to come up with money you don’t have right now.
5. The Right to Challenge Notices. The IRS mails tens of millions of notices each year. They are almost always demands for more money. The good news is that you can challenge and cancel those notices if you disagree and act promptly.
6. The Right to Use the Problems Resolution Office. One of the most frustrating aspects of dealing with a huge, often uncaring bureaucracy such as the IRS is it can be difficult to get even the most obvious errors corrected. If you are ever backed into a corner by the IRS and no one seems willing or able to help, contact the Problems Resolution Office (PRO). For more info go to IRS.gov.
The PRO was set up in 1988 to assist citizens whose problems seem to fall through the gaping cracks in the floor of the IRS’s “We Care” Department. Simple problems, such as account statements and case status, can be handled with a phone call. Pressing problems such as improper payment demands or wage and bank levies should be addressed in writing with Form 911.
Prepare your taxes on-line With L & R Tax Preparation
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