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!
Getting it right
Five days ago I read a post on a topic that is of interest to everyone. The author of course responded to my comment. AN up and coming CPA/tax blogger gave a note where, of course, the author responded, and I put in another two cents worth. At this point, a new voice entered with a statement and some questions.
I hope now to answer those questions, and maybe a few others.
This all started simply enough because of a 2003 Study. Findings were such that CPA Prepared Returns Result in Fewer Audit Adjustments than Returns Prepared by Non-CPAs
I made the comment that maybe this study was not entirely accurate. Not because of the study itself, but because taxpayers blindly believe that a person with CPA behind their name means they are tax preparation experts.
For the record, just so you know, just because somebody has CPA behind their name, this does not make them a “tax professional”.
In a post from another tax blogger, she was thinking about all the fancy credentials the AICPA offers for CPAs to specialize – financial planning, fraud examination, business valuation – and wondered how to become a certified tax expert. A representative of the AICPA (American Institute of Certified Public Accountants) responded to this saying, “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’.”
As I read this I was amazed that someone representing the AICPA actually admitted that the general taxpaying public blindly believes that just because someone is a CPA they own the title of tax professional.
Again, A CPA designation does not by itself qualify as tax expert. Other than EA (Enrolled Agent), there is no real designation available to be obtained to verify or prove a Tax Preparation Professional. There needs to be.
I suggested then that we needed to educate taxpayers in the difference of just a CPA and a tax professional (who by the way could be a CPA).
As it was pointed out to me, who would pay for this, who should or would be charged with this responsibility?
The comment that sparked this post – “I think the industry should accept that it has taken certain missteps along the way and repair that. . .”
In an annual report by National Taxpayer Advocate, Nina Olson said that she would work with the Inspector General for Tax Administration to develop regulations for presently unregulated (commercial preparers who are not attorneys, CPAs or enrolled agents) tax preparers.
To me this is misleading. I mean it is being proposed that those who are not attorneys, CPAs or enrolled agents aren’t regulated. When in fact they are governed by the same rules as those preparers as who are attorneys, CPAs and enrolled agents. (We are talking about what is commonly referred to as an un-enrolled preparer.)
So to clarify, According to Circular 230 (Circular 230 contains the regulations governing the practice of attorneys, certified public accountants, enrolled agents, enrolled actuaries, and appraisers before the IRS.) a preparer is defined as “An individual who prepares and signs a taxpayer’s tax return as the preparer, or who prepares a tax return” And preparers are governed by the regulations described in Circular 230, including ethics.
If you are an Attorney, CPA, EA you are afforded more mobility within the IRS to act on a taxpayers behalf as also described and regulated by Circular 230.
As it stands right now, anyone can claim to be a tax preparer. There are no guideline as to education requirements, or continuing education requirements. This concerns people, as it should.
I am considered an un-enrolled preparer. By all means I am all for a change. Somewhere somehow there needs to be some sort of something, be it college education and designation or Federal licensing. There needs to be something. To assume this needs to only be done for un-enrolled preparers is pompous.
Any preparer, whether you are un-enrolled, a CPA, an Attorney, and EA, whatever they are, there needs to be something for everyone who signs as a preparer. A standard for all who assist taxpayers in the preparation of their return.
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. . .
Last week’s explosion at L & R Tax Preparation
As I mentioned last week, all week, I went and took a big step. I moved the web site I had for my business together with the blog “the tax guy” all to the same server. All went well, so far as the blog. Something I contribute 100% to WordPress .com / .org. These are two different things. This blog was at WordPress.com. When I went to my ‘all on one server’ (I won’t plug them, not yet, it is still a work in progress), I needed to use the software from WordPress.org. It was very easy to move all the pages from one to the other. (Although I am not posting over there anymore, that sight will still run, for a while, to make sure everyone makes the move to here.)
I would advise anyone who wants to blog to start at WordPress.com. Of course if you have a http mindset and know all there is to know, WordPress.org is probably more your speed and you probably already know this.
The server I was using for my web site on the other hand, not so cool. The pages/website didn’t make the move, the old server in fact deleted those pages when I announced to them I was moving. I give them credit for waiting until the date I had chosen, but I guess in India, their days are earlier than ours because I lost it all very early in the morning. And there (from what I can figure out) is no hope of getting those back.
At first I was really taken back (pissed off is more like it) by the whole ordeal. I mean over 60 pages of information being viewed over 500 times a week, gone, “poof”. But after a few days I came to realize that this wasn’t such a bad thing. It is, but it isn’t.
It is a bad thing in that there are a lot of people not getting the information I was putting out. Mostly about the stimulus, but also how to’s. I had a price guide for Fair market value of items donated, worksheets to help calculate different things, a buffet of links to more information, and now the reason I started the site was to get the information out, is gone. I Even had started building an Organizer to help everyone prepare for their preparer (or self preparation). A college of mine mentioned that the whole thing really sucked because it was apparent (to him anyways) that I had put a lot of work into the site.
I did do a lot to get that site going. Luckily most everything I have saved as a MS Word file. Most everything.
After I stopped being mad at the whole thing. I realized a few things. First and foremost, the information was there but it was noticeable to me and to others that the site had been built in a hurry. Thoughts jumping, sentence structure not up to par (well, I am human I guess) from an English teachers point of view. A lot of other things that just made it, well, off kilter I think.
So it was a good thing that his all happened in that I can now create a better site, one that is easier to read and a lot easier to navigate. Of course this created a new issue. How to build the site? There is a lot of site building software out there too. I was hoping for a WYSIWYG platform. In my mind a lot easier. Through the week I tried a lot of different kinds. Only one looked like it was workable. (I created the last site using that services provided building tool – my first ever). But I still wasn’t the happiest with it.
Then from my friends at Our Fourpence Worth via Twitter, gave me a few more ideas and I really liked what I saw from their suggestions. (New friends are cool, even better are ones from around where I grew up.) And it was through those suggestions I found Joomla.
A lot of information to read. But I have decided that this is what I would use. I have it now, but I am still very new to it all and I have a lot to learn. The best part of it is there are spectacular step by step directions on the various things to do. Like wordpress it is very spectacular and can grows with the site builder.
The first thing is I need to do is upgrade it. Then the real fun begins. Getting started. Luckily Joomla as a visual tutor to help guide me. I may eventually break down and have to buy the guide book, but I am going to see what I can do with the tools I have available.
The whole process took over a week. Had I found something I liked sooner, I would have had my site up by now, or at least a good portion of it. Instead it is a bit empty. Okay a lot empty. But I feel I have the tool I need to make a quality site, that all will find useful.
I invite you all to follow along as I learn and build. I would also truly welcome your suggestions as this goes along. After all I do it so you can have the information. Follow along at http://lrtaxprep.com. Just don’t expect much in the beginning. I will keep updating my status on the project but not in such length here anymore. Look for the updates to fall at the end of my Passing the week post on Sundays.
Mode of taxation
“The mode of taxation is, in fact, quite as important as the amount. As a small burden badly placed may distress a horse that could carry with ease a much larger one properly adjusted, so a people may be impoverished and their power of producing wealth destroyed by taxation, which, if levied in any other way, could be borne with ease.”
— Henry George,
a19th-century American economist
Beyond giving everybody a collective headache when tax season rolls around, taxes have a tremendous influence on our way of life. From daily decisions like where to shop to life’s major decisions {where to buy property, where to establish a business, when and where to retire, and how to plan for death}, taxes are there to push us one way or the other, often practically dictating what we can do.
Progressively higher income tax rates – or “taxing the rich” – cause many productive people to work less and retire earlier, draining the economy and destroying jobs. These stair-step tax rates also bump married couples into higher tax brackets, take an unfairly large chunk out of a one-time spike in income, and increase tax evasion.
It has been said that democracy is two wolves and a lamb voting on what to have for dinner, and many sages have warned that the majority in a democracy may oppress the minority. We have seen this scenario play out in tax policy many times.
Some of the most foolish taxes have been enacted by the many on the few. This was true of the income tax in 1913, it was true of the Alternative Minimum Tax in 1969, and it will be true of the tax increases that Congress is proposing right now.
For a century now, it has always been just a handful of “the rich” or “greedy corporations” that will supposedly bear a new tax, but over time we learn that almost everyone is paying those taxes and that we should defended the rights of the few more vigorously.
“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
Thoughts of taxation
“The mode of taxation is, in fact, quite as important as the amount. As a small burden badly placed may distress a horse that could carry with ease a much larger one properly adjusted, so a people may be impoverished and their power of producing wealth destroyed by taxation, which, if levied in any other way, could be borne with ease.”
a19th-century American economist
Beyond giving everybody a collective headache when tax season rolls around, taxes have a tremendous influence on our way of life. From daily decisions like where to shop to life’s major decisions {where to buy property, where to establish a business, when and where to retire, and how to plan for death}taxes are there to push us one way or the other, often practically dictating what we can do.
Progressively higher income tax rates – or “taxing the rich” – cause many productive people to work less and retire earlier, draining the economy and destroying jobs. These stair-step tax rates also bump married couples into higher tax brackets, take an unfairly large chunk out of a one-time spike in income, and increase tax evasion.
It has been said that democracy is two wolves and a lamb voting on what to have for dinner, and many sages have warned that the majority in a democracy may oppress the minority. We have seen this scenario play out in tax policy many times.
Some of the most foolish taxes have been enacted by the many on the few. This was true of the income tax in 1913, it was true of the Alternative Minimum Tax in 1969, and it will be true of the tax increases that Congress is proposing right now.
For a century now, it has always been just a handful of “the rich” or “greedy corporations” that will supposedly bear a new tax, but over time we learn that almost everyone is paying those taxes and that we should defended the rights of the few more vigorously.
“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
—Winston Churchill
Prepare your taxes on-line With L & R Tax Preparation
L & R Tax Preparation
Tax Preparation, Payroll, and Accounting,
Including online services.
E=MC2 or use QuickBooks
