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!
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. . .
Paying Too Little OR Too Much. . .
Paying Too Little OR Too Much When Filing A Regular Middle Income Tax Return!
This is another addition to the series “Mistakes made when choosing a paid tax preparer”.
Don’t pay to little or too much when filing your income tax return. That might have sounded odd to you?
Why would you not want to pay too little to have your taxes filed with a tax professional? Well, let me explain. What’s too little or too much? It depends. Let’s start with the “paying too little” for filing a middle income person’s tax return. Who is it do you think are the tax professionals charging the least amount or advertise the lowest fees for tax preparation? Some of these folks are the “fly-by-night” tax preparers. Yeah, they may know a thing or two about filing some tax forms. What they don’t know, they try and figure out as they go along. These may be nice people for the most part, but getting them to be your tax representative with the IRS might not be the wisest decision.
What about paying too much when filing a tax return? Did you know to some people, paying the most money to file their taxes is like a badge of honor? (Or if you want to know the secret truth — it makes the person feel important [like a "somebody"] because they paid $500.00 or $700.00 or $1,200.00 to have their taxes filed!) I’m a rich important guy, “I paid my accountant $600 bucks to file my taxes this year!” as he sips his ‘shaken not stirred martini’ at the country club.
No thank you!
Yes, you’d probably be surprised, but in a lot of cases, when someone in the middle income tax bracket wants to be sure they’ve filed correctly with the IRS they (very foolishly) go pay too much at some CPA’s office with the leather couch and fancy plants and wall hangings, and after they write the check to the accountant for $500 bucks or whatever, they feel pretty good, but their gut tells them something is wrong.
Well, there usually is something wrong. It’s called overpaying when you don’t have to!
Regular retail tax offices with nice, clean working environments are just fine. Getting a quality preparer with multiple guarantees backing up their work, ongoing support and year round access to a manager or person in charge is all you need. Do you need to pay $500.00 or $1,000.00 dollars for that? Actually, on most middle income returns, you can pay in the $150 to $250 range and be just fine. Some high-priced tax professionals will charge you $500 or $600 for the same forms and schedules.
My advice is to find a tax professional who charges by the form so he/she is not pulling fees out of thin air. If he adjust the price that is on him. Like I said, you can over pay or actually under pay – either way, both will come back to bite you in the preverbal end.
Getting the best value for your money is always the right way to go!
Again, I want to invite any and all guest post on this subject. I want to hear from all bloggers or just readers with their own input. Let’s see what you see I am missing. If you have some words of wisdom on this subject please let us share it with everyone, if it is something that has already been covered, so what, I am looking for others to tell what they know or have learned about finding a paid preparer.
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