Home » Posts tagged 'Choosing a Preparer'
Tag Archives: Choosing a Preparer
Seven Things Your Accountant Should Have Told You – a Good Post From the Past
1) Hire the right accountant. Accountants have niches just like other professionals such as attorneys and doctors – if you were getting a divorce [god forbid], you would hire a family law attorney, not a tax attorney. Well, the same rule applies with your accountant. Your accountant should have experience working with clients in your particular industry -this will make sure that he or she understands and applies the correct tax laws.
2) Do some tax planning. No matter the size of your income, it never hurts to have your accountant look at your tax picture -BEFORE- yearend, estimate your income tax liability, and then suggest ways to mitigate the taxes. Once your tax liability is known, you can plan for how you will meet your obligation.
3) Always consult with your accountant before making large cash purchases. Sometimes life brings us a fabulous financial windfall… we sign a new contract, we get an unexpected bonus, we get $12 million for starring in a movie, or we win the “Showcase Showdown” on the Price is Right. Regardless of the windfall, before you spend all the money, you should check with your accountant to make sure that your windfall doesn’t include with it some income tax consequences.
4) Live within a budget. If you haven’t already, you should sit down with your accountant and figure out how much is available to spend. It’s just that simple. Don’t spend what you don’t have. Moreover, don’t spend what you “expect” to have before you have it.
5) Always, and I mean always, have money set aside for emergencies. How much to set aside is really relative to your income and your annual expenses. Generally, you should set aside enough money to pay at least 6 to 12 months of living expenses. Now – keep in mind – setting aside doesn’t mean investing it in some crazy volatile investment where you might lose it all. That would defeat the purpose of the emergency fund. No – put it somewhere safe like in a certificate of deposit. This will make sure that you have the cash available in the unlikely event that you do receive an unexpected tax bill or need to be represented before the IRS in the case of an audit.
6) Have a plan B. Planning for the possibility of a life-changing event is never fun. Nevertheless, people need to face that these things happen. Things such as the death of a spouse, the loss of a career, or a disabling illness will affect your ability to meet your financial obligations. Therefore, you should sit down with your accountant and your attorney to discuss your “what if” plans. A plan “B” can be as simple as having a life insurance policy or indicating who will raise your children in the event of your death.
7) Be involved. Okay so a celebrity [like Nick Cage] might not have the time to be completely “in the know” about every financial dealing. But frankly, that’s too bad. Ultimately, the taxpayer is responsible for what is reported on his or her tax return. Consider this, you are signing your return under penalty of perjury. Therefore, handing off all of your financial information – for someone else to deal with without any personal oversight is a risky endeavor that just might cost you 6.2 million dollars and a tax lien on your house. Ouch!
The IRS Presents: Eight Tips to Help You Choose a Tax Preparer
The IRS urges people to use care and caution when choosing a tax preparer. Remember, you are legally responsible for what’s on your tax return even if it was prepared by an another individual or firm.
Most tax return preparers are professional, honest and provide excellent service to their clients. However, unscrupulous tax return preparers do exist and can cause considerable financial and legal problems for their clients. Therefore, it’s important to find a qualified tax professional.
The following tips will help you choose a preparer who will offer the best service for your tax preparation needs.
- Check the person’s qualifications Ask if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.
- Check on the preparer’s history Check to see if the preparer has any questionable history with the Better Business Bureau, the state’s board of accountancy for CPAs or the state’s bar association for attorneys.
- Find out about their service fees Avoid preparers that base their fee on a percentage of the amount of your refund or those who claim they can obtain larger refunds than other preparers.
- Make sure the tax preparer is accessible Make sure you will be able to contact the tax preparer after the return has been filed, even after April 15, in case questions arise.
- Provide all records and receipts needed to prepare your return Most reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items.
- Never sign a blank return Avoid tax preparers that ask you to sign a blank tax form.
- Review the entire return before signing it Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.
- Make sure the preparer signs the form A paid preparer must sign the return as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return. The preparer must also give you a copy of the return.
You can report abusive tax preparers and suspected tax fraud to the IRS on Form 3949-A, Information Referral or by sending a letter to Internal Revenue Service, Fresno, CA 93888. Download Form 3949-A from IRS.gov or order by mail at 800-829-3676.
Links:
- Form 3949-A Information Referral (PDF 94K)
- Where Do You Report Suspected Fraud Activity?
Stacie's Tax Stuff 