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Whole Ball of Tax 2003
HOW TO PICK A TAX PREPARER WHO'S RIGHT FOR YOU
(RIVERWOODS, ILL., January 2003) – Each year, millions of Americans
turn to professional tax preparers for help with their annual returns
as they seek to minimize their tax liability, without inadvertently
crossing the IRS. According to the latest IRS estimates, in 2000,
nearly 69 million returns were submitted by an accountant, tax attorney,
enrolled agent, a retail tax service or other paid tax preparer. To
help you pick a professional who’s right for you, CCH INCORPORATED
(CCH), a leading provider of tax law information and professional
tax preparation software, offers these tips.
Step-by-Step Guidance
Step 1: Identify Several Candidates
4 Go with know-how.
It’s a good idea to look for a tax professional who has consistent
experience in tax, especially since tax laws change frequently.
Since 1995 alone, there have been almost 1,500 amendments to Internal
Revenue Code sections. The increasing use of time-delayed effective
dates for tax legislation means that new provisions can sneak
into the tax code with little notice years after they were approved.
Unless you’re tracking new tax developments every day, chances
are you’re not aware of all of the changes that have taken effect.
4 Ask your friends.
Ask friends whose financial situations are similar to your own
if they can recommend anyone to help you.
4 Contact your state CPA,
Legal or Enrolled Agent organizations. Many state organizations
maintain computer databases of local accountants and other tax
preparers and will provide free assistance in helping you select
a tax professional in your area. Also, many of these organizations
provide free assistance to low-income taxpayers who may not be
able to afford tax preparation help. Finally, there are a number
of Internet sites that provide listings and directories of accountants
organized by locality.
Step 2: Ask the Right Questions
Once you have identified several candidates, take the time to discuss
these important questions with them:
4 What is the focus of
your practice? Some tax professionals have specialties in
areas such as real estate or small business. If you have specific
concerns, make sure your tax professional is qualified to provide
the special assistance you require by asking for references.
4 Are you familiar with
the laws of states in which I am subject to tax? If you have
financial interests in states other than where you live, make
sure your tax professional is familiar with those state laws or
has access to research tools covering those states. For example,
if you receive income from a partnership operating in another
state or live in one state and work in another, selecting a tax
professional with interstate knowledge is important.
4 Does your experience
meet my needs? You should have a general idea of your financial
situation before searching for a tax professional. Are your taxes
simple or complicated? Do you run a business from your home, have
multi-state holdings or limited partnerships? The better you understand
your financial needs, the better prepared you are to find someone
to meet them.
4 How do you bill your
clients? Before you ask your tax professional to do anything,
get a good idea of how he bills and the level of detail provided.
Does he charge an hourly rate or a straight fee? How and when
will you be billed? Will you be billed for research time if needed?
Get the billing and payment terms in writing.
4 Are there any additional
fees? If you think, for example, you are interested in taking
advantage of a refund anticipation loan, be sure to ask about
associated fees. Most likely, there’s the fee to the tax preparation
company to complete your tax forms, a separate fee to file your
return electronically - which is a
requirement for loan program participation – and the bank loan
fee itself. You may find you’re paying a hefty interest rate on
your own refund.
4 How do you characterize
your professional style? Does she take an aggressive approach
to minimize the tax burden even if it means incurring questions
from the IRS or an audit? Or does she take a conservative path
and risk paying a few extra dollars? Choose a tax professional
whose approach closely matches your own philosophy.
4 If I am audited, will
you represent me? Ask your potential tax professional if he
would represent you if the IRS questions your filing or decides
to audit you. If so, ask if he has much experience with IRS audits.
While some such experience is good, too much can be a warning
sign.
4 How do you keep current
with the tax law? Does the preparer use current-year computer
software to prepare your returns? Also, ask if she has access
to tax research services, such as CCH, should the need for research
arise.
4 What do you need from
me? Ask exactly what information is needed and in what form.
Many professionals provide print or electronic "organizers"
to help you sort your financial records. Some ask that all tax
information be saved on a computer disk, which can be downloaded
into tax return software. The more organized you are before you
give your tax preparer your records, the better he is able to
prepare your return in the shortest time (and the more money you
can save in fees).
Step 3: Do a Final Check
4 Make sure your CPA is
licensed by the state CPA association. If you decide to hire
a CPA, check with your state CPA Society to verify her license
and to see if any complaints have been filed. If complaints have
been filed, look elsewhere.
4 Take a good look at your
return before it is filed. Even if your return is prepared
and signed by a paid professional, you are responsible for the
accuracy of everything on there. Make sure the information on
your return is accurate.
Some General Hints
4 Keep accurate records
all year. Or, at least organize your records before you give
them to your tax professional. That means saving important receipts,
stock earnings statements and salary records. By organizing your
tax information before giving it to your tax professional, you’ll
save the cost of having him organize it for you.
4 Consider filing electronically.
Electronic filing allows individuals or their tax professionals
to send a return directly to the IRS through a computer modem
at designated locations. Although a fee is often involved, the
IRS has initiated a program to provide free electronic filing
through participating software providers. The main benefit of
e-filing is that you receive your refund much faster than if you
file through the mail. Filing electronically may not be the best
option if your refund is small because the fee may be larger than
your refund.
4 Get some mileage out
of paying your taxes. You can use a credit card to pay taxes
and in exchange take advantage of some benefits, such as matching
airplane miles offered by credit card companies. Consider the
benefits of charging your taxes, then quickly paying off the debt.
You can use a credit card this year to pay your taxes when e-filing
your return or using Telefile.
4 Don’t wait until the
last minute. The earlier you begin, the better. If you just
can't file on time, the last day you can file for a four-month
extension without penalty is April 15. Even if you file for an
extension and you think you owe, you still have to pay by that
date to avoid interest and penalties.
4 Know your options. Certified
public accountants are not the only help available for tax preparation;
there are also tax attorneys, enrolled agents, certified financial
planners and consumer retail tax preparation companies.
Confidentially Speaking …You’re Not
It’s important to remember that even after you’ve made an informed
choice, you still need to proceed with caution. Congress granted taxpayers
numerous new rights under the IRS Restructuring and Reform
Act of 1998 that affect both individual taxpayers and hundreds of
thousands of accountants and enrolled agents who advise them on tax
matters. One provision extended the existing attorney-client privilege
to non-attorneys authorized to practice before the IRS.
"There are limitations, however, to this privilege with regard
to tax preparation," cautioned CCH Principal Analyst Mark Luscombe,
JD, CPA.
"If you review how confidentiality has been applied in the attorney-client
environment, you’ll find that the privilege doesn’t apply to preparation
of tax returns. Communications with respect to tax return preparation
are not protected under the law, and taxpayers should not make the
mistake of assuming that everything told to accountants is considered
privileged communications," Luscombe said.
Definition of Terms
Here are the different types of tax professionals available to help
you:
Certified Public Accountant: A CPA is someone who has a wide
range of accounting experience and has passed the CPA exam, which
is given by the state board of accountancy. In order to be eligible
to sit for the test, a CPA candidate must complete a number of education
requirements. In addition, states can impose their own requirements.
In order to maintain their certification, CPAs must earn a number
of continuing education credits through their CPA societies.
Enrolled Agent: Enrolled agents specialize in taxation and
are given their titles by the IRS. To become an EA, an individual
must either practice at the IRS for five years and be selected by
application, or pass an extensive four-part exam. They can represent
taxpayers before the IRS, and in administrative proceedings, circuit
court and, possibly, Tax Court if they pass the appropriate tests.
Retail Tax Preparation Company Employee: In general, people
working at a consumer tax preparation company are trained and certified
by the company that hires them. They have been trained by the company
to handle returns for individuals who don't feel confident completing
their own returns.
Certified Financial Planner: Certified financial planners
receive special certification for financial planning, estate planning
and investments for individuals from several noted organizations.
Many are capable of providing tax assistance, but may not be formally
trained as such. Many accountants are also certified financial planners.
Tax Attorney: A tax attorney is trained in the law and chooses
to specialize in tax matters, including preparation, audits and litigation.
As a general rule, attorneys are certified by the state in which they
practice and many are required to complete continuing education courses,
though not necessarily in tax topics.
About CCH INCORPORATED
CCH INCORPORATED, headquartered in Riverwoods, Ill., was founded
in 1913 and has served over four generations of business professionals
and their clients. The company produces more than 700 electronic and
print products for the tax, legal, securities, human resources, health
care and small business markets. CCH is a wholly owned subsidiary
of Wolters Kluwer North America. The CCH web site can be accessed
at cch.com. The CCH
tax and accounting destination site can be accessed at tax.cchgroup.com.
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For more information on the president's 2003 Economic Growth Tax Plan, please visit,
2003 Bush Tax Plan
The 2003 Whole Ball of Tax also is available in print. If you would like to request
the print version, please contact:
Leslie Bonacum
(847) 267-7153
mediahelp@cch.com
Neil Allen
(847) 267-2179
allenn@cch.com
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