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Link to special CCH Tax Briefings on key topics from 2003:
CCH can assist you with stories, including interviews with CCH subject experts.
Also, the CCH Whole Ball of Tax 2004 is available in print. Please contact:
Leslie Bonacum
(847) 267-7153
mediahelp@cch.com
Neil Allen
(847) 267-2179
allenn@cch.com
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CCH Whole Ball of Tax 2004
How to Pick a Tax Preparer Who's Right for You
(RIVERWOODS, ILL., January 2004) – If this is the year you decide to hire a
tax preparer, you’re in good company. Every year, millions of Americans turn
to professional tax preparers for help sorting out the latest tax law changes
and filing their annual returns. In fact, according to the latest IRS estimates,
in 2001, over 72 million returns were submitted by an accountant, tax attorney,
enrolled agent, retail tax service or other paid tax preparer – up almost 5
percent from the 2000 tax year. To help you pick a professional who is 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
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, there have been over 1,500 amendments to Internal Revenue Code
sections. The increasing use of time-delayed effective dates and rate changes
that are phased in and out means that changes can sneak into the tax code
with little notice. Unless you’re tracking tax developments every day, chances
are you’re not aware of all of the changes that have taken effect.
Ask your friends. Ask friends whose financial situations are similar
to your own if they can recommend anyone to help you.
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, ask these important questions:
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.
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.
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 multistate
holdings or limited partnerships? The better you understand your financial
needs, the better prepared you are to find someone to meet them.
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.
Are there any additional fees? If you think 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.
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.
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.
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.
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
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.
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
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.
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.
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.
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.
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 communication," 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 more than four generations of business professionals and their clients.
The company produces more than 700 electronic and print products for the tax,
accounting, legal, securities and small business markets. CCH is a Wolters Kluwer
company. The CCH Federal and State Tax group, CCH Tax Compliance and Aspen Publishers
Tax and Accounting group comprise the new Wolters Kluwer Tax and Accounting
unit. The unit’s web site can be accessed at tax.cchgroup.com.
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