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Income tax preparation
Before choosing your income tax preparer
January 19, 2005 - by Crown Financial Ministries
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When it is time to pay taxes, many Americans consider getting help from an income tax preparation service. These services, however, may vary greatly in accuracy and cost.
The following information may help taxpayers decide whether they need tax preparers and, if so, how to select tax preparers that best suit taxpayers needs.
The need for a tax preparer
Before hiring tax preparers, taxpayers need to make sure they really need to pay for that kind of assistance. With help from a tax preparation software package or the Internal Revenue Service (IRS), taxpayers may be able to do the tax preparation work themselves.
The local IRS office will help prepare income tax forms and taxpayers can receive answers to questions by using the IRS' free information resources.
For additional information concerning free services provided by the IRS, contact the local IRS office by calling toll-free (800) 829-1040.
However, if taxpayers do not feel qualified to prepare their taxes, or tax situations are so complex that taxpayers do not feel comfortable preparing the taxes themselves, they may want to consult a tax preparer.
Before taxpayers retain tax preparers, it is best to determine what type of service is needed and then choose the tax preparer who can best perform the service needed for least amount of money.
Types of preparers
Tax preparers differ greatly in education and training, so taxpayers need to choose carefully in order to ensure they pay for only the services that are needed.
There are four basic types of professional tax preparers: enrolled agent, certified public accountant (CPA), attorney, and tax preparer.
Enrolled agent. Enrolled agents are certified by the IRS after having worked five years or more as IRS auditors or after having passed a government exam. Enrolled agents are authorized to represent taxpayers before the IRS.
Certified public accountant. CPAs have passed a professional qualifying exam and are authorized to represent taxpayers before the IRS. Public accountants (PAs) generally have special accounting training but they lack certification and cannot represent taxpayers before the IRS.
Attorney. Attorneys who have passed the bar exam are authorized to represent taxpayers before the IRS, but they may or may not have special tax training.
Tax preparer. Tax preparers may or may not have special training or experience. Some tax preparation firms require that their tax preparers have extensive training and experience, but others require very little.
Although, generally, tax preparers cannot represent taxpayers before the IRS, they can answer questions regarding how returns were prepared and filed.
Making choices
The more complex the tax situation, the more logical it seems to seek advice from tax professionals. To find the preparer that best suits taxpayers' needs, the following questions need to be answered satisfactorily.
Taxpayers should expect certain practices from tax preparers. Tax preparers should go through a checklist of deductions to see if any apply to taxpayers.
Preparers also should sign taxpayers' tax returns and enter his or her name and Social Security number or federal identification number.
A preparer should not guarantee a refund before completing the return; nor should he or she suggest taking nonexistent deductions, pad deductions, or propose any other improprieties.
In addition, preparers should not ask taxpayers to sign blank returns or returns completed in pencil or erasable ink.
Taxpayers' responsibility
Although taxpayers may have hired tax preparers to prepare tax returns, it is the ultimate responsibility of the taxpayer to make sure that the return is accurate and factual.
Taxpayers are personally liable for any additional tax, interest, or penalty, even if there is a written guarantee that preparers will pay any interest or penalty levied because of errors, mistakes, or irregularities.
Therefore, taxpayers should take the following steps to ensure that tax preparers give their best efforts in preparing their tax returns.
Before choosing income tax preparers, taxpayers first need to decide whether they need a commercial tax preparer by determining what type of tax help is needed, if any, and how much they are willing to pay for the service.
Taxpayers can save by preparing their taxes themselves. However, if taxpayers do not feel comfortable about preparing their own taxes or if their tax circumstances are complex, professional help should be considered.
To view the original text of this article, click here to visit Crown Financial Ministries website.
The following information may help taxpayers decide whether they need tax preparers and, if so, how to select tax preparers that best suit taxpayers needs.
The need for a tax preparer
Before hiring tax preparers, taxpayers need to make sure they really need to pay for that kind of assistance. With help from a tax preparation software package or the Internal Revenue Service (IRS), taxpayers may be able to do the tax preparation work themselves.
The local IRS office will help prepare income tax forms and taxpayers can receive answers to questions by using the IRS' free information resources.
For additional information concerning free services provided by the IRS, contact the local IRS office by calling toll-free (800) 829-1040.
However, if taxpayers do not feel qualified to prepare their taxes, or tax situations are so complex that taxpayers do not feel comfortable preparing the taxes themselves, they may want to consult a tax preparer.
Before taxpayers retain tax preparers, it is best to determine what type of service is needed and then choose the tax preparer who can best perform the service needed for least amount of money.
Types of preparers
Tax preparers differ greatly in education and training, so taxpayers need to choose carefully in order to ensure they pay for only the services that are needed.
There are four basic types of professional tax preparers: enrolled agent, certified public accountant (CPA), attorney, and tax preparer.
Enrolled agent. Enrolled agents are certified by the IRS after having worked five years or more as IRS auditors or after having passed a government exam. Enrolled agents are authorized to represent taxpayers before the IRS.
Certified public accountant. CPAs have passed a professional qualifying exam and are authorized to represent taxpayers before the IRS. Public accountants (PAs) generally have special accounting training but they lack certification and cannot represent taxpayers before the IRS.
Attorney. Attorneys who have passed the bar exam are authorized to represent taxpayers before the IRS, but they may or may not have special tax training.
Tax preparer. Tax preparers may or may not have special training or experience. Some tax preparation firms require that their tax preparers have extensive training and experience, but others require very little.
Although, generally, tax preparers cannot represent taxpayers before the IRS, they can answer questions regarding how returns were prepared and filed.
Making choices
The more complex the tax situation, the more logical it seems to seek advice from tax professionals. To find the preparer that best suits taxpayers' needs, the following questions need to be answered satisfactorily.
- What tax preparation training does the preparer have?
- How does the preparer keep abreast of tax laws and changes?
- How does the preparer check for accuracy? Are returns reviewed for math errors only or also errors in tax-law interpretation?
- What is the fee and how is it determined?
- Can returns be filed electronically?
- Will the same person who prepares the return conduct the initial interview?
- How many tax returns does the preparer complete each year?
- How does the preparer manage quality control?
- Where can the preparer be reached later on in the year if there is an audit by the IRS?
- Can the preparer represent taxpayers before the IRS if needed and, if so, what will be the charge?
Taxpayers should expect certain practices from tax preparers. Tax preparers should go through a checklist of deductions to see if any apply to taxpayers.
Preparers also should sign taxpayers' tax returns and enter his or her name and Social Security number or federal identification number.
A preparer should not guarantee a refund before completing the return; nor should he or she suggest taking nonexistent deductions, pad deductions, or propose any other improprieties.
In addition, preparers should not ask taxpayers to sign blank returns or returns completed in pencil or erasable ink.
Taxpayers' responsibility
Although taxpayers may have hired tax preparers to prepare tax returns, it is the ultimate responsibility of the taxpayer to make sure that the return is accurate and factual.
Taxpayers are personally liable for any additional tax, interest, or penalty, even if there is a written guarantee that preparers will pay any interest or penalty levied because of errors, mistakes, or irregularities.
Therefore, taxpayers should take the following steps to ensure that tax preparers give their best efforts in preparing their tax returns.
- Before visiting tax preparers, taxpayers should read their tax booklet or the more comprehensive IRS Publication 17, Your Federal Income Tax, and familiarize themselves with information that could be applicable to their tax situations.
- Before visiting tax preparers, taxpayers need to make a list of any applicable tax-related questions and ask them.
- Gather and bring to tax preparers all information, forms, documents, receipts, and vouchers that might apply to taxes, tax credits, or tax deductions, including the previous year's tax returns. Too much information is better than too little.
- After returns are prepared, check to ensure that all information is correct before signing and before paying the tax preparation fee.
- It is to taxpayers' advantage to have taxes prepared early. An early return will receive the most concentrated and thorough effort by preparers.
Before choosing income tax preparers, taxpayers first need to decide whether they need a commercial tax preparer by determining what type of tax help is needed, if any, and how much they are willing to pay for the service.
Taxpayers can save by preparing their taxes themselves. However, if taxpayers do not feel comfortable about preparing their own taxes or if their tax circumstances are complex, professional help should be considered.
To view the original text of this article, click here to visit Crown Financial Ministries website.
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