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Thursday, January 27, 2011

Tax Time - Seven Tips for Selecting a Tax Preparer

Blog posting written by Beanna J. Whitlock, EA, CSA

Portions of this blog posting have been taken from CSA Journal #46 article, Tax Time - Seven Tips for Selecting a Tax Preparer, May 2010

The U.S. Internal Revenue Service (IRS) announced that in the near future, all signing tax return preparers will be required to register with the IRS, test for competency, and maintain no less than 15 hours of continuing professional education each year. This registration and licensing process is scheduled to begin in 2011 and is to be fully implemented within three years. How will the new law affect seniors and the Certified Senior Advisors (CSAs) that serve them?

Who Needs to Register - and Why

Many seniors believe that during retirement, their tax reporting and obligations are less than when they were actively employed. In reality, a retired seniors taxes can be far more complex than they were previously. An experienced and qualified tax return preparer can help seniors understand the rules and regulations so that they can lessen the tax burden on their retirement incomes.

Certified Public Accountants (CPAs), attorneys, and Enrolled Agents (EAs - federally authorized tax practitioners) can prepare tax returns and are all subject to strict licensing, testing, and background investigation. Furthermore, they hold the particular privilege of representing taxpayers before all administrative levels of the IRS.

By contrast, other tax-returns preparers may represent taxpayers before the IRS only if they personally prepared the tax return in question and only at an initial IRS examination. If an issue remains unresolved after that meeting, the return preparer can go no further. Seniors who have a neighbor or acquaintance prepare their taxes could find themselves adrift in tricky and sometimes financially dangerous waters. The fact that a preparer charges for service does not mitigate such a risk.

Advice for Seniors and CSAs

Seniors deserve the confidence that their tax returns will be complete and accurate and that anyone they pay to prepare those returns is knowledgeable, diligent, ethical, and accurate. Seniors who are selecting a trusted tax advisor should follow these guidelines:

  1. Get a referral from a trusted friend, relative, or associate
  2. Have a brief telephone interview with the preparer, asking them important questions such as: "how long have you been preparing tax returns" and "can you represent me before the IRS if there is a problem on my return?"
  3. Make an appointment early in the filing season (January through April 15.)
  4. Bring everything the return preparer might need.
  5. Be prepared to answer questions about your income, lifestyle, and expenses. If the tax preparer does not ask any questions, he or she is probably not able to work in your best interest. Terminate the meeting and look for a different preparer.
  6. Every CSA should have a cadre of tax professionals in his or her rolodex. Not every tax professional will work well with a particular client, so know your clients -- and your tax professionals. Also, CSAs who might be called on to review a seniors tax return should encourage the senior to sign and file IRS Form 8821, Authorization to Disclose, with their tax returns. This form allows the IRS to send any correspondence, audit letters, or balance due notices to the CSA, as well as to the taxpayer. The form does grant power of attorney but can give a CSA the necessary knowledge to assist the senior.

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