4 Tax Preparer Tips and Warnings

4 Tax Preparer Tips and Warnings

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How to avoid an IRS audit.

If your tax preparer makes a mistake on your return he’ll have your back covered, right? Well, he may represent you when audited by the IRS, but if you are fined for his mistake, then that cost is shouldered by you and you alone. And with tens of millions of Americans relying on the services of a tax preparer, the chances are great that a mistake-generated audit will affect you.

One reason why you use a tax preparer is because tax rules are often difficult to decipher. With hundreds, if not thousands of lines of tax numbers, even an innocent mistake may come back to haunt you.

IRS Fines and Penalties

Taxpayers are legally responsible for paying their taxes and any fines incurred. The IRS holds you responsible although if your tax preparer was unethical, the IRS will pursue that individual too. You’ll still be left with a bill for the fine and the tax due so it important to find a tax preparer that has an excellent reputation. And if he or she guarantees that your return will be free from mistakes, then that’s even better.

Here’s how to avoid an IRS audit by choosing a qualified tax preparer:

1. Perform web research. Much information about tax preparing professionals is available online. State boards of accountancy are good places to look for professionals with such sites listing each certified public accountant along with their ethical or malpractice lapses, if any. The IRS offers a similar database. However, you should know that seasonal tax preparation folk do not have the same professional requirements of CPAs. It really comes down to getting what you paid for when it comes to tax preparation.

2. Guarantees or not. Be mindful that some tax preparers make claims that they may not be able to keep. For instance, one might say, “I guarantee you an “X” refund.” Setting a dollar amount is not ethical, however if the tax preparer says, “If you are eligible for a refund, I will get the full amount do to you,” doesn’t set an amount nor does it guarantee a refund. Still, examine any claims carefully.

3. Who pays what. Some tax preparers make a point to cover your penalties and interest if they make a mistake. You will still be responsible for back taxes, but this person will cover the related costs. But, don’t take this person’s word for it — get in writing before you hire her.

4. Look for a specialist. Not every tax preparer is skilled to handle every aspect of every return. At least not to the full degree as a specialist would. Use a small business tax preparer for your upstart company or home-based business. If you have rental property, select a tax preparer with expertise in that area. Rely on referrals to help you find a professional and, importantly, do not wait until the heart of tax season to start searching for one as they’ll be too busy to handle your late request.

Tax Preparation Considerations

When your tax preparer finishes your return, examine it very carefully. Do not authorize her to send it to the IRS until you understand each line. You have a right to question some approaches particularly if a large deduction would flag the IRS. You should also avoid percentage-based billing, an arrangement where the tax preparer nets you a larger refund in a bid to enjoy a greater commission.

See Also12 Ways to Cut Your Taxes

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