Archive for Monday, February 18, 2008

Taxing decisions

Do your homework to find the right preparer

February 18, 2008


Looking for help?

Some useful Web sites and phone numbers for finding an accountant or getting help preparing your taxes:

¢ Internal Revenue Service:

Click on "1040 Central" from the home page.

¢ Volunteer Income Tax Assistance Program: (800) 829-1040.

Free tax help for low- and moderate-income taxpayers.

¢ Tax Counseling for the Elderly: (800) 829-1040 or, for information about AARP-sponsored sites, call (888) 227-7669.

Free tax assistance to people age 60 and older.

April 15 may seem like a long way off, but for those who don't actually enjoy waiting until the last minute to file their 2007 tax return, it'll be here before you know it. And if you dread the prospect of tackling a 1040 on your own, you might want to consider enlisting the assistance of a certified public accountant.

These calculator cowboys can be invaluable in navigating the impenetrable thicket of the tax code - all in the hope of avoiding an audit letter from the IRS, and perhaps getting a big refund check from Uncle Sam.

Finding the right CPA is not all that different from seeking the best doctor, dentist or lawyer. Basically, it requires an interview. Here are some key questions that will help you find the accountant who will best help you survive this taxing tax season:

¢ Can you recommend someone?

One of the first and essential questions to ask is: Who is the trusted accountant of your friends or co-workers or those in a similar business situation? Run that accountant's name through the local Better Business Bureau or the department or board in your state that licenses and oversees public accountants.

"In so many ways, getting good references should be the No. 1 goal in helping choose a tax preparer - and a brain surgeon for that matter," says Clay Sanford, spokesman for the North Texas Regional office of the Internal Revenue Service.

¢ What's your experience level?

How long has the prospective accountant been in his or her tax practice? And has the accountant developed more of an expertise in individual or business returns?

¢ How big is your firm?

If you're not going with a huge, national operation like H&R; Block, you will want to know the size of the private firm the potential accountant runs. If the accountant runs his or her own shop, is there a back-up preparer to deal with the potential backlog of returns rushing in at one time? Can the CPA assure you that your return will get the proper attention?

¢ May I see your license and registration, please?

Don't be reluctant to ask the prospective CPA (or "paid preparer") to verify his or her formal license or registration as a professional tax preparer. Then confirm with the state licensing or registration board.

¢ How much do you charge?

What is the accountant's fee and what is it based on? Some accountants price their services according to the number of forms needed to complete the return. Fees can be inexpensive for a simple 1040, but progressively more costly as you add various schedules (form 8863 for education credits, form 709 for U.S. gift tax return), and individual financial wrinkles such as calculating interest and dividend income, itemization and whether a home mortgage is involved. Some accountants base their fee on how much time it takes to complete the return, instead of just the gross income of the client. According to Fort Worth CPA Tim Tatom, hourly rates can start at $75 and zoom up to several hundred dollars.

¢ Will you stand up for me if I'm audited?

Ask how many of the accountant's clients have been audited. And in case of an audit, will the accountant fully represent you in those nervous dealings with the IRS? The accountants interviewed for this story say that they represent their audited clients.

¢ Do you work often with owners of small businesses?

Does the accountant have solid experience filing for small businesses, or handling returns tailored to a specific profession? Many accountants generally will take more time (and charge a higher fee) to complete a small business tax return, whose profit-loss statement usually is more complicated to deal with than a plain W-2. Tatom says he often is approached by doctors because they know that the largest segment of his client base comes from the health care field. Meanwhile, Fort Worth CPA Wendy Ezell has expertise with various professional groups, including tax concerns including the trucking industry.

¢ How often do you work with complicated family issues?

Ask whether the accountant has experience with certain knotty personal situations affecting one's return. This refers to issues like a complex inheritance, an unforeseen death or a messy divorce. It also can include the tax accountant working with a newly constructed family trust. According to Tatom, in a divorce involving children, the common question is who has the right to claim the children as an exemption on their tax return.

¢ Are you fully up to speed on the latest changes in tax laws?

Is the accountant up to date on the latest wrinkles in the tax code - especially those covering deductions? Tatom has been grilled on numerous occasions by prospective clients on such arcane bits of tax code such as whether that new air conditioner or water heater can qualify the filer for a residential energy credit.

¢ I'm already in trouble with the IRS. Can you help me?

The ultimate question here is: Can you get me out of trouble or minimize the damage? This tends to come up, according to Ezell, when a potential client hasn't filed taxes in three to four years. One solution she suggests is that the delinquent taxpayer agree to a lump settlement with the IRS and then pledge to be a taxpaying citizen for the next five years.

"These issues come up often when a divorce takes place or with business partnerships that go sour," Ezell says.


toefungus 10 years, 4 months ago

Just say no to HR Block and similar tax mill services. They will just try to rip you off with bank fees, refund loans, and nuisance fees. Income tax preparation is their second line of business.

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