The
media, the Internal Revenue Service and Attorneys General of many
states have focused on fraud committed by tax preparers. While the
relative rate of fraud among preparers is small (see Tax Fraud By The Numbers In Taxing Subjects), the publicity has raised the issue among taxpayers.
This year, taxpayers who are shopping
for a new preparer, or who are concerned about the potential for fraud,
may have questions they need to have answered before they give you their
business. The California Tax Education Council (CTEC), which regulates
preparers in that state, has released a list of questions taxpayers
should ask.
Here, somewhat expanded, is a list of ten you should be prepared to answer when asked:
1) What kind of tax preparer are you?
Taxes may legally be prepared by
attorneys, accountants, enrolled agents or professional preparers. You
should be able to tell the customer which category your firm falls
into. In addition, you should be able to show some documentation of
your status – professional certifications, membership in national or
state associations, etc.
2) Did you take any training to be current with this year’s tax law changes?
Not taking Continuing Professional
Education (CPE) classes may
mean that you would miss some critical deductions – or worse yet, not
know some of the deductions that have expired. Be prepared to show what
you know.
3) Do you have a Tax Preparer Identification Number (PTIN)?
Since 2011, anyone who prepares federal
tax returns for a fee must have a PTIN. Make sure you obtain a PTIN
and renew it each year – it will further substantiate your credibility
as a professional preparer.
4) Will you sign my tax return, or do I have to do it myself?
Again, the regulations are clear. If you prepare the return, you must sign the return in addition to the taxpayer.
5) How are you insured?
Depending on your state laws, you may
be required to carry a bond, or basic insurance. At the very least,
you should carry errors and omissions coverage. And be prepared to show
that you have a current policy in effect.
6) With the tax season
delay this year, when can I expect my refund? What programs do you have
in place to get my refund to me more quickly?
If you offer e-file (most of you are
mandated to do so), then you can provide the quickest way for the
taxpayer to receive their refund – e-file with direct deposit. Refund
Settlement products are an option for taxpayers who either don’t have a
bank account or don’t have the funds to pay the tax preparation fee up
front. These products can allow the taxpayer to e-file and receive their refund via direct deposit or debit card. State and federal laws may affect the programs available to you.
7) How long have you been in business at this location?
Neighborhoods change over time, so
people living in the community you serve may not know you. Be prepared
to show how long you have been in their community, serving them. Note
that consumer advocates urge taxpayers not to use new, untried tax
services, regardless of what they promise for refunds.
8) Have you ever been audited by the IRS, charged with a tax preparation crime or reported to the Better Business Bureau?
IRS Audits of their procedures are
increasingly a way of life for professional preparers; charges are
sometimes made but not pursued, and disgruntled customers may report you
to the BBB simply because they do not like the size of their refund.
Whether or not any of these things have happened to you, you should be
prepared to answer frankly – and back it up if necessary.
9) How will my return be affected by the Patient Protection and Affordable Care Act (also called the ACA, or ObamaCare)?
This is bound to be the most
often-asked question this year, and the biggest shocker for people who
have not paid attention to the details of the ACA. As the law is
constantly evolving, it is critical that you keep abreast of change. Be sure to know how
7216 regulations impact your communications with taxpayers about the
ACA.
10) How do you calculate charges for preparing a tax return?
This is perhaps the toughest question
to answer – not because you fees are necessarily out of line, but
because every return is different. Most have a set amount for basic
returns, and a list of other fees for more complicated returns –
multi-state returns, foreign revenue, and other associated factors.
Whatever you do, don’t charge a contingent fee, or fee based on a
percentage of the refund. This violates Treasury Department Circular
230 regulations.
Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we
inform you that, to the extent any advice relating to a Federal tax issue is
contained in this communication, including in any attachments, it was not
written or intended to be used, and cannot be used, for the purpose of (a)
avoiding any tax related penalties that may be imposed on you or any other
person under the Internal Revenue Code, or (b) promoting, marketing or
recommending to another person any transaction or matter addressed in this
communication
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