Tax Time Tips
April 15 is approaching and if you haven’t yet selected a tax preparer, here are some helpful tips to assist in making this very important hire.
1. Get recommendations from family and friends
Ask for recommendations from those who you trust and may have had similar tax preparation needs. Here are some considerations:
• In California, the only individuals allowed to charge a fee for preparing taxes are
Certified Public Accountants (CPAs), Public Accountants (PAs), Enrolled Agents (EAs), attorneys, and California Registered Tax Preparers (CRTPs).
• Only CPAs, EAs and attorneys have unlimited representation rights before the IRS and may represent their clients on any matters including audits, payment/collection issues, and appeals.
• In addition to tax preparation, are you looking for an accountant to assist with financial planning, estate issues, IRS issues or business planning?
2. Review the tax preparer’s history with the appropriate licensing authority:
• The California Board of Accountancy for CPAs and PAs, which provides the public the ability to check the status of a CPA license with License Lookup on its website, www.cba.ca.gov
• The California Tax Education Council (CTEC) for California Registered Tax Preparers
• The U.S. Department of the Treasury for Enrolled Agents
• The California Bar Association for attorneys
3. Meet the Tax Professional
Because you will be trusting someone with your financial information, being comfortable with them is important. The best way to determine that is through an interview, preferably in person, but at the very least, by telephone. What to ask:
• What type of tax work do they typically perform? Compare the response to your service needs.
• What office hours does the tax preparer or firm keep? Determine whether the office is open year-round; inquire if he/she is available to take telephone inquiries.
• Ask what type of continuing education the individual has taken recently. It is important to select a CPA who has completed continuing education consistent with the type of services you are selecting.
• Has the tax preparer been disciplined?
• Does he/she carry professional liability insurance? This helps protect consumers in the event a claim is made for damages arising from a tax preparer’s failure to perform tax or other services satisfactorily.
• If you hire a CPA, ask for an engagement letter. The engagement letter should detail who will be performing the work, including whether the work is outsourced, confirm that all private and personal information is secure, and specify the cost of the services. CPAs are required by law to ensure that none of your confidential information is disclosed without your permission. Therefore, you should ask whether the CPA discloses any of your confidential information to persons or entities in connection with outsourcing any services provided by the CPA on your behalf. While other persons or entities may provide you with financial services, including tax preparation, it is important to be aware that this regulation pertains only to California- licensed CPAs.
• Ask about service fees. Avoid preparers who base their fee on a percentage of your refund or those who say they can get larger refunds than others can. Always make sure any refund due is sent to you or deposited into your bank account. Taxpayers should not deposit their refund into a preparer’s bank account.
• Ask about anything on your tax return you don’t understand. Review all information before you sign your tax return: name, address, social security numbers, or other tax identification numbers. Even if a paid professional is preparing your taxes, you are responsible for what is on your return.
4. Additional Services
Often times a taxpayer’s first relationship with a CPA is through tax work. Be aware that additional services may carry additional requirements, such as:
• Peer review – If the services you require include either reviewed or audited financial statements, you should ask the CPA for the results of his/her most recent peer review. Peer review is a systematic review of a firm’s accounting and auditing services performed by a CPA who is unaffiliated with the firm being reviewed to ensure work performed conforms to professional standards.
• Authority to sign – If the services you require include an audit, a review of financial statements, or an examination of prospective financial information, you need to be sure that the CPA signing the report is authorized by law and qualified, through education and experience, to do so.
Some Final Advice
• Never sign a blank return. Don’t use a tax preparer that asks you to sign a blank tax form.
• Don’t use a tax preparer that refuses to sign your tax return or complete the required tax preparer information.
• Be certain to get a copy of your completed tax return.
• E-file and request a direct deposit refund. You will generally receive your refund much more quickly, and it reduces the possibility of identity theft.
• Don’t be late. Your federal tax return must be filed before midnight on Tuesday, April 15. However, if you need extra time you can file IRS Form 4868 by April 15 and delay filing your federal return until October 15. Getting the automatic extension does not delay the requirement that you pay your taxes by April 15, and penalties could be imposed and interest charged on taxes not paid by April 15.