10 Things You Should Look For in A Tax Professional

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Let’s get to today’s topic:  10 Things You Should Look For in A Tax Professional.  Or like I like to say, what makes someone more qualified than you to prepare your tax return and charge you a nice chunk of change for the privilege?Picture1

Number 1. Do they have a PTIN? A what? OK, a PTIN is a Preparer Tax Identification Number. It is issued by the Internal Revenue Service.  Anyone wanting to prepare a tax return and charge a fee for their service is required to register with the IRS, pay a fee and obtain a PTIN.  PTINs must be renewed each year.

Number 2.  What is the Preparer’s History?  Just having a bunch of letters after your name doesn’t necessarily indicate the experience or quality of the individual.  You can and probably should check with the Better Business Bureau, State Board of Accountancy for Certified Public Accountants, your State Bar Association for attorneys and the IRS Office of Enrollment for enrolled agents to find out if there have been any complaints or disciplinary actions taken against your prospective tax preparer.  Ask them questions, both about their experience and about your specific tax situation.  Just because someone is an attorney, a CPA or an Enrolled Agent, doesn’t necessarily mean they have the experience you need to handle your personal or business tax situation.

Number 3.  Don’t hesitate to ask questions or interview a prospective preparer to ensure you are comfortable with their understanding of specific orspecialized needs you have?  Do you need someone with expertise in military member tax situations?  Business?  Retiree?  Income from multiple states or countries?  Ask questions until you are satisfied the individual you are going to work with understands your tax situation and can navigate the Tax Code to address your specific or specialized needs.Hand Holding Cash and Credit Cards
Number 4.  How do you charge?  Avoid preparers that base their fees on a percentage of your refund.  First, this is NOT an ethical best practice.  Second, you want to ensure your preparer isn’t looking to inflate their fee by bending, stretching or ignoring rules resulting in you getting a bigger refund than you are legally entitled to so they can charge you a higher fee.  Also avoid preparers that claim they can get you a bigger refund than some other preparer.  Also, be careful in shopping around for the lowest price.  I am a firm believer in you get what you pay for – especially if what you’re paying for is low cost support.  Would you shop for the cheapest cancer care doctor or brain surgeon if you needed one?  Probably not.  Don’t settle for the lowest cost tax preparation service just because they were the cheapest.  Now, I’m not saying you should have your tax return prepared by an attorney or a CPA because their rates are higher than other places.  Some people may need the types of services these professionals provide.  Many taxpayers can find more affordable options as their situations do not require the type of specialized expertise of a tax attorney or accountant.efileNumber 5. Do they offer electronic filing?  Any reputable tax preparer can easily meet IRS suitability requirements to be Electronic Return Originators.  An electronically filed return is more secure, and results in less errors than manual paper filed returns.  Electronic filing speeds up refund processing tremendously.  Which there’s less of a chance of your return getting lost and you will get your refund in hand much quicker than if you mail it in.  Many times, errors that can delay or derail you getting your refund for weeks can be immediately identified with an electronically filed return and quickly corrected.  There just is no reason in this day and age to use a tax preparer that doesn’t electronically file tax returns.  While there are still some instances where specific forms or types of returns may not be eligible to be electronically filed, but they are few and far between.

Number 6. What information do you need to provide?  Understand up front what you need to provide to have your tax return prepared accurately.  The preparer should ask you for copies of prior year tax returns to identify any items that need to be reviewed for impact or inclusion on this year’s return.  The preparer should require all records and receipts necessary to accurately prepare your return.  Preparers should not encourage you to file your return before your W2 or investment documents come out.  This is a bad practice.  While you might be able to save some time in getting your tax return filed, you are significantly increasing the chance of receiving a dreaded IRS letter because they have information that doesn’t show on your return because you filed before all your paperwork was received.  This can result in anxiety when you get a letter, and having to pay additional fees for someone to amend your return to address the missing items.  You also may end up having to pay hundreds if not thousands of dollars in additional taxes, penalties and interest for incorrectly filing your return in the first place.  If you are filing a joint return, the preparer should involve both taxpayers in the preparation of the tax return.  While it may be common for one spouse to deal with financial or tax issues more than the other, the preparer should ensure they do not rely on information only provided by one spouse.  A joint return signed by both spouses makes each spouse jointly and severally liable for the accuracy of the return.  You want a preparer that treats each spouse as an equal party to the return.april 15 cleanNumber 7.  What do they do after April 15th?  You want to know if your preparer is going to be available after April 15th if you have any questions or correspondence related to the tax return they prepare.  Understand up front how to you get help after the return is filed and  after the April 15 deadline.  Many preparers are part time or seasonal employees until April 15th.  You want to know who and how any tax issues that may come up after April are handled.

Number 8.  Understand who has access to your information.  Privacy and data security issues are in the news almost daily.  Identity theft is one of the fastest growing crimes in the world.  We are surrounded by technology most of us haven’t a clue how they work.  Is my data in the cloud?  What does that even mean?  Reputable preparers will have security measures in place to protect the papers, records and receipts you provide to prepare your return, the data on the computers used to prepare your returns, the communications channels used to transmit your return data from the preparer’s computer to the IRS, credit or debit card information related to paying for your services and any physical records required to be retained by the preparer after your return has been filed.  The preparer should not provide your information to anyone outside the normal processing without your written permission. Ask questions on how your information, both records and receipts and the digital files are safeguarded by the preparer and their firm.

Number 9.  Find out who will actually sign the tax return.  If someone other than the preparer is the one that signs the return, you may consider having these conversations with that person as well.  In fact, if someone else is going to sign your return, maybe that’s who you want to deal with in the first place.  Avoid the middleman.

Number 10.  What happens if “gulp” you’re audited?  While the taxpayer is IRS logoresponsible for what they sign for on the tax return, it is best to know up front what audit support is available if you receive the dreaded letter from the IRS or state on your tax return.  Be comfortable with the level of audit support offered compared to the complexity of the issues on your tax return.  Be comfortable with the professionalism, expertise and experience of the preparer that they will ask you enough questions and conduct what is known as sufficient due diligence to prepare an audit proof return.  No preparer should guarantee your return will not be audited.  There certainly are procedures that preparers should follow to reduce the likelihood of you being audited.

I have to admit, I have a vested interest in people using paid tax preparers to prepare this year’s income tax return.  Can you prepare your own return?  Probably.  There are many resources available in the marketplace today to aid taxpayers on preparing and filing their tax returns at little or no cost.  Should you prepare your own return?  My advice to you is use some common sense.  While most tax software is pretty easy to follow, with simplified steps for ease of use, it is also very easy to prepare a bad tax return.  Anyone is capable of preparing a tax return either on line, with other software or by hand and filing a totally incorrect return.  The mistake you make may merely cost you by overpaying tax you otherwise didn’t owe or it may be a costly error resulting in misreported income and underpayment of tax that results in hundreds or thousands of dollars in additional tax, penalties and interest.

Jeff Randall is a Principal Tax Advisor for  Tax Break and a coach for Faith-based Financial Fitness.  Reach him at jeff.randall@fulcrum6.com.

Don’t Get Holiday Cash…from a tax prep firm. Get Your Own Money

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Call me crazy, (and my wife and kids can attest to that fact!).  It’s the beginning of the holiday season (you know, spring, summer,
nicholas-530330_1920.jpgHallothankshankwanzmas).

You can tall the holiday season has begun in full force when commercials 24/7 offer and repeat and repeat stuff you probably don’t need and cannot really afford, all with an idyllic backdrop of lightly falling snow and perhaps a Santa with his troupe of reindeer frolicking playing their legendary games.

And speaking of games, if we’re completely honest, we all have one or more games we play in our lives.  As kids, we learned the game of how to look and act like we were thrilled to go to Auntie Em’s house for Thanksgiving when we really just wanted to stay home parked in front of the Playstation console.  As parents, many moms learned the game of soccer (really how many soccer moms really played soccer when they were kids?) and how to appear enthusiastic about their darling offspring’s practices, games and associated expenses.  As dads, we learned how to play ‘Stern Dad‘ with our sons as they venture outside the sandbox of Generally Acceptable Activities Publically Acknowledged (GAAPA), while at the same time remembering our own youthful exuberance hopefully still unknown by our own ‘Stern Dads‘).

So, there’s games we all play.  And it’s all Fun and Games as long as everyone involved understands all the rules and the roles of the players, everybody plays fair, and nobody gets hurt.  Let’s consider a Game I like to call Financial Reality.  In the Game of Financial Reality, there are millions of extraordinary people like you and I, working hard trying to provide a decent standard of living for our families.  In the Game of Financial Reality, there are employers, landlords, pastors, lawyers, bankers and tax preparers.

  • employers – hire, fire, set our objectives and provide our compensation for work performed.
  • landlords – collect rent and maintain the premises many of us live in
  • pastors – provide spiritual leadership and mentoring
  • lawyers – either help us in the fight against evil or are the center of evil (?)
  • bankers – guardians of our wealth, manage (and manipulate?)  the flow of currency to keep the economy going while receiving a consistent percentage for their time and trouble
  • tax preparers – aid us in complying with the IRS and our state and local tax rules and regulations by translating our activities in the Game of Financial Reality into a multitude of lines and forms known as an annual income tax return.

Ok, are we clear on who the players and their roles in the Game of Financial Reality?  Let’s roll the dice and play!

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I landed on the ‘Get Holiday Cash‘ space.  Hmm, how do I do that?  I get my normal take home pay each payday, less those deductions that eat up so much of my pay.  How do I ‘Get Holiday Cash‘ in this game?

Two players jump up almost simultaneously and say that’s simple. Mr. GreenSquare, a tax preparer, tells me I can get an Advance against my next income tax refund by getting Line of Credit from his people.  He assures me it’s really simple, just bring in your last paystubs, your last tax return, and $49 and my tax preparers will fix you right up.

Mr. Jackson, another tax preparer, tells me not to pay any attention to Mr GreenSquare.  I can come into his offices and start my next tax return now and he’ll give me a loan for the holidays based on my next tax refund.  It’s a 0% interest loan and he’ll even make sure I finish preparing and filing my tax return with his tax preparers.

Wow, the  Game of Financial Reality just got confusing to me real fast.  So, I ask to see the rules (remember how they’re printed on the inside of the cover?).  I see the rules for employers, landlords, pastors, lawyers, bankers, and tax preparers.  I ask “which player looks out for my financial interests and help me keep the most of my hard earned money?”

The employers and landlords shrugged.  The pastor said ‘really not my area of expertise’.  The lawyers looked at each other and laughed.  The bankers pondered a moment and then one admitted ‘we tell you that’s what we do, but we’re really more interested in our financial well-being than yours.’

I looked at the tax preparers – Mr. GreenSquare and Mr Jackson.  They sat quietly. “Well,”  I said.  “What about you guys?  Aren’t tax preparers supposed to be looking out for my best interests? Why do I have to pay you either a large fee or interest to borrow against my refund?  Isn’t it my money?”

“Oh, yes,” they both answered.  “But we’ll give you access to some of your refund money now for the holidays so you don’t have to wait until you file your tax return and get your refund next spring”.

“OK, let me get this straight,” I said. “I can pay an upfront fee and get a line of credit at a high interest rate from you, Mr GreenSquare and then pay you back plus interest when I get my refund next spring.”  “Yes, that’s right and don’t forget we’ll be here to help you file your income tax return, we already have most of your information in our computer,” he replied.

“Or, Mr Jackson, I can come to you now and start my tax return with your tax preparers and you’ll loan me money at 0% interest against my tax refund and I can pay you back when I get my refund, ” I asked.  “That’s right, and don’t forget we’ll finish your tax return and you’ll pay us at that time.”

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I got up from the table. “I’m sorry folks, but I don’t want to play this game any longer.  The players and their roles are too blurred.  I thought a tax preparer was supposed to help me understand the rules so I keep more of my hard earned money.”  All the players nodded and said “Oh that’s  a tax professional.  We were going to include a tax professional in our game, but they refused to play with us.”

So, I decided to rethink my rethink white dude for anti emerald ads 3 linkapproach to getting Holiday Cash.  Here’s what I learned from a tax professional.  Over 100 million Americans got refunds from the IRS in 2015 and again in 2014.  The average refund amount in each year was around $2,800.

Simply put, the IRS overcharged over 100 million hard working people $2,800 a year in each of the last two years.  For Americans getting paid every two weeks, that’s over $100 each and every paycheck all year.

And, some of America’s largest tax preparation companies take advantage of the IRS overcharging Americans by charging large fees each year or interest to essentially borrow own OWN MONEY instead of showing us how to avoid paying too much tax in the first place.

Here’s a novel idea from a tax professional.  How about – instead of getting and Advance line of credit or a holiday loan against your refund – how about just getting your own money?  When a tax prep company helps you borrow against your refund, don’t they have an interest in making sure you continue to pay in to much tax so they can offer you the same program year after year?

By adjusting your income tax withholding, you can changeRPRx with link to holiday amount the IRS charges you each and every payday.  If you are in line for a refund this year, like 100 million other Americans, you’ve probably already paid in enough to cover all the tax you owe on what you made this year.  You can change your withholding now for the remainder of this year and get more of YOUR MONEY in the remaining paychecks this year.

And, if you’re likely to get a refund next year, you can change your withholding the first of the year to get more of YOUR MONEY in each and every paycheck all of next year.

A tax professional told me his job was to help me understand how to keep more of my hard earned money and pay the lowest amount of tax legally. The tax professional’s job is to help me get more of MY MONEY in each paycheck during the year and still not owe at the end of the year.  The tax professional didn’t want me to be like over 100 million Americans that got $2,800 back when they filed their tax return.  I can get that money throughout the year and not be overcharged $100 a payday by the IRS.

And the tax professional doesn’t charge a large fee or interest when they show me how to get MY OWN MONEY.

That’s a game I’ll gladly play.

Jeff Randall is a Principal Tax Advisor for  Tax Break and a coach for Faith-based Financial Fitness.  Reach him at jeff.randall@fulcrum6.com.

3 Huge Tax Deductions New Home Buyers Can Use to Put More Money in Their Next Paycheck

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The American Dream is to own your own home.  This is an exciting time for you if you are a first time home buyer.  Congratulations!  You may have decided to buy your new home for many reasons – new addition to the family, better neighborhood, or improvement in your quality of life.  Your new home may be sitting on hundreds if not thousands of dollars.  How?

mortgage-295211_1280Most homes purchased in the United States are financed with home mortgages that carry interest payments that can be deducted on your income tax return each and every year.  With your new home mortgage you have the key to unlock valuable tax deductions that will reduce the amount of your hard earned income that is taxed by the US Government and the State. Like the excitement and satisfaction you get when you turn the key in the front door of your new home, you can experience the same excitement and satisfaction knowing you are saving money every day on your income tax.

What many new home buyers do not know is that can take the tax savings from their new home and put more money into their paychecks NOW.  When I purchased my house, I saw HUGE tax savings and got a refund of over $10,000 the first year.  Then I figured out how I could UNLOCK that $10,000 a year in tax savings and put more moneyu into my take home pay each payday and not wait until the end of the year to get my refund.

Here’s 3 of the biggest tax deductions you can unlock.  Your new home may be sitting on hundreds if not thousands of dollars in tax savings that you could be putting put into your paychecks.

padlock-303617_1280    Home Mortgage Interest and Points

The Internal Revenue Code is often used to provide incentives for economic activity.  Providing taxpayers a tax deduction for mortgage interest and points paid has long been used as an incentive for sustaining or increasing activity in the home construction market.  Purchases of new homes or existing homes.  There were nearly 5 million home sales in 2014 with a median home value of $208,000.  That’s a lot of economic activity!

Interest paid by you (and/or your spouse) on a home loan for either your primary (principal) or secondary residence is deductible in the year paid as an Itemized Deduction.

1098 FormThis interest is commonly reported to you on either a Form(s) 1098 by your bank or lender and on a HUD1 form when the property is initially purchased or refinanced.

Points are prepaid interest often required by a lender to secure or as a condition of financing.  Points paid in the year of initial property acquisition are fully deductible; points paid when refinancing can only be deducted over a period of time equal to the mortgage period.  Points paid are commonly reported on the Form 1098 and the HUD1.

padlock-303616_1280    State and Local Taxes

Money Down the DrainThe Tax Code can be considered a pay-as-you-go system.  This means that income tax is due to the Federal and State (and local, in some cases) Government as income is earned throughout the year.  The Internal Revenue Code provides taxpayers protection from being taxed on the same income more than once.  Taxpayers are allowed to deduct the amount of State (and local) income tax that they pay during the year as an Itemized Deduction on their Federal income tax return.  If amounts deducted are refunded by the State or local government when their annual returns are filed, the refunded State tax may need to be reported as income on the following year’s Federal income tax filing.

Taxes that you pay during the calendar year for State (and local) incomes taxes may be through withholding from paychecks, estimated tax payments or to settle a balance due on a prior year state tax return can be claimed as an Itemized Deduction to reduce income subject to Federal income tax.

If no state income tax was paid during the calendar year, a deduction for sales taxes paid during the calendar year can be claimed instead.

State Income Taxes paid can usually be found on your Form W2 and on last year’s state income tax return.  Income taxes are required to be withheld in accordance with either a table or formula that factors gross pay for the work period, frequency that you get paid, the filing status you claim and number of exemptions you claim.

Income taxes withheld from each employee will certainly vary as the relevant factors vary significantly from taxpayer to taxpayer.   Employers withhold income taxes from their employees and deposit them with the State (or local) tax authority in each taxpayer’s account.

 

padlock-303615_1280   Real Estate Property Taxes

Home owners like yourself, as well as the owners of other private real estate in your community – shopping centers, apartment complexes, factories – are assessed real estate property taxes to provide funds necessary to support functions that benefit the community at large.

Property TaxTaxes are assessed on your new home, by local governments based on a formula levying a tax amount for public schools, local infrastructure and other approved common services.  Typically, real estate taxes are based on periodic valuations of real property by the local government and the amount of tax is approved by elected representatives each year. Real estate taxes support functions like police and fire protection for your home and your neighbors’, public schools, public utilities, street maintenance, and local government expenses.

Real estate taxes are assessed by the local government to be equal across the same classes of real estate.  Your new home, for example, will have the same rate assessed as similar homes in your community.  Factories will have the same rates assessed as other factories in the community, etc.

Real estate taxes are typically paid in arrears  – tax paid in the current period is for last year.  Real estate taxes are paid either annually or semi-annually and many homeowners have an amount added to the monthly mortgage payment to be set aside in an escrow account to accumulate to the amount of real estate taxes that will be due in the next period.

While your principal and interest payment should remain fixed, your monthly mortgage payment is often adjusted each year to account for changes in the cost of insurance or taxes being paid by the lender on your behalf out of escrow.

Real estate taxes paid can be identified either from a Form 1098 from your bank or from your local government property tax invoice/office.

home-209172_1280What most new home owners don’t know is that you can unlock those savings TODAY – without waiting to file your income tax return next spring.  You can put the dollars your new home saves you in tax deductions into your paychecks NOW without waiting for your tax refund next spring.  The IRS collected $274 Billion from over 101 Million taxpayers last year and refunded that money only after people filed their income tax returns.  If you wait until you file your tax return to unlock the tax deductions your new home qualifies you is like giving the IRS a loan – at ZERO per cent interest.

Jeff Randall shares in his eBook Give Yourself a Raise : 7 Tax Deductions Every New Home Owner Can Unlock to Put More $$$ in Each Paycheck how you can use your new home to lower your income tax this year AND how you can take those savings now and put more money into your next take home paycheck.

Jeff Randall coaches individuals, couples and entrepreneurs on money management based on Biblical principles, and personal and business tax strategies. He is an Enrolled Agent licensed to practice before the Internal Revenue Service.  He provides representation services to individuals, couplJeff Randall background transp w logoses and businesses to resolve back tax issues.  His Refund Planning and Prescription (RP Rx) process helps hundreds of clients across the US and in 16 countries put the most money into each paycheck and not owe tax at the end of the year when they file their income tax returns.

Jeff is founder and Principal Advisor of Tax Break  http://www.taxbreak.tax.  He is the author of numerous tax and entrepreneur advisory resources and host The Tax Break Radio Show. Click Let’s Talk to send questions or feedback..

Your Tithe; Honor God and Reduce Your Taxes?

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With Good Friday and Easter so close to the April 15 deadline for US income tax filing, let’s take a look at the relationship between your tithe and your income taxes.

 Malachi 3:10 states “Bring the full tithe into the storehouse, that there may be food in my house. And thereby put me to the test, says the Lord of hosts, if I will not open the windows of heaven for you and pour down for you a blessing until there is no more need.”  The Lord directs each of us to tithe, or give the first tenth of our income to His church.  Often we hear of legal debates surrounding separation of Church and State. The Internal Revenue Code recognizes churches as qualified organizations and allows tax deductions for donations to churches.

I’ve heard from many taxpayers over the years about their donations to the Church.  Many times, I hear, “I put X amount in the collection plate every week“.  My first piece of advice on tithing is this – you don’t tithe by putting cash in the collection plate.  In order for a donation to be tax deductible, any donation to a charitable organization that exceeds $250 needs to be acknowledged by that charity.  You need documentation on the charity’s letterhead acknowledging the amount of your  donation. From the Internal Revenue Code perspective your tithe is a donation.  From God’s perspective, we are instructed to give a tenth of our income as a tithe.  In order to receive the proper acknowledgment of your donation from the church you should make your tithe by check to the church or through the church’s e-giving. If you’re dropping some bills in the collection plate when it passes, I’d venture your donating to the church, you’re not truly tithing. And you may not receive the necessary acknowledgement from the church to deduct your giving on your taxes.

Now let’s look at a tax strategy around tithing.

In the Washington DC metropolitan area the median income is $90,000.  For example, Denise makes $90,000 as an employee.  Denise rents an apartment and typically claims the standard deduction on her tax return.  She doesn’t have any major medical expenses, and donates on average of $20 a week in the collection plate and another $500 during the year to various church sponsored charitable activities.  Denise has her state withholding taken out of each paycheck which comes to $4,950 for the year.  This year, Denise can either claim a standard deduction of $6,200 or itemize her deductions.

Denise $20

Denise has itemized deductions.  She has the state withholding of $4950.  Her donations in the collection plate added up to $1040 for the year; if the church has provided her a statement on their letterhead acknowledging those donations, she can claim them as a tax deduction. Same with the additional $500 she made to various church sponsored charities.  Denise has a total of $6,290 in deductions she could claim as itemized deductions.  Now Denise can itemize because the total itemized deductions is greater than her standard deduction for the year.  In Denise’s case however, the difference is only $90.

For most states, when the state tax is calculated, claiming the standard deduction will result in lower combined income tax.  Most states will reduce itemized deductions by the amount of state income tax claimed as a Federal itemized deduction.  In Denise’s case, if she itemized on the Federal she would end up saving only a few dollars on the Federal return and it would cost her significant dollars in higher state income tax when she completed the state tax return.  So, Denise really has no tax benefit from the $1,040 and $500 in donations she has made to the church this past year.  The amount of Federal income tax Denise paid this year totals $15,825. Here is another example.

Denise Tithe Denise committed herself last year to putting God first in her life and began tithing the first of the year. Denise’s tithe totaled $9000 last year and she received a statement at the end of the year from her church acknowledging her giving. She still had her state withhold
ing taken out of each paycheck and that came to $4,950 for the year. She now has a charitable donation of $9000.  She has a total of $13,950 in itemized deductions, greatly exceeding the $6,200 standard deduction.  Her Federal income tax bill is now $13,888.  Denise has saved $1,937 on her Federal taxes and another $345 on her state income tax.  By putting God first and following His instructions to tithe, Denise unlocked tax savings as well.

 I know what you are thinking……Denise donated $7500 more than before and is only saving about $2000.  She’s still out over $5000.  Remember, 1 Timothy 6:10 says “For the love of money is a root of all kinds of evils. It is through this craving that some have wandered away from the faith and pierced themselves with many pangs.” I offer up that it’s not about the money.  We are all stewards of all God provides us, and he instructs us to give freely the first tenth.  Matthew 6:33 “But seek first the kingdom of God and his righteousness, and all these things will be added to you.”  I’m merely highlighting that tax benefits will be added to you when you tithe.

 

Questions/Comments please give us a call at 703.365.0105; email me at jeff.randall@fulcrum6.com OR go to our website at www.taxbreak.tax

 

10 Things You Should Look For When Needing a Tax Professional

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Or like I like to say, what makes someone more qualified than you to prepare your tax return and charge you a nice chunk of change for the privilege?

#1 Do they have a PTIN? A what? There you go Jeff, using all those fancy letters. OK, a PTIN is a Preparer Tax Identification Number. It is issued by the Internal Revenue Service. Anyone wanting to prepare a tax return and charge a fee for their service is required to register with the IRS, pay a fee and obtain a PTIN. PTINs must be renewed each year.

#2. What is the Preparer’s History? Just having a bunch of letters after your name doesn’t necessarily indicate the experience or quality of the individual. You can and probably should check with the Better Business Bureau, State Board of Accountancy for Certified Public Accountants, your State Bar Association for attorneys and the IRS Office of Enrollment for enrolled agents to find out if there have been any complaints or disciplinary actions taken against your prospective tax preparer. Ask them questions, both about their experience and about your specific tax situation. Just because someone is an attorney, a CPA or an Enrolled Agent, doesn’t necessarily mean they have the experience you need to handle your personal or business tax situation.

 #3. Don’t hesitate to ask questions or interview a prospective preparer to ensure you are comfortable with their understanding of specific or specialized needs you have? Do you need someone with expertise in military member tax situations? Business? Retiree? Income from multiple states or countries? Ask questions until you are satisfied the individual you are going to work with understands your tax situation and can navigate the Tax Code to address your specific or specialized needs

#4. How do you charge? Avoid preparers that base their fees on a percentage of your refund. First, this is NOT an ethical best practice. Second, you want to ensure your preparer isn’t looking to inflate their fee by bending, stretching or ignoring rules resulting in you getting a bigger refund than you are legally entitled to so they can charge you a higher fee. Also avoid preparers that claim they can get you a bigger refund than some other preparer. Also, be careful in shopping around for the lowest price. I am a firm believer in you get what you pay for – especially if what you’re paying for is low cost support. Would you shop for the cheapest cancer care doctor or brain surgeon if you needed one? Probably not. Don’t settle for the lowest cost tax preparation service just because they were the cheapest. Now, I’m not saying you should have your tax return prepared by an attorney or a CPA because their rates are higher than other places. Some people may need the types of services these professionals provide. Many taxpayers can find more affordable options as their situations do not require the type of specialized expertise of a tax attorney or accountant.

 #5. Do they offer electronic filing? Any reputable tax preparer can easily meet IRS suitability requirements to be Electronic Return Originators. An electronically filed return is more secure, and results in less errors than manual paper filed returns. Electronic filing speeds up refund processing tremendously. Which there’s less of a chance of your return getting lost and you will get your refund in hand much quicker than if you mail it in. Many times, errors that can delay or derail you getting your refund for weeks can be immediately identified with an electronically filed return and quickly corrected. There just is no reason in this day and age to use a tax preparer that doesn’t electronically file tax returns. While there are still some instances where specific forms or types of returns may not be eligible to be electronically filed, but they are few and far between.

 #6. What information do you need to provide? Understand up front what you need to provide to have your tax return prepared accurately. The preparer should ask you for copies of prior year tax returns to identify any items that need to be reviewed for impact or inclusion on this year’s return. The preparer should require all records and receipts necessary to accurately prepare your return. Preparers should not encourage you to file your return before your W2 or investment documents come out. This is a bad practice. While you might be able to save some time in getting your tax return filed, you are significantly increasing the chance of receiving a dreaded IRS letter because they have information that doesn’t show on your return because you filed before all your paperwork was received. This can result in anxiety when you get a letter, and having to pay additional fees for someone to amend your return to address the missing items. You also may end up having to pay hundreds if not thousands of dollars in additional taxes, penalties and interest for incorrectly filing your return in the first place. If you are filing a joint return, the preparer should involve both taxpayers in the preparation of the tax return. While it may be common for one spouse to deal with financial or tax issues more than the other, the preparer should ensure they do not rely on information only provided by one spouse. A joint return signed by both spouses makes each spouse jointly and severally liable for the accuracy of the return. You want a preparer that treats each spouse as an equal party to the return.

 #7. What do they do after April 15th? You want to know if your preparer is going to be available after April 15th if you have any questions or correspondence related to the tax return they prepare. Understand up front how to you get help after the return is filed and after the April 15 deadline. Many preparers are part time or seasonal employees until April 15th. You want to know who and how any tax issues that may come up after April are handled.

 #8. Understand who has access to your information. Privacy and data security issues are in the news almost daily. Identity theft is one of the fastest growing crimes in the world. We are surrounded by technology most of us haven’t a clue how they work. Is my data in the cloud? What does that even mean? Reputable preparers will have security measures in place to protect the papers, records and receipts you provide to prepare your return, the data on the computers used to prepare your returns, the communications channels used to transmit your return data from the preparer’s computer to the IRS, credit or debit card information related to paying for your services and any physical records required to be retained by the preparer after your return has been filed. The preparer should not provide your information to anyone outside the normal processing without your written permission. Ask questions on how your information, both records and receipts and the digital files are safeguarded by the preparer and their firm.

 #9. Find out who will actually sign the tax return. If someone other than the preparer is the one that signs the return, you may consider having these conversations with that person as well. In fact, if someone else is going to sign your return, maybe that’s who you want to deal with in the first place. Avoid the middleman.

 #10. What happens if “gulp” you’re audited? While the taxpayer is responsible for what they sign for on the tax return, it is best to know up front what audit support is available if you receive the dreaded letter from the IRS or state on your tax return. Be comfortable with the level of audit support offered compared to the complexity of the issues on your tax return. Be comfortable with the professionalism, expertise and experience of the preparer that they will ask you enough questions and conduct what is known as sufficient due diligence to prepare an audit proof return. No preparer should guarantee your return will not be audited. There certainly are procedures that preparers should follow to reduce the likelihood of you being audited.

I have to admit, I have a vested interest in people using paid tax preparers to prepare this year’s income tax return. Can you prepare your own return? Probably. There are many resources available in the marketplace today to aid taxpayers on preparing and filing their tax returns at little or no cost. Should you prepare your own return? My advice to you is use some common sense. While most tax software is pretty easy to follow, with simplified steps for ease of use, it is also very easy to prepare a bad tax return. Anyone is capable of preparing a tax return either on line, with other software or by hand and filing a totally incorrect return. The mistake you make may merely cost you by overpaying tax you otherwise didn’t owe or it may be a costly error resulting in misreported income and underpayment of tax that results in hundreds or thousands of dollars in additional tax, penalties and interest.

There’s my Top 10 Things You Should look for when you are looking for a paid tax professional to prepare and file your tax returns this year. I welcome your questions and comments. You can call Tax Break at 703.365.0105 or email us attheradioshow@taxbreak.tax.

3 Things that May Slow Your Tax Refund

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congressAcross this great land of ours, thousands of tax practitioners, software developers, IRS and state tax and revenue offices are hard at work studying current Federal, state and local income tax laws to provide taxpayers a smooth filing of their 2014 income tax returns.  The IRS has completed their annual road show, spreading the good word and setting the stage for everyone to file according to the law of the land.  But wait!  Uncertainty is the only sure thing one can count on in today’s world according to Washington.   There are 3 looming events that may impact your tax refund this year.

#3  Debate, Debate, Delay

The lame duck Congress attempted to pass legislation to extend a number of tax provisions that expired at the end of 2013.  Similar to changing the expiration date on dairy products after they’ve hit the shelf, routinely expired deductions have been resurrected at the last minute (or several days after the last minute) to provide current year tax relief.  Under the threat of a Presidential veto because not everyone’s favorite items were included in the extenders bill, there is no deal on the table.  Debate will likely continue between the lame duck Congress and the White House until Congress recesses for the year.  The baton will then pass to the new Republican-majority Congress to continue the debate after New Year’s.  Result:  tax filing will likely be delayed again in 2015 until the extenders issue is resolved and IRS (and everyone else) retools to help taxpayers file and get refunds due.

#2  Everybody Join Hands and Sing Kumbaya

Dateline: Washington, December 11, 2014.  Congress and the White House agreed on the hotly debated extenders bill extending many tax provisions that expired at the end of 2013.  President Obama acknowledging bipartisan responsibility for providing fair and just tax relief to millions of Americans as he signed the bill into law as the 113th Congress evacuated Washington.

#1  More Debate, Debate and Delayed Filing

The 114th Congress takes up the baton and drafts a revised extenders bill, largely ignoring the threat of a Presidential veto so early in the term.  Debate continues into mid-January with IRS issuing a delay in the start of accepting tax returns until sometime after the Hatfield and McCoy factions at either end of Pennsylvania Avenue lay down their microphones and pass something.  Anything.  Result: The delay of 2014 filing until the end of January last year starts to look like the good old days to the IRS and tax practitioners.

Jeff Randall is a Principal Tax Advisor and Financial Coach at Tax Break.  jeff.randall@fulcrum6.com

Marriage is Marriage: Now, How Do We File Our Income Taxes?

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utah-coupleJune 26, 2013 The United States Supreme Court ruled in Windsor v. United States that Section 3 of the Defense of Marriage Act was unconstitutional.

October 6, 2014 The Supreme Court dismissed appeals to overturn same-sex marriage laws in Virginia, Utah, Oklahoma, Indiana and Wisconsin.

Utah CoupleHeadlines in newspapers and media outlets across our nation herald a long awaited, hopefully anticipated, and widely unexpected (at least by timing) decision on the legality of same-sex marriage. While yesterday’s action by SCOTUS only immediately established the foundation for marriages in the 5 states where current appeals had been filed, it is interpreted by most constitutional scholars that the Court is placing this matter in the states hands. It is widely expected that soon, 30 states will have enacted legislation legalizing same-sex marriages.

So, what does the Supreme Court’s rulings have to do with how you file your income tax? Lots.

The Internal Revenue Code (IRC) requires all married couples to file either as Married Filing Separately, Married Filing Jointly, or Head of Household (if certain conditions apply). If you get married in 2014, you no longer can file Single, you must file with an appropriate Married filing status. If you were legally married prior to June 26, 2013, the IRS allows you to file amended tax returns (Form 1040X) if you wish to change your individual filing statuses from Single to Married Filing Jointly for years 2011 and 2012. It may be in your best interest to do so, but not necessarily. You are not required to amend prior years to change from Single to Married, but can if you so wish. Consult a qualified tax professional to determine the best filing status for you and your spouse to use.

Couples may think that Married Filing Separately is the easier way to file, i.e., like continuing to file Single. Not so fast. There are many unfavorable provisions in the Tax Code for couples filing Married Filing Separately. It is highly unlikely that couples using the Married Filing Separately status will pay less combined tax than if they filed Jointly. I amended 2013 returns for a couple last week that resulted in a tax savings of more than $10,000 by filing Married Filing Jointly.

The October 6 dismissal of state appeals before the Supreme Court clears the way for the simplification of tax filing for same sex couples in many states. Up until now, couples in states that did not recognize same-sex marriages were forced to file as Married on their Federal income tax returns and then as Single on their state returns. One would expect that standardization of filing statuses will result as more and more states adopt inclusive marriage definitions.

A toast to all newlyweds. Now consult with your tax professional to understand how your marriage will affect this year’s refund!

Jeff Randall is a Principal Tax Advisor and Financial Coach at Tax Break. jeff.randall@fulcrum6.com

Autumn’s Starting & So Is Your 4th Quarter

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autumnsstar1Autumn is starting this week and September 30th marks the end of the 3rd quarter of Calendar Year 2014. Now’s a good time to take a two-minute timeout to both look back at the year so far and look ahead to the 4th Quarter.

2:00 State of the Company
What’s the company look like at this point? Whether you’re a start-up in the first year of business or your company’s seen many an autumn come and go, it’s a good idea to pause and take stock of where the company is at. Is it staying true to its intended mission or has there been some drift or pulling away from that mission? Is the mission truly changing or is some action needed to set it back on track. Verify the mission is intact or identify actions needed to make the necessary course correction.

1:30 Products and Services
How are sales of your products and/or services? How did actual sales in the 3rd quarter compare to your forecasts? Were there offerings being monitored throughout the quarter that now need to be cut? Stop offering poor performing products and services so you can free resources to bolster other offerings or to introduce new products/services.

1:00 Manage Effectively
Pause and assess management effectiveness, whether it be just you or you and your team (if you have a team, don’t assess them without first assessing yourself). Are goals clearly stated and understood? Are you (and the team) fully committed to achieving the goals? Do the players have the adequate knowledge to execute strategies to achieve the goals? Does sufficient technical ability exist or can it be obtained? How does management reinforce all participants to ensure the quarter’s goals are met?

00:30 Show Me the Money
We all know: it’s all about the money. Did you meet your financial goals for the year to date and the quarter just ended? If you don’t know – find out! Identify (quickly) what corrections may need to be made to ensure the 4th quarter performance meets both the quarter’s and year’s financial goals. Put in place monitoring techniques to improve both the timeliness and usefulness of financial data you need to achieve this quarter’s goals. Make sure 3rd quarter tax reports are completed and filed on time and all necessary deposits have been made.

00:00 Time to Play
OK, timeout’s over. Business continues at its normal frenetic pace. Take a deep breath and jump back into it. Make an appointment with your tax advisor to identify any year-end tax savings strategies for both you and your business. Here’s to your best 4th Quarter ever!

Author info: Jeff Randall is a senior tax advisor and business coach to entrepreneurs. Contact: jeff.randall@fulcrum6.com

Do You Have More Month than Money?

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hand-holding-cash-and-credit-cardsSo, are you finding moHand Holding Cash and Credit Cardsre and more that there is more month left than money? Making minimum payments becoming a way of life? Always worried about next month’s bills? Money fights making life difficult with your spouse? You’re not alone.  More than 70% of households in the United States are living paycheck to paycheck.  You have options to take control of your money and not feel controlled by your money.  There are methods proven to be effective in making profound impacts on the lives of millions of people.  First – you need to not buy things you don’t have cash to pay for.

Sounds simple, but how can you get your finances under your control?  I can help. You can control your money instead of feeling like it is controlling you. I can guide you out of debt and onto the path of financial freedom using a process that’s helped millions of people just like you.