Deduct Everything!. Eva Rosenberg
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• LITC—Most people have never heard of these Low Income Taxpayer Clinics. They are overseen by the National Taxpayer Advocate Service. Often affiliated with colleges or universities, LITCs offer free or low-cost services to taxpayers in trouble. They represent low-income individuals in disputes with the Internal Revenue Service, including audits, appeals, collection matters, and federal tax litigation. LITCs can also help taxpayers respond to IRS notices and correct account problems. Some LITCs provide education about taxpayer rights and responsibilities for low-income taxpayers and taxpayers who speak English as a second language (ESL). Use the LITC map to find one in your area: http://www.taxpayeradvocate.irs.gov/about/litc.
Tip #30:
How many kinds of tax professionals are there? These are the main categories of tax preparation and consultation professionals you should choose from. (Numbers in parentheses are the PTIN holders in each category):
• Enrolled agents (EA; more than 50,000)—EAs are the nation’s tax specialists, with the highest credential that the IRS issues to tax professionals. They are licensed to work anywhere in the country and overseas, with respect to your IRS and state issues. They must complete an average of 24 hours of tax education every year (30 hours if they are a member of the National Association of Enrolled Agents). They are a perfect choice if you need individual and business tax preparation, tax planning, tax audit representation, or you have tax debts. These are their areas of specialty. Some EAs also handle estates, trusts, and nonprofit organizations. Many also offer bookkeeping and payroll services year-round.
• Certified public accountants (CPA; more than 213,000)—CPAs are the best-known tax professionals. They are licensed by their state CPA society and/or consumer affairs departments. Their practice tends to be limited to their own state unless another state offers reciprocity. However, the IRS will accept their credentials anywhere in the United States or overseas. CPAs must also get continuing professional education, but there is no mandatory tax education requirement. Most CPAs prepare all kinds of tax returns. Some are adept at IRS audits, while a few are skilled at tax debt representation. So if you have that kind of problem, ask about their experience first. CPAs are great if you have a high-value business—especially if you are hoping to go public one day. For many CPA firms, write-up (accounting) is their lifeblood. Some firms primarily prepare tax returns for their business clients, related parties, and referrals. They are excellent if you have a nonprofit organization, which often requires an annual audit. Some offer certified audit services.
• Tax attorneys (more than 31,000)—These people are also licensed by their state Bar and/or state consumer affairs agencies. Like CPAs, their practice tends to be limited to their own state, unless another state offers reciprocity. However, the IRS will accept their credentials anywhere in the US or overseas. Like CPAs, attorneys must also get continuing professional education, but there is no mandatory tax education requirement. You generally do not need an attorney to prepare your personal tax return. Some tax attorneys (often members of the American Bar Association Tax Section [http://www.americanbar.org/groups/taxation.html]) will have extensive, complex, high-level tax backgrounds and continuing education. Use attorneys for estate and gift planning, business succession planning, and criminal tax issues. You need their help on all contracts and agreements, especially with respect to real estate, business agreements, trusts, wills, and so on. You don’t generally need a tax attorney to help you with IRS debts. EAs and CPAs can help you with that. You might need an attorney to represent you on complex foreign bank account and asset issues. However, some EAs and CPAs can help with the noncriminal areas of foreign account reporting.
• State-licensed professionals—Of all fifty of the United States, only three have any licensing requirements for tax professionals. They are California, Oregon, and Maryland. Tax preparers in these states must pass a test and take a certain number of hours of continuing education in taxes and ethics each year. If you live in one of these states, make sure your tax preparer is either licensed by the state or is an EA, CPA, or attorney. Note: Attorneys and CPAs licensed in other states, but practicing in CA, OR, or MD, may have to register with these states’ tax preparer programs. No one else may charge you to prepare a tax return. These tax professionals are limited to preparing a tax return and to answering the IRS’s or state’s questions about the tax return that they prepared. That’s it. They are not permitted to represent you at any levels of the IRS with respect to balances due, collections, appeals, notices, or anything else. However, they may be able to help with some of your state tax department issues.
• Annual Filing Season Program Certificate of Completion (AFSP; more than 43,000)—In 2014, the IRS instituted a voluntary program to allow unlicensed tax professionals in 47 states to demonstrate a higher level of training and expertise. These people have all the same rights as the state-licensed preparers when it comes to dealing with the IRS. They may represent you at IRS audits on the tax returns they prepared. They cannot speak for you before the IRS collections or appeals divisions.
• Unlicensed tax professionals who have PTINs (more than 375,000)—These people are permitted to prepare your tax return and to file your tax return electronically. Period. Some are highly experienced and do get a great deal of education and training throughout the year. Many are not, so beware. To determine if the unlicensed tax professional of your choice is reliable, here are some steps to take:◦ Check that IRS PTIN database I mentioned previously. If it shows that their PTIN is in good standing, that’s good news.◦ Ask if they are a member of any professional tax organizations. Some reputable organizations include the National Association of Enrolled Agents (NAEA), National Association of Tax Professionals (NATP), National Society of Accountants (NSA), National Association of Tax Consultants (NATC), and American Society of Tax Problem Solvers (ASTPS), among others: https://www.taxsites.com/associations.html. All these organizations require their members to maintain high standards of continuing education.
Tip #31:
Avoid tax preparation outfits within certain retail establishments. Services offered at car lots, stereo stores, and other high-ticket stores where they provide free or low-cost tax preparation services are often really designed to help you get a refund to use toward a store purchase. The preparers may be unlicensed, untrained, and only know how to generate high refunds in ways that may not be legal.
Tip #32:
Avoid tax offices that push refund anticipation loans (RAL)—especially if they tell you that you must get one. With current IRS efiling protocols, you will probably get your refund deposited directly to your bank account within about ten business days or less. So there is absolutely no need to pay someone a high fee to get your own money. The IRS frowns on this practice and has posted alerts to the public about what to watch out when being offered RALs: http://www.irs.gov/uac/Tax-Refund-Related-Products.
Tip #33:
Read your tax return before you sign it. By law, all tax preparers must give you a copy of your tax return before you sign the Form 8879 or Form 8453 to file electronically. It doesn’t have to be on paper; an electronic copy is OK. But do take the time to read and review it before you sign the electronic filing forms or before mailing in your paper tax return. If the preparer made an error, it’s your problem and your responsibility. So read the whole return and ask questions if you don’t understand something.
Tip #34:
Amazing and magical refunds are too good to be true. Some unscrupulous preparers attract clients by promising huge refunds. They make up numbers on