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Tax Preparer, Enrolled Agent, CPA or Tax Attorney?

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When you need a tax professional who should you turn to?  Well, it depends on how complicated your taxes are and how much money is at stake.  Here is some information to guide you in your decision.

There are four different types of tax professionals 1) general preparer 2) enrolled agent 3) certified public accountant 4) tax attorney.   Some including myself might be more than one type for example I am a tax preparer, CPA and Tax Attorney.

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General Tax Preparer:

Anyone can open a business and prepare taxes for others.  All they have to do is apply for and receive a tax identification number from the IRS.  A preparer can have no experience and no education and still be preparing businesses for others.  HR Block, Liberty and other chain tax preparation firms fit into this category.  Often their staff only has a tax course taught by the firm before they are preparing taxes for clients.  The general tax preparers are best for simple returns because they are the least expensive and often competent enough to handle a simple return.   Common prices for a simple return prepared by a general tax preparer are $50-100 for a simple Federal Return.

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Enrolled Agent:

An enrolled agent is a person who has earned the privilege of practicing, that is, representing taxpayers, before the Internal Revenue Service. Enrolled agents, like attorneys and certified public accountants (CPAs), are unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and which IRS offices they can practice before.

An enrolled agent has taken a test with the IRS and completed continuing education classes on tax preparation.  Enrolled agents are not required to have an accounting degree.  Enrolled agents are generally less expensive than CPAs and Tax Attorneys.  A typical price for a simple return prepared by an enrolled agent is $75-150 for a simple Federal Return.

For more information on enrolled agents see the following IRS website:  http://www.irs.gov/taxpros/agents/article/0,,id=123388,00.html

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Certified Public Accountant (CPA):

CPAs have both an accounting degree and at least 2 years of work experience.  Certified public accountants are often chosen to prepare business tax returns because they can also perform financial statement reviews and compilations. Often businesses will see their CPA throughout the year for tax planning and financial statement reviews.  CPAs are more expensive than enrolled agents and general tax preparers because they have their licenses to maintain and also have demanding continuing education requirements.  People with complex returns or business returns often chose CPAs because their tax expertise makes up for their more expensive prices.  A typical CPA will charge $100-300 for a simple Federal Return.

The American Instititute of Certified Public Accountants is the largest CPA professional group for more information see the following AICPA website:

http://www.aicpa.org/Pages/Default.aspx

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Tax Attorney:

Tax Attorneys are the most expensive tax professionals.  They have graduated from law school and have passed a state bar exam.  A lot of the tax attorneys are also certified public accountants.  They rarely prepare individual tax returns.  Tax attorneys are used for IRS audits and complex tax transactions.  A typical tax attorney will bill by the hour and on average charges $200-400 per hour.

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Conclusion:

If you need the help of a tax professional use the one that can proficiently accomplish your needs with the lowest price.  If you have a simple tax return any experienced tax preparer should be able to prepare your return.   However, if you have more than a simple return or a business you should consider using a CPA.

Also, if you are paying more than the average prices listed above you might want to chose a different professional.  Well, I hope you found this post beneficial if you would like more information give me a call at 702-216-1011.  For other posts and tax related videos check out my blog at http://www.arlintlaw.com/blog.

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How to Report Suspected Tax Fraud Activity

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How to Report Suspected Tax Fraud Activity

Suspected tax fraud can be reported to the IRS using Form 3949-A, Information Referral. The completed form or a letter detailing the alleged fraudulent activity should be addressed to the Internal Revenue Service, Fresno, CA, 93888. The mailing should include specific information about who is being reported, the activity being reported, how the activity became known, when the alleged violation took place, the amount of money involved and any other information that might be helpful in an investigation. The identity of the person filing the report can be kept confidential.

Whistleblowers also may provide allegations of fraud to the IRS and may be eligible for a reward by filing Form 211, Application for Award for Original Information, and following the procedures outlined in Notice 2008-4, Claims Submitted to the IRS Whistleblower Office under Section 7623.

What is an IRS Audit?

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An IRS audit is a review/examination of an organization’s or individual’s accounts and financial information to ensure information is being reported correctly, according to the tax laws, to verify the amount of tax reported is accurate.

Publication 556, Examination of Returns, Appeal Rights and Claims for Refund explains the audit process in more detail.

 

IRS Audit Selection

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Audit Selection

Selecting a return for audit does not always suggest that an error has been made. Returns are selected using a variety of methods, including:

Random selection and computer screening – sometimes returns are selected based solely on a statistical formula.
Document matching – when payor records, such as Forms W-2 or Form 1099, don’t match the information reported.
Related examinations – returns may be selected for audit when they involve issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for audit.

IRS Audit Methods

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An audit may be conducted by mail or through an in-person interview and review of the taxpayer’s records. The interview may be at an IRS office (office audit) or at the taxpayer’s home, place of business, or accountant’s office (field audit). The IRS will tell you what records are needed. Audits can result in no changes or changes. Any proposed changes to your return will be explained.

Your Rights in an IRS Audit

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Publication 1, Your Rights as a Taxpayer, explains your rights as a taxpayer as well as the examination, appeal, collection, and refund processes. These rights include:

  • A right to professional and courteous treatment by IRS employees.
  • A right to privacy and confidentiality about tax matters.
  • A right to know why the IRS is asking for information, how the IRS will use it and what will happen if the requested information is not provided.
  • A right to representation, by oneself or an authorized representative.
  • A right to appeal disagreements, both within the IRS and before the courts.