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Choose A Tax Preparer Who'S Right
For You. But A Word of Caution: New Privilege Provided to Taxpayers in 1998.
Doesnt Apply When it Comes to Completing Your Tax Return
(RIVERWOODS, ILL., January 20, 1999) Every
January, millions of Americans start worrying about their
taxes and about choosing a professional tax
preparer. In 1996, more than 60 million federal income
tax returns were submitted by an accountant, tax
attorney, enrolled agent, a retail tax service or other
paid tax preparer. CCH INCORPORATED, a leading
provider of tax law information and professional tax
preparation software, offers these guidelines for
selecting the right tax professional along with a
word of caution about a new law that affects taxpayers
who hire accountants.
The Privilege Stops at the Door
During Tax Season
In 1998, Congress granted taxpayers a number of rights
under a new law that affects both individual taxpayers
and their accountants and enrolled agents who advise them
on tax matters. Specifically, the new law extends the
existing attorney-client privilege to non-attorneys
authorized to practice before the IRS.
However, CCH Principal Analyst Mark Luscombe, JD, CPA,
cautions taxpayers to understand the limitations of this
new privilege, especially with regard to tax preparation.
In short, the privilege doesnt apply when
youre working on your tax returns.
"If you review how confidentiality has been
applied in the attorney-client environment, youll
find that the privilege probably doesnt apply to
preparation of tax returns," said Luscombe.
"So, dont assume everything you tell your
accountant is considered privileged communications.
Its simply not protected under the law."
With that word of caution, CCH suggests you consider
the following when trying to find the right tax preparer
Beginning Your Search
- Go with experience. Look for a tax
professional who has consistent experience in
tax, especially since there were more than 600
changes to the tax code last year alone.
- Ask your friends. Ask friends whose
financial situations are similar to your own if
they can recommend anyone to help you.
- Contact your state CPA, Legal or Enrolled
Agent Organizations. Many state organizations
have free referral services, and many of these
organizations provide free assistance to
low-income taxpayers who cant afford tax
After Identifying Prospects, Ask These Questions
- What is the focus of your practice? Some
tax professionals have specialties in areas such
as small business. If you have specific concerns,
make sure your tax professional is qualified to
provide the special assistance you require by
asking for references.
- Are you familiar with the laws of states in
which I am subject to tax? If you have
financial interests in states other than where
you live, make sure your tax professional is
familiar with those state laws. For example, if
you live in one state and work in another,
selecting a tax professional with interstate
knowledge is important.
- How do you bill your clients? Before you
ask your tax professional to do anything, get a
good idea of how he bills and the level of detail
provided. Does he charge an hourly rate or a
straight fee, and how and when will you be
billed? Will you be billed for his research time?
Dont forget, the fee you pay your
accountant this year could be a deduction on next
- How do you characterize your professional
style? Does your tax preparer take an
"aggressive" approach to minimize the
tax burden even if it means incurring questions
from the IRS? Or, does she take a conservative
path and risk paying a few extra dollars? As the
client, you make the final decisions, so choose a
tax professional whose approach closely matches
your own philosophy.
- If I am audited, will you represent me? Ask
your potential tax professional if he would
represent you if the IRS questions your filing or
decides to audit you. If so, ask if he has much
experience with IRS audits. While some such
experience is good, too much can be a warning
- How do you keep current with the tax law?
Ask the tax preparer if he uses current-year
computer software to prepare returns. Also, ask
if she has access to authoritative tax research
services, such as CCH, should the need for
in-depth research arise.
- What do you need from me? Ask exactly what
information he needs and in what form. Many tax
professionals provide "organizers" to
help you sort your financial records effectively.
The more organized, the better he is able to
prepare your return in the shortest time (and the
more money you can save in fees).
A Final Check
- Make sure your CPA is licensed by the state
CPA association. If you decide to hire a CPA,
check with your state CPA Society to verify her
license and to see if any complaints have been
filed. If several complaints have been filed,
- Keep accurate records all year. Or, at
least organize your records before giving them to
your tax professional.
- Create an outline of your financial picture.
You should have a general idea of your financial
situation before you begin searching for a tax
professional. Are your taxes relatively simple or
complicated? Do you run a business from your
home, have multi state holdings or limited
partnerships? The better you understand your
financial needs, the better prepared you are to
find someone to serve your needs.
- Don't wait until the last minute. Whether
you are planning to complete your return yourself
or hire someone to complete it for you, the
earlier you begin the process, the better. If you
just can't file on time, remember the last day
you can file for a four-month extension without
penalty is April 15, 1999. But, if you think you
owe, you still have to pay by April 15 to avoid
interest and penalties.
- Know your options. Certified Public
Accountants are not the only help available for
tax preparation. There are a number of good
options, including tax attorneys, Enrolled
Agents, some Certified Financial Planners and
consumer retail tax preparation companies (such
as H&R Block).
About CCH INCORPORATED
CCH INCORPORATED, headquartered in Riverwoods,
Ill., was founded in 1913, the year the federal income
tax was created, and has served four generations of tax
professionals and their clients. For more information
about taxes, visit the CCH website: www.cch.com.
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