This time of year is when investors see tax preparer shops sprout up like daffodils and looking like supermarkets with ads in the windows offering discounts, refund loans, and other enticements.
But how many of your clients are savvy when it comes to picking someone to prepare their taxes? It may be easy to overestimate clients’ ability to choose well.
And not choosing well can have serious consequences and land an investor on the IRS’ radar screen.
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After that, it becomes the taxpayer’s burden to resolve any legal issues, no matter who is responsible for the mistake.
An IRS survey showed that 94% of taxpayers who use tax preparers generally follow their advice. As many as 62% follow it blindly.
The last few years have seen the IRS trying to better regulate the tax preparation industry as a result.
Choices for tax preparation range from a family member who is considered to be a whiz with numbers, volunteers for organizations offering services for low income or elderly taxpayers, registered tax return preparers, enrolled agents (EAs)—often former IRS employees—and
certified public accountants (CPAs) along with tax attorneys.
Clients should check tax preparer qualifications, educational backgrounds, and the requisite for continuing education.
Those with small businesses should consider hiring an EA, CPA, or tax attorney. Clients should also check Better Business Bureau records and how fees are calculated.
They should also make sure they will have access to the tax preparer after filing season in case other questions are asked or errors need to be corrected.
Many of your clients may have a tax preparer or planner whom they trust. But like anything else, making that assumption always opens the door for unanticipated risks.
You can raise your value in your clients’ eyes by making sure
all aspects of their planning are being taken care of appropriately.