CARL WATTS & ASSOCIATES

October 22, 2012

www.carlwatts.com
office@carlwatts.com
Washington DC
 tel/fax 202 350-9002
TOP
Tax Professionals -
Do You Need One?
Troubles viewing this message? View in browser online here
Even so, online filing can be time consuming and minor/common mistakes in figures can lead to a plethora of complications.

If you value your time and are not too comfortable with handling figures, tax laws and new software programs, a tax preparer my be right for you. The price is not high and it could save you a lot of headache.

If, by any chance, you get audited by the IRS, an enrolled agent can represent you before the IRS.

Your tax returns can get more and more complicated with any or several of the following situations:

- You have a mortgage, children and some investments;

- You have income from real estate, Partnerships, S-Corporation, foreign income and acquisitions or divestitures;

- You are self-employed or own your business;

- You have financial transactions that may impact your tax situation, like forgiveness of debt, transferring an asset, swapping of an asset, disposition of an asset, giving money or assets to family members or charities and estate planning;

- You are facing a life change, such as relocation, marriage, divorce, a new child, a kid heading off to college, or retirement.

This list is somehow simplified, there are of course other situations that require specialized help and, unless you’re a professional yourself, if you want to succeed financially you should be willing to pay for good financial and tax advice, especially from a CPA or financial planner.

In choosing the right tax professional, you should do your homework and make sure you find someone who understands your unique situation.

- Ask for referrals from friends, family or colleagues who have similar tax situations;

- Interview several tax pros and make sure you ask the following questions:
-
What licenses, experience or other credentials do you have?

-
What is your main area of expertise?

-
Do you prepare returns yourself, or do you outsource it to someone else?

-
How long will it take to prepare my return?

-
Can you help me if I get an IRS notice or if I am audited?

-
Do you do tax planning and tax estimates also?

-
Are you available throughout the year if I have questions or need to do any tax planning?

-
What are your fees?


There is no doubt that finding a tax professional you can trust and respect is no easy matter. There may be dramatic differences in their knowledge and experience, desk manners and temperament, therefore never forget that we are always here, happy to be of any service to you!

Good luck and keep close for our following Newsletter.

Who are these tax professionals that we’ve been advising you to go to in most of our newsletters?

Many people will call themselves tax professionals but there is a significant difference in qualifications.

Tax Professionals is a generic term describing a variety of professions including Enrolled Agents, Certified Public Accountants, Financial Planners, Accountants, Tax Preparers, and some Lawyers.

An enrolled agent (EA) is a federally authorized tax practitioner empowered by the U.S. Department of the Treasury to represent taxpayers before the Internal Revenue Service. An EA has to pass the Special Enrollment Examination, or must have worked at the IRS for five years in a position which regularly interpreted and applied the tax code and its regulations. The IRS conducts a background check as well as a review of the applicant’s tax compliance. Also the IRS requires ERs to complete 72 hours of continuing professional education every three years.

A tax preparer is an individual who has been given limited training, usually 3-6 weeks, on the tax forms, types of income and expenses and how to use tax software. Thanks to recent law changes they must be licensed and receive annual training to ensure familiarity with the most recent laws.

Attorneys and Certified Public Accountants (CPAs) are licensed on a state by state basis, and are empowered by the Department of the Treasury to represent taxpayers before the IRS.

Attorneys and CPAs are generally recognized as having the greatest expertise in understanding taxes. Both the fields of law and accounting are broad and professionals often specialize in specific areas of practice.

A CPA has general knowledge in all accounting disciplines such as audit, cost, revenue, preparation of financial statements and tax. A CPA may specialize in one or more areas, so it is important to understand what area of accounting they have practical experience.

A tax attorney has a law degree and also has an accounting degree usually with a CPA specializing in tax. Many tax attorneys focus on corporate and/or partnership taxes, acquisitions/divestitures, real estate or representing a defendant in an IRS audit.

A financial planner is a practicing professional who prepares financial planning for people covering various aspects of personal finance which include: cash flow management, education planning, retirement planning, investment planning, risk management and insurance planning, tax planning, estate planning and business succession planning (for business owners). All of this is commonly known as personal financial planning designed to create a financial plan, a detailed strategy tailored to a client's specific situation, for meeting a client's specific goals.

Of course there is a lot more to be said about these professionals and their expertise. But maybe equally important is to know if and when you need to enroll any of their services.

So what should you do about your tax returns?

First of all, no matter what your tax situation looks like, you need to have all of your papers and information ready and well organized. For more details on how you need to prepare for your tax preparer or tax return filing, please click on the link to one of our previous newsletters.

If you have basic filing needs with just one or two W-2s and no deductions other than standard deductions, the do-it-yourself approach may work for you just fine. You can use online software programs or even buy one of them for the federal return; most states have online applications for filing the state return as well.