Preparation of tax returns should be done very cautiously, because the tax payer is responsible for each and every word written on the tax return even though it is prepared by a professional. The preparer should be able to provide you with practical and convenient tips for tax saving.
You can find an efficient tax preparer online only if you put genuine efforts in searching for one.
Check while hiring tax preparer online
There are certain things that one should follow when hiring an individual or a firm for online tax preparation:
- Legally speaking, the professional preparer should sign the returns form in the preparer areas. He/she should furnish the identification number on the return. He or she should give a copy of the return to the tax payer.
- The preparer should be very accurate with filling in your details. Your personal information along with your registration number should be mentioned accurately.
- The tax preparer should be efficient in online accounting.
- Do not sign on blank tax returns form ever and do not use a pencil for signing as the signature can be easily erased and your signature replaced.
- You should present any notices and refund checks that you might have got from your attorney to the tax preparer for preparing the returns.
- Online bookkeeping is something that your tax preparer should be efficient in.
- The tax preparer should be adequately qualified and experienced for his/her job, because each and every word he or she writes in the return from is evaluated by the tax collection authorities, and there is every opportunity of the tax payer being penalized for terms that are vague or seem to be unreliable.
Online Tax Preparation Process
Tax preparation should be done with a lot of caution as each and every word mentioned in the tax returns form is the responsibility of the tax payer, even though it might be prepared by another person, a professional or a firm. The tax preparer should be well versed in his/her work. He/She should be adequately qualified and experienced to prepare the tax returns statement. He/She should fill out the form with clear and reliable statements and should sign the tax returns form wherever applicable.
He/She should fill in the areas on the tax return form where the preparer’s information is required. Details like identification number should be clearly furnished on the form and should be signed. The person should not leave any blank areas. The details of the tax payer presented on the returns form should be accurate. It is mandatory for furnishing the registration number of the tax payer. The tax preparer should be able to provide easy-to-implement tax saving tips, and he/she should be adept at online bookkeeping and accounting. Any notices and refund checks, if obtained from an attorney, should be furnished to the tax preparer. On the whole, preparation of tax return statements should be done in a very careful manner as mistakes might cost the tax payer a lot.
The IRS has been sending out letters to income tax preparers for the past few years reminding them of their obligation to prepare accurate tax returns on behalf of their clients. During the month of November, the IRS started sending out letters to more than 21,000 tax preparers across the country. The reason for these letters is because the returns prepared during the past tax season have shown a high percentage of inaccuracies and misinterpretations of the tax law. The agency will be focusing on preparers who prepared a large number of individual returns with Schedules A (Itemized Deductions), C (Profit or Loss from a Business), and E (Supplemental Income or Loss) during the past filing season.
The letter contains an enclosed documents related to Schedules A, C and E. The documents address some tax issues that the IRS review considers to have been misunderstood or misinterpreted.
Tax return preparers are expected to be knowledgeable in tax law. They are expected to take the necessary steps to file an accurate return on behalf of their clients. These steps include reviewing the applicable tax law, and establishing the relevancy and reasonableness of income, credits, expenses and deductions to be reported on the return.
In general, preparers may rely on good faith client-provided information. However, they can not ignore reasonable inquires if the information furnished by their client appears to be incorrect, inconsistent with an important fact or another factual assumption, or is incomplete. Tax preparers must make appropriate inquiries to determine the existence of facts and circumstances required as a condition of claiming a deduction or a credit.
Both the tax preparer and their clients may be adversely affected by incorrect returns. These consequences may include any and all of the following:
• If their client’s returns are examined and found to be incorrect, they (the client) may be liable for additional tax, interest and penalties.
• Preparers who preparer a client’s return for which any part of an underestimate of tax liability is due to an unreasonable position can be assessed a penalty of at least $1,000 per tax return.
• Preparers who preparer a client’s return for which any part of an underestimate of tax liability is due to recklessness or intentional disregard of rules or regulations by the preparer, can be assessed a penalty of $5,000 per tax return.
The letter further goes on to state that preparers in addition to their responsibility to exercise due diligence in preparing accurate tax returns for their clients should also be aware of the IRS’s tax return preparer requirements. This includes entering the Tax Preparer Identification Number on all returns prepared for compensation and adherence to the electronic filing requirements.
IRS revenue agents will be conducting 2,100 compliance visits nationally with members of the tax preparer community. The purpose of these visits is to make sure that preparers are complying with the current return preparer requirements and to provide information on new preparer requirements effective for the 2012 tax season. These visits are expected to start in November 2011 and be completed by April 15, 2012.
Taxpayers should be careful when choosing a tax preparer. While most paid preparers provide honest and excellent service to their clients, there are some that make common mistakes or engage in fraud and other illegal activities.
Reputable preparers will ask to see receipts and other documentation when preparing a tax return. They will ask numerous questions to determine whether expenses may be claimed as deductions or qualify for favorable tax treatment. By choosing a reputable preparer you can avoid additional taxes, interest and penalties that could result from an examination of your tax return.
In summary, the IRS continues to monitor tax return preparers. They are looking to make sure they are in compliance with tax return preparer guidelines and they continue to review tax returns in which there has been shown a high degree of inaccuracies and misinterpretations of the tax law.