Question: How Do I Find a Good Tax Adviser?
There are a lot of disreputable tax advisers out there, ranging from the well-meaning but ignorant to the downright illegal ones. It is difficult to know whether a tax adviser is giving you the right information, or if the person will stand up with you in the case of an audit.
Answer:
Spotting Bad Tax Advice
One way to spot bad tax advice is to analyze what the tax adviser is suggesting. For example:
- Under-reporting or omitting income. If someone advises you not to report all your income, that's a red flag. You received the money, you must report it. That includes barter transactions, which the IRS says you must report in most cases.
- Overstating deductions or claiming false deductions. If you didn't actually spend it, you can't report it. For example, you may or may not be eligible for a home office deduction. The rules are complicated, so let your CPA or tax adviser determine if an expense is deductible.
- Claiming personal expenses as business deductions. Paying personal expenses with business funds is a big "no no." Set up separate checking accounts and don't let any personal expenses get paid from your business. If a personal expense is part of a business bill, separate the two in your accounting setup.
Check on Your Tax Adviser
Only advisers who are qualified to represent you before the IRS should be giving tax advice. An IRS-qualified representative can be a tax attorney, Certified Public Accountant (CPA), or Enrolled Agent. Be cautious about relying on anyone's advice. Here are some ways you can check to see if your tax preparer is legitimate:
- Use the Department of Justice's Tax Division website to see if this preparer has been barred from practicing.
- Contact the Better Business Bureau to see if there have been complaints against the preparer.
- If the tax preparer is a Certified Public Accountant (CPA), you can check with the American Institute of Certified Public Accountants (AICPA) for disciplinary actions or your state's accountancy board to see if the CPA has any charges against him/her.
- If the tax preparer is an attorney, check out the preparer on your state's bar association.
- You can also check with the IRS Office of Professional Responsibility (OPR) for enrolled agents or the oversight agency in states that license or register tax preparers.
Finding a Reputable Tax Preparer/Adviser
Finding a good tax preparer/adviser is a matter of trial and error. Here are some suggestions for finding and evaluating a tax adviser:
- The IRS says:
Understand that the most reputable preparers will request to see your receipts and will ask you multiple questions to determine your qualifications for expenses, deductions and other items. By doing so they have your best interest in mind and are trying to help you avoid penalties, interest or additional taxes that could result from an IRS examination.
- Look for a CPA or tax attorneywho is experienced in the kind of business you are operating. Check with other businesses in your field to get references. If you have to choose between location and experience, go with experience. Many professionals work online or by video conference and phone/email, so you can still contact the adviser easily, even if the person is not in your town.
- Ask who will be preparing your business returns; you will pay more to have the person in the firm with the most experience do your return, but it should be worth it.
- Select a preparer who is able to accompany you to audits; only attorneys, CPAs, and enrolled agents can represent taxpayers before the IRS in all matters, including audits, collection actions, and appeals. Other return preparers may represent taxpayers only in audits regarding a return that they signed as a preparer.
