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ASK THE EDD ATTORNEY – HOW TO MAKE A WISE CHOICE WHEN SELECTING A TAX RETURN PREPARER

By Robert S. Schriebman
November 19, 2015

Introduction

This is an important time of the year for making plans for the 2015 filing season and especially for year-end tax planning. I have seen my share of sad cases; clients who have been victimized by unethical so-called tax professionals. In early November the IRS issued a press release giving important information on how to go about selecting an ethical and responsible tax advisor and tax return preparer, (IR-2015-124).  In this article I will share with you many of the important factors published by the IRS as well as give you my own personal "war stories."

This is the best time of the year to interview and retain a competent tax prepare and advisor.  Don’t wait until February or March 2016 when these people have their hands full helping existing clients get ready for the filing season.

Tips To Keep In Mind When Selecting A Tax Professional

  • Select an ethical advisor and preparer: Think about it, you are about to divulge to this person information and documentation that you would not want to place in the hands of someone who may cause you a world of hurt. You are giving this person your social security number, bank account information, the nature of your investments and other sensitive information. Yes, websites, radio and television commercials are helpful, but word of mouth is still the best recommendation. Don’t be afraid to ask the professional for referrals. You should also check to see if there are any complaints filed with the Better Business Bureau or the Chamber of Commerce.

    If you are selecting an enrolled agent as your tax professional check with the IRS Office of Enrollment to see if that person is in good standing. You can also check the IRS Office of Professional Responsibility (OPR) to see if that person has had any complaints filed with the IRS. OPR can discipline an errant tax professional including the suspension and revocation of his or her ability to practice before the IRS. The IRS OPR also regulates attorneys and CPAs.  If you are selecting a Certified Public Account (CPA) you can verify his or her good standing with the State Board of Accountancy. If you are selecting an Attorney you can check with the State Bar of California to see if that person has had any disciplinary issues.

    "War Story": Several years ago a client came to me with serious IRS and FTB problems. She was previously represented by a person in my community who held himself out to be an attorney. I checked the State Bar records only to find no record of this person. I contacted the State Bar and the local police. Sure enough, this fellow had been "practicing" for years and no client ever asked him to prove that he was currently licensed to practice law. So when you think about hiring a tax professional make sure you ask that person if he or she is authorized to practice law, accounting, or tax return preparation.

  • Make sure your tax professional is available after the tax filing season. After tax returns are filed both the IRS and the FTB review virtually each and every filed return. They may find math errors, or the failure to include a W2 or a 1099 that shows up on their records. Of course you will not be notified of these findings until after "tax season."  You may have to consult with your preparer in order to file an amended return or submit an appropriate response.

    "War Story": I recently completed an EDD audit of a small tax preparer firm that operates only during tax season. Even though they are in the business of providing proper and accurate information on IRS and FTB returns on behalf of their clients, their personal records left a lot to be desired. I had to work hard to convince the EDD not to assess stiff penalties for inadequate books and records.

  • Ask about service fees. An ethical tax advisor or return preparer will charge you a flat fee or a reasonable hourly rate for his or her services.  The IRS warns against hiring preparers who base their fees on a percentage of your refund or promise you they will get you a higher refund than anyone else. Never have your tax refund sent to your preparer. Always make sure that the refund is either sent directly to you or deposited electronically in your bank account – not your preparer’s bank account.
  • Never sign a blank tax return. If your preparer asks you to sign a blank tax return – run!

    A Sad Case: Recently I represented a young lady who retained an unethical preparer. She signed blank returns. The preparer put in all kinds of phony charitable contributions for 2 years. This preparer was on the IRS radar. The IRS began a process of auditing all of the preparer’s clients. This fellow skipped town and was unreachable. The IRS disallowed each and every charitable deduction and handed my client an additional 20% negligence penalty. The FTB did the same thing. I was grateful to both the IRS and the FTB for not assessing fraud penalties or filing criminal charges against my client.

  • Review your tax returns and ask questions before you sign. It does not matter whether you are a good person but your preparer is a crook. In the end you are responsible for what is on your IRS and FTB returns. Make sure your returns are accurate before you sign them. If you are not sure of anything stated on your return(s), ask for an explanation. If you do not receive a satisfactory explanation, don’t sign those returns! Take them to a reputable tax preparer. You might have to begin the entire process anew or go on an extension – it’s worth it.

    Note: As often happens in a marriage, one spouse will be in charge of getting all the paperwork ready for the preparer and bringing the joint income tax returns home for signing. Most of the time, the other spouse will sign the completed returns without reviewing them or asking any questions. This is the type of situation that leads to cases involving "innocent spouse" relief. But that is the subject for future articles.

Conclusion

It has been my experience that most professional tax advisors and return preparers are honest hard-working people. They do the best they can with the information and documentation provided to them. However, if you have kept up with my articles, you will be aware of a virtual epidemic of tax fraud and refund fraud that has taken over $5 billion from the US Treasury over the past year. And some of this fraud can be placed at the door of unethical "tax professionals." When choosing a tax professional, be proactive, check the person out. Ask for references and ask to see proof that your tax preparer is currently licensed and in good standing with licensing and governmental agencies. The IRS suggests that you visit its website about Abusive Return Preparers on IRS.gov. You will learn valuable pointers and you will also learn how to make a complaint about a tax return preparer.

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Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 40 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments.

Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See "California Tax Collection Practice and Procedures" and "California Taxation Practice and Procedure", both published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, "IRS Tax Collection Procedures - A Manual for Practitioners" published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, "IRS Tax Collection Procedures - A Manual for Practitioners" published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See "California Tax Collection Practice and Procedures" and "California Taxation Practice and Procedure", both published by Commerce Clearing House.

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