Tips & Advice
Can a tax preparer be sued?
Yes, a tax preparer can be sued for malpractice if the plaintiff can demonstrate that they suffered damages due to a tax preparer’s failure to meet the minimum standards required by the IRS. A higher-than-wished-for tax bill is not usually justification. However, there may be just cause if the tax preparer made mistakes on a tax return that led to gross overpayment of tax, or if the tax preparer made mistakes on a client’s tax return that led to the client being audited or sanctioned. A tax preparer can also be sued for misappropriating the client’s funds.
What are the benefits of filing taxes electronically?
The benefits of filing taxes electronically are chiefly that the documents arrive faster to the IRS and state tax centers, and can be processed faster. Also, for those who are e-filing payments, you know the money is going immediately to the IRS or the state, and there is an electronic record—so no stress about a check being lost or a payment not recorded.
How much does it cost to have taxes filed professionally?
The cost to have taxes filed professionally ranges from about $150-$800, but the average cost for an individual is $250. The lowest cost is for someone filing a Form 1040 without itemized deductions. The highest cost is for corporate tax forms, which are largely for legitimate businesses with several employees.Many former 1099 contractors are switching to LLC or S-Corp status and therefore end up needing to file business taxes. Even individuals who are filing 1099s with itemized deductions and multiple clients might find themselves paying $500 to have their taxes professionally prepared because of the amount of detail work this requires from the tax preparer.
What documents are needed for filing taxes?
To files taxes you must provide all W2s and 1099s for the previous year, business-income records (for small business owners), investment-income records, rental-property income records, and documents showing social security and unemployment income. If you’ve settled a debt and received a document forgiving a certain amount, you should include that paperwork as well.
What is a certified tax preparer?
According to the IRS, a certified tax preparer is an authorized tax professional. The IRS assigns a Preparer Tax Identification Number (PTIN) to people who have attained this authorization.
There are different credentials under the PTIN umbrella.
Note: Specific practice rights of “Unlimited Representation Rights” and “Limited Representation” were redefined in 2016, to assign less-qualified preparers fewer responsibilities under “Limited Representation.”
- “Unlimited Representation Rights,” i.e., the power of representing clients on all tax-related issues
- This includes Enrolled Agents, who are licensed by the IRS, and CPAs, who are licensed by state boards of accountancy, the District of Columbia, and U.S. territories
- Attorneys licensed by state courts
- “Limited Representation” certification for seasonal or non-credentialed individuals who can prepare taxes only, but not represent clients to the IRS
Is it recommended to hire a CPA for business taxes?
Many experts recommend that you hire a CPA for business taxes instead of hiring an accountant without the CPA designation. A CPA is qualified to represent you if your business is audited by the IRS; an accountant who does not have the CPA designation is not eligible to handle this task. Also, CPAs must maintain state licensing; keeping this license current requires them to stay abreast of tax laws. This gives them a command of the tax code that can help your business minimize its tax burden.
An audit is a process in which the accounts of a company or an individual are officially inspected to ensure that financial representations made are accurate and within the letter of the law. With organizations, an audit may be done internally by an employee of the company, or it might be handled externally by an outside auditor. Audits can also be conducted by the IRS, which is typically done to make sure that the reported amount of tax is accurate.
CPA stands for certified public accountant, and this professional may be hired by an individual or by a company. A CPA may oversee budget and financial management, or maintain a company's financial records. They might act as consultants, tackling things such as compensation and benefits. Also, CPAs may assist a company with fraud prevention and strategic planning.
Is it necessary to hire a CPA for personal taxes?
It's not always necessary to hire a CPA for personal taxes, but doing so brings certain benefits. A CPA possesses useful experience and training in tax preparation, and might be able to share tips that can help you reduce your tax burden. If you have a complicated tax situation, a CPA will be able to help you navigate your return in a way that drastically reduces the risk of an error that could potentially trigger an audit. Hiring a CPA to prepare your return might also save you time.
What type of education does a CPA receive?
When it comes to educational requirements, CPAs must hold at least a bachelor's degree, and they must have no fewer than 150 semester hours of formal schooling. Also, CPA candidates must obtain a passing score in the Uniform CPA exam. This exam is prepared by the American Institute of Certified Public Accountants.