This past few weeks I’ve been sharing queries which you can ask your tax professional to notify whether or not your tax preparer is advisable for you.
Does reading this inquiry make you wonder if your tax preparer is doing everything possible to reduce your audit risk?
Some people have a worry of being audited. Allow me to share some frequent concerns I hear:
They are nervous their tax return has mistakes They are surely anxious about having the ability to provide the specified information They worry about the fee. Most people concentrate on the price of taxes, penalties and interest that could be owed, but what about the price of hiring a tax professional to control the audit? Preparer expenses incurred during a mean audit are 10 to 15 times the fee to prepare your tax return!
The IRS Was Stepping Up Its Hard work Now, there can be much more factors to add to the list. The IRS is stepping up its pains to increase overall compliance.
The IRS was performing 3 times as numerous audits as they did a few years ago Plus, due to the current financial system, the IRS is anticipated to continue to increase the quantity of audits performed.
The IRS recently announced its obligation to examine 6,000 business returns. The IRS will give attention to payroll tax and employment concerns, including member of staff classification (like independent contractors), officer’s compensation, fringe settlement and non-filers.
The IRS can be increasing up its efforts including value to tax return professional fulfillment.
The IRS is distributing letters and visiting a large number of tax return preparers to, along with other things, discuss frequent mistakes.
By the way, among the frequent mistakes being discussed is reviewing pertinent books and report of the taxpayer. When you read my report last week, this is exactly one the questions I suggested a tax return preparer be asked!
With these increased hard work, audit risk is important to consult with your tax preparer.
Here are some things to look for to see if your tax preparer is taking the proper steps to minimize your audit risk.
Does your tax professional ask you queries? Questions indicate that your tax preparer is attempting to validate details and gain a proper knowledge so your tax return is filed accurately. One of the causes returns are audited is for the reason that details is wrong.
Does your tax preparer have the expertise you need? Having a tax preparer who knows the ins and outs of your business makes a difference, especially in terms of filing an accurate tax return.
For instance, some industries must make certain tax elections to be able to appropriately claim tax benefits. A tax preparer with competence in this kind of industry will know the principles, and will know the questions to ask you to make sure the election is properly filed.
Even the IRS is worried about tax preparers who understands the rules. Starting this year, all income tax return preparers be obliged to register using the IRS, as well as in some cases, some must even pass an examination.
Does your tax preparer discuss filing methods with you? Often times when I present an income tax return, there are pertinent things which can be done to reduce audit risk.
For example, let’s say there is a bigger than normal deduction to claim. There are some situations in which a big deduction might pull inspection from the IRS. This is an example of a condition where submitting strategy may help reduce audit risk.
Initially, where the deduction is claimed on the tax return can affect audit risk. In this case, I would ask the taxpayer questions about the deduction to have a greater understanding so I can then determine which rules apply. In several cases, multiple set of rules applies and which can provide a chance to reduce audit risk.
Next, voluntarily attaching records to clarify the bigger than common deduction can affect audit risk. If ever the return is flagged because of the large deduction, an agent may review it and the additional records may resolve the issue without further action taken.
Does your tax preparer present an audit security plan? An audit security plan handles professional fees incurred in reference to an income tax inspection, examination, review, investigation or clarification of any item(s) on your federal or state income tax forms.
While an audit defense plan does not insure you will not be audited, it does cover that the preparer fees to handle a federal or state income tax audit of a tax return are covered. The audit protection plan also contains responding to federal or state notices received.
When a tax professional offers an audit resistance plan, it indicates the tax preparer is thinking about audit risk and has an incentive to minimize it.