CPA Guide: Save Time, Money, & IRS Stress with a Tax Accountant for Tax Preparation

Save Time, Money & IRS Stress by selecting the right Tax Accountant, building a strong relationship, and preparing effectively with this valuable Guide and Tax Checklists.

Disclaimer: My goal in these articles is to simplify the complex and help you take the next step in your financial situation. As such, this is not a comprehensive deep dive into every possible nuance or strategy. This article, like all my resources, is intended solely for educational purposes and should not substitute for specific investment, financial, or tax advice. Always consult a qualified tax professional for guidance about your tax situation.

💡 Key Takeaways - Tl;dr:

• Tax Prep is Hard: It’s Complicated, Time-consuming, Errors and Mistakes are Expensive, Tax Bills are High, and Audits are Intimidating and Expensive

• A Tax Accountant Should: Save you Time, Money, Stress, and help you Avoid IRS Audits

• Step 1: Determine Whether You Need a Tax Accountant. How complex is your situation? Do you understand your taxes? How much work do you have? Do you have any “special” tax situations?

• Step 2: How to Find a Qualified Tax Accountant. Ask for Referrals, check the IRS Directory, Google, and Reviews.

• Step 3: Vetting your Tax Accountant. Once you’ve found one, vet them to understand their Expertise, Services, Experience, Capacity, Fees, Tax Planning, License, Insurance, Representation, Communication, & Technology.

• Step 4: Building a Relationship with Your Tax Accountant. Ensure Honesty and Transparency, Ask for Advice when needed, and Share your Goals and Plans.

• Step 5: Prepare for Your Tax Engagement. Save Time & Money by Preparing your Tax Documents for your Tax Accountant with Checklists and Organizers.

• Step 6: Understand Important Deadlines. Understand your Filing Deadlines and ensure your Tax Accountant has enough Information and Time to File Returns.

• Tax Organizers and Preparation Checklists for working with your Tax Accountant for Personal & Business Tax Preparation

My central assumption in this guide: you want to optimize your earnings, minimize taxes, and simplify tax filing to reduce IRS stress as much as possible.

This article is one among many in my tax planning series that aims to help you do just that.

Why is Tax Preparation so Challenging?

Have you ever asked yourself that question? I ask it… every year at tax time… and I’ve been doing this for well over a decade now.

Here’s the problem as I see it:

• Tax Prep is Daunting. It requires a highly specialized skillset that most lack and wouldn’t benefit from learning if they wanted to.

• Taxes are Overly Complicated. Think about all the chaos in Washington, then imagine distilling that mess into an interconnected web of laws and regulations and then untangle what that mess means to your tax liability.

• Learning all the Regulations takes too much Time. Your time is better spent elsewhere making money and bringing value in your area of expertise. The reality is that doing it yourself often costs more in errors and time than it saves.

• Errors are Costly. Not only do you get penalties and interest, but if you file incorrectly, you may invalidate a tax strategy and tax savings. Incorrectly filed tax returns are also difficult and expensive to amend.

• Taxes are Expensive. One of the biggest expenses in your business and life is your tax bill. Not knowing how to file correctly will likely compound what you owe in taxes.

• Tax Audits Suck. The fear of an IRS audit ranks up there with the fear of a terminal disease diagnosis. Going through an audit is stressful and costly in advisor fees and tax bills in bringing about a resolution.

• Tax Accountants Can’t Do it All. Even if you work with a Tax Accountant, you still have to gather your documents and provide accurate information… you can’t get out of this work!

• Misconception about Tax Accountants and Tax Savings. Keep in mind, not all tax preparers do tax planning, and when you pay for tax preparation, you are not paying for tax planning. If you have done tax planning, it is essential that your Tax Accountant understands your tax planning strategies and is able to implement them effectively.

That all sounds miserable, but this article is my guide to help you through to successfully file your tax returns with as little stress as possible.

Why Trust Me?

As a licensed CPA with over a decade of experience handling a broad range of tax returns. My firm has hundreds of clients ranging from simple 1040’s to complex Partnership and Corporation returns.

We are right now getting into the swing of tax season, meeting with our clients to help them prepare their tax filings.

As you are needing to prepare for your tax return filings, I want to guide you through our process. I’ll provide you tools and checklists to work successfully with your Tax Accountant this tax season.

Your goals in partnering with a qualified Tax Accountant or CPA should be to:

• Save time - so you can focus on building your business and making money.

• Save money - save on taxes and avoid costly errors.

• Save Stress - avoid having to delve into the complexities of the tax code yourself and let someone else do it faster and more accurately.

• Avoid IRS Audits - don’t set yourself for unnecessary IRS notices and audits by making mistakes, and partner with an expert for representation if needed.

In this article, I’m going to help you complete the following steps for a successful tax season:

• Step 1: Determine Whether You Need a Tax Accountant

• Step 2: Find a Qualified Tax Accountant

• Paid Subscribers: Step 3: Vet your Tax Accountant

• Paid Subscribers: Step 4: Build a Relationship with Your Tax Accountant

• Paid Subscribers: Step 5: Prepare for Your Tax Engagement.

• Paid Subscribers: Step 6: Understand Important Deadlines

• Paid Subscribers: Prepare using Tax Prep Checklists and Organizers

Step 1: Determine Whether You Need a Tax Accountant

Answer these 4 questions to determine if you even need a Tax Accountant, or whether you should self-file with software or bring to a fast-file company.

How complex is your situation?

There have been times when I have advised potential clients with simple filings that they will be better served by TurboTax or H&R Block than by my firm. The truth is their situation is simple and there isn’t much I can do to offer value to them. My fees will be too high and my CPA skillset is not necessary and can’t be leveraged to save them money on their taxes. On the other hand, if you have multiple schedules or a Partnership, S Corporation, or C Corporation tax return, I’d recommend engaging a Tax Accountant.

Ask yourself the following questions:

• How many tax forms have you received?

• Do you know how to process each of them?

How well do you understand your taxes?

If your returns are simple, and if you are familiar with your tax returns and have a good grasp on what is required, you may be better off filing your own returns.

When you review your prior year tax returns, can you tell if they are correct or not?

If your understanding is limited or if you have received a tax form you aren’t familiar with, you are better to engage a Tax Accountant. At the same time, have them walk you through the returns when they are complete so you can build your knowledge - it will serve you well in the future!

How much tax work do you have?

The amount of tax work you have to do is based on the complexity of your situation. If you have more than a 1040 and a few schedules, this can become overwhelming with the details involved in preparing and linking the tax forms.

Tax software can certainly help, but without a deeper knowledge of these forms, it can be difficult to verify that everything has been prepared correctly.

Do you have any of the following special situations?

If you have the following situations, engaging a Tax Accountant is a good idea:

• Schedule C Self Employment Income

• Schedule E Rental Property Income

• Schedule F Farm Income

• Complex Investment or Royalty Income

• Foreign Income, Assets, and Bank Accounts

• Asset Sale with Capital Gains or Losses

• Real Estate Transactions

• Early Retirement Distributions

• Cryptocurrency Transactions

• Tax Credits

• Complex K-1s

• Charitable Contributions of Property

• Stock Options or Equity Compensation

• Debt Forgiveness

• Natural Disaster Losses

• Multiple State Filings

• IRS Audit, Notices, Back Taxes, or Debt Resolution

• Amending Prior Year Returns

• Major Life Changes like Marriage, Divorce, or Death

• Business Tax Returns - 1065, 1120S, 1120

• Inheritance, Gift, and Estate Taxes

Ok, let’s assume you made it through this list and your answer is, “Yes, I need a Tax Accountant.” The next step is finding one.

Step 2: How to Find a Qualified Tax Accountant

Before diving into how to find a Tax Accountant, it's crucial to understand the reality that anyone can call themselves a tax preparer without specific qualifications. This lack or regulation led to the IRS to attempt to enforce qualification requirements back in 2011, which was ultimately struck down in court (more on this debacle).

Despite this setback, the IRS hasn’t been shy about warning against those they consider to be unqualified. Every year they release what they call the “Dirty Dozen” to warn against “unscrupulous tax return preparers.” They warn that “shady tax preparers” may:

• Refuse to sign the tax return or ask people to sign a blank return.

• Charge a fee based on the size of the refund.

• Ask for a cash only payment without providing a receipt.

• Invent false income to try to get their clients more tax credits.

• Claim fake deductions to boost the size of the refund.

• Direct refunds into their bank account, not the taxpayer's account.

A Revealing Customer Support Call

A few tax seasons ago, I had an enlightening conversation with a lead customer support manager at a well known tax software company about tax preparer qualifications. I called in to resolve a problem with a specific tax form not populating correctly, which they were able to promptly address.

However, the conversation then took an unexpected turn when I asked him about the kinds of support calls they receive from other tax preparers.

His answer was both surprising and unsettling. The majority of tax preparers who called in weren’t actually struggling with the software at all. Instead, they called in because they had no idea how to file the correct forms for their clients’ specific situations. Despite being tax preparers and presenting to the public as tax experts, they often sought tax advice from his customer support team, who was not equipped or able to provide it.

The insight here is clear: Many unlicensed tax preparers lack sufficient knowledge, training, and problem-solving skills to correctly file more than the simplest of tax returns. This is an area where you need an expert.

How do you find a Qualified Tax Accountant?

I’ll start with some advice direct from the IRS. The IRS provides a pretty good guide to help you Understand Credentials for Tax Preparers. Here’s the breakdown of the three credentials they recommend for a qualified Tax Accountant:

• Enrolled Agent (EA): Licensed by the IRS. They take a 3-part exam focused solely on tax. The have continuing education requirements and can represent you before the IRS.

• Certified Public Accountant (CPA): Licensed by State Boards. Professionally trained in accounting, finance, taxation, business, and audits. Stringent education, experience, and continuing education requirements. Able to represent before the IRS.

• Tax Attorney - Professionally trained attorney who specializes in tax law. Able to provide legal advice and represent taxpayers in civil and criminal tax court before the IRS.

Strategies for Finding the Right Tax Accountant

Here are the steps that I would recommend you take to find a qualified Tax Accountant:

1. Referral - Seek recommendations from a trusted professional like your Financial Advisor, Wealth Advisor, Lawyer, or other business owners.

2. IRS - Use the IRS’s Directory of Federal Tax Return Preparers with Credentials and Select Qualifications to find preparers with PTINs and IRS-recognized professional credentials.

3. Local Search - Google CPAs in your area if you want someone local. Keep in mind that most Tax Preparers work fully online, so you can often choose a Tax Accountant anywhere in the country as long as they are familiar with your State and Local tax filing requirements.

4. Check Reviews - Review both positive and negative reviews to determine quality and reliability of potential accountants.

Once you’ve found who you think is a good Tax Accountant, it’s important to also vet them to make sure they are legitimate and confirm that they are the best fit for your situation.

Paid Subscribers will get the following below:

• Step 3: Vetting your Tax Accountant

• Step 4: Build a Relationship with Your Tax Accountant

• Step 5: Prepare for Your Tax Engagement

• Step 6: Understand Important Deadlines

• Tax Preparation Checklists

• Tax Preparation Organizers

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Questions or further thoughts? Feel free to drop them in the comments and we can dive deeper!

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