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Jagella
12-26-2011, 12:27 PM
Hello friends:

I was recently hired by a local Liberty Tax Service, and I will begin working for them in January 2012 as a paid tax preparer. I have some questions about my upcoming employment.

I understand that all business expenses must be reported on Schedule C. What if the taxpayer has income reported on his 1099s but claims he does not have expense information and cannot obtain it? Should I decline to prepare the return?

What other basic non-tax advice might you offer? What is the profile of an ideal tax preparer on a professional and personal level? What can I do to really please my boss, and what should I avoid doing to displease her? What advice might you offer about my relations with customers?

Thanks!

Jagella

jamesray50
12-27-2011, 12:51 PM
Good luck on your job during tax season. I don't do taxes, but my understanding is that if you can't provide receipts for expenses than you can't claim them on your tax return. I would still fill out the return, but with the info provided. But, I don't think you have to physically see receipts, maybe, a file of some sort, a checkbook, etc. Are you signing the return saying you will represent them if they are audited? Do you have a PTIN? Or does your employer have the PTIN and will represent them if they are audited? Why don't you just ask her how she handles these types of situations?

Evan
12-27-2011, 12:58 PM
Failure to report all business expenses would be illegal, and the return should not be prepared, as they're manipulating their earnings. Refer to Revenue Ruling 56-407. Specifically why this is illegal is because you're manipulating their net earnings from self-employment, and that would have an affect on the Earned Income Credit. Further, if you look at the due diligence requirements for the EIC, which now need to be filed, one question is whether all expenses have been claimed. As now you'll be attesting that this is, you will also be on the hook for penalties if this comes back to you.

I've seen a few preparer's who filed fraudulent returns, and the taxpayers even if they tell you some information may be missing, they will throw you under the bus as they expected you to tell them and "had no idea" this was fraudulent. If you question something, make sure you get a second opinion from a colleague first, as the IRS has been cracking down in a lot of areas. And as they keep track of all returns prepared with your PTIN, you do not want to have all of the returns you prepared subject to an audit (extreme case).

As for working with the public, try just to be warm and understanding of your clients and get to know them. They're more than a checklist, and if you see things that are interesting maybe that sparks a conversation. Did they just buy a new house? OK -- did they just move to the area? How do they like their new house, etc., etc. Same thing with newborns, or any additions/deletions of dependents, casualty losses, etc. The more genuine you are in their story and life, the more likely they are to return in future years.

Of course I should say that the typical customers of the "chain" tax prep firms generally are driven by price and location. Relationships can be a defining point, but most would drive across town if they saved $10. Those are all clients I don't have the time to bother with at all.

Jagella
12-27-2011, 02:33 PM
Good luck on your job during tax season.

Thanks a lot! Good luck is always in short supply, and I can always use more.


I don't do taxes, but my understanding is that if you can't provide receipts for expenses than you can't claim them on your tax return.

That sounds reasonable to me, but it's safe to say that some taxpayers, especially those who may prepare their own returns, don't have those receipts. The IRS does not require that you submit receipts with your return. In case of an audit, though, you'd need to document your expenses with receipts. If you cannot document an amount you deducted, the IRS may disallow that expense deduction.


I would still fill out the return, but with the info provided. But, I don't think you have to physically see receipts, maybe, a file of some sort, a checkbook, etc.

I'll need to ask the office manager about receipts and other documents the taxpayers may submit with their tax information.


Are you signing the return saying you will represent them if they are audited? Do you have a PTIN? Or does your employer have the PTIN and will represent them if they are audited? Why don't you just ask her how she handles these types of situations?

I'm not sure about my needing to sign any returns, but I do have a PTIN. I'm guessing that my returns will be signed electronically. We do offer audit assistance to taxpayers who have their returns prepared with us. At an audit, we explain how the return was prepared. We also offer “correspondence assistance” which means we help customers with any correspondence they get from the IRS or state tax offices.

I will ask my manager about these situations.

Thanks a lot!

Jagella

Jagella
12-27-2011, 02:53 PM
Failure to report all business expenses would be illegal, and the return should not be prepared, as they're manipulating their earnings. Refer to Revenue Ruling 56-407. Specifically why this is illegal is because you're manipulating their net earnings from self-employment, and that would have an affect on the Earned Income Credit. Further, if you look at the due diligence requirements for the EIC, which now need to be filed, one question is whether all expenses have been claimed. As now you'll be attesting that this is, you will also be on the hook for penalties if this comes back to you.

Here's what the IRS (http://www.eitc.irs.gov/rptoolkit/faqs/duediligence/)has to say about the matter:


You must also use professional judgment regarding the credibility of your client and the answers you receive. If you are not comfortable with the answers or credibility of the client, then due diligence dictates you do not prepare the return.

That what I thought. Don't prepare the return if you don't think the client is credible.


As for working with the public, try just to be warm and understanding of your clients and get to know them. They're more than a checklist, and if you see things that are interesting maybe that sparks a conversation. Did they just buy a new house? OK -- did they just move to the area? How do they like their new house, etc., etc. Same thing with newborns, or any additions/deletions of dependents, casualty losses, etc. The more genuine you are in their story and life, the more likely they are to return in future years.

I'm hoping to come across as a friend who lent a helping hand. That way they may go to their friends and say: “I just had my tax return prepared at Liberty. A guy there helped me get a big refund, and he was really nice and sympathetic. I'd recommend Liberty if you need your taxes prepared!”

Jagella

jamesray50
12-27-2011, 03:34 PM
I had thought about studying for the EA exam, but I have changed my mind. With the way the rules change every year and as many rules as there are I don't really want to spend my time studying at my age. Plus, after working at a CPA office for 14 years during tax season and the long hours, it is kind of a relief not working all the overtime. I think I'll just stick to bookkeeping and preparing year end books for the tax preparer. Good luck Jagella!

Jagella
12-27-2011, 05:55 PM
I had thought about studying for the EA exam, but I have changed my mind. With the way the rules change every year and as many rules as there are I don't really want to spend my time studying at my age. Plus, after working at a CPA office for 14 years during tax season and the long hours, it is kind of a relief not working all the overtime. I think I'll just stick to bookkeeping and preparing year end books for the tax preparer. Good luck Jagella!

I understand what you're saying about tax preparation. It's a tough job. I used to work at H&R Block, and I told myself I'd never do it again. What changed my mind is the tough job market. I wasn't able to find any other work. One day I saw a sign advertising a "free" tax course at Liberty Tax Service very close to where I live. I decided to take the course, and I was treated very well at Liberty--unlike what I experienced at H&R Block.

So here I go again. I'll try to make sure the outcome is very different this time.

Jagella

Evan
12-27-2011, 09:24 PM
Regarding your link -- the due diligence requirements will need to be filed by the preparer during this tax season. So while you aren't required to go through that form with your client, it is still expected you will be able to answer these questions based on all of your other questions. You should not assume those answers.