Ep 37: Tax Prep 101: Your Guide to the Ultimate Tax Pro
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Tax season is around the corner. If you are looking for a new tax professional, we have you covered.
In today's episode, we are going to walk you through how you select a good tax professional, especially if you have cross-border needs or assets overseas.
The ten items or tips to consider as you select your tax professionals. If your tax preparer meets these tips, you are likely in excellent hands. The tips range from
Checking the preparer's history for any disciplinary actions, to service fees, to electronic filing, and realistic expectations, amongst others.
We end the episode by explaining what to do if you see suspicious or abusive tax preparers. IRS is interested in hearing from you.
Episode Links & Resources
Loving v. IRS: Treasury's Authority to Regulate Tax Return Preparers
Watch Out For Unrealistic Expectations and Falsely Inflating Returns
Are you Tax-compliant With Your Overseas Assets? - Free Guide - Scroll to the bottom of the page.
The speakers' views and opinions discussed in this episode should not be considered financial, tax, or legal advice. Consult your advisor for any legal, cross-border tax, and financial advice.
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Jane Mepham, CFP® (00:00:03)
Welcome to another episode of the International Money Cafe Podcast. In today's episode, we're going to address a topic that we've seen come up a lot and continues to come up. The topic is, how do you choose a good tax preparer and especially in the cross-border space? So what happened was a while back,
I was trying to help a prospect client actually, and they'd asked the question, how do you go about choosing a good tax preparer? And so instead of, of course, going to Google, I reached out to Manasa, who I think is a great tax professional. And I said, Manasa, could you put a list together for me? Because I want to share this with somebody who's looking to get a new tax professional in their life.
And Manasa was amazing. She's very detailed. And she came up with this great list of the 10 things to look for ⁓ if you're looking to choose a new tax preparer. So what I've asked Manasa to do if, if she could walk us through the tax, the 10 tips. ⁓ And as we go along, I have some questions. I'm going to throw those questions at her. I'm sure she's going to be awesome with it.
So, Manasa, are you ready for this?
Manasa Nadig, EA (00:01:32)
I'm ready. As ready as ready can be, yes.
Jane Mepham, CFP® (00:01:34)
Okay, great. Awesome. I mean, this is what you do for a living, right? ⁓ So when I think of a tax professional, I think of somebody that one can basically prepare your taxes and really understands the inner workings of all the IRS tax code. I think of somebody that can coordinate with your financial planner.
Manasa Nadig, EA (00:01:40)
I know.
Jane Mepham, CFP® (00:02:01)
And really somebody that should make your life very, very easy. Okay. So, Manasa, the first thing I know you wrote down was check your preparer qualifications. And I'll let you quote whatever the Circular is. Talk to us more about this one.
Manasa Nadig, EA (00:02:20)
Yes, yes. So here's a quick background. So there's Circular 230, the Internal Revenue Service, gives certain professionals representation rights with them. And these are usually the top three are Enrolled Agents CPAs, and tax attorneys. Basically,
The Circular 230 is almost like a list of ethical requirements that these professionals have to fulfill to stay in compliance. That means every year they sign off on that they have taken a minimum number of CPE credits. If they have not been convicted of any crimes, you know, they are
They have filed their own tax returns and so on and so forth. So this is important for people who don't know. So if you are looking for a tax professional, make sure that they have any one of these three qualifications. And there is also a PTIN number, which is basically an acronym for Preparer Tax ID number.
And it is an optional requirement to have this PTIN number. And if a tax professional has this number, then you can look them up on the IRS's website. Now,
Jane Mepham, CFP® (00:04:10)
Wait, so are you saying some tax preparers may not have the PTIN number and it's okay?
Manasa Nadig, EA (00:04:18)
Well, a few years ago, yes, a few years ago, somebody, know, let's go back a little bit more. The IRS made it mandatory at one point for every tax professional to have a PTIN number. But then somebody else came back and it was challenged in court. That was the loving case. ⁓ And then the IRS sort of had to step back because
the court said that they could not mandate every tax preparer have a PTIN number. But it's usually good practice for you to have a PTIN if you are a tax professional. So having said that, you could have a PTIN number, but you may not be an EA or a CPA or a tax attorney. And if you're not,
if or your tax preparer is not, then make sure that they have met the IRS's minimum competency requirements and we can link on what that is in our show notes or our newsletter. So that's the one about preparer qualifications, Jane.
Jane Mepham, CFP® (00:05:35)
Okay, you heard it here. I'll move on to the next one. You also said, and I had a few questions around this, check on the preparer history. What exactly do you mean by that, Manasa?
Manasa Nadig, EA (00:05:52)
So there are certain places where you can volunteer to put your information up. And usually you pay for those. And as a business person, you also know this. That's the Better Business Bureau and other places like that. Now, other than that, you can also check a business or a tax preparer's history about
Whether they had any disciplinary actions taken against them or what their licensure status is through state boards. If they are a CPA or an attorney, they would be registered with their state. ⁓ And ⁓ as for Enrolled Agents, you can look up their information on the IRS's Office of Enrollment. So if...
they are not on that list of disciplinary actions, then that's a good thing. And you can definitely look them up and you should look them up if you have any doubt in your mind as to their Circular 230 qualifications.
Jane Mepham, CFP® (00:07:07)
Okay, okay, let's move on. Now this one comes up a lot when it comes to fees and we know there's all kinds of fees being charged in the industry. you said to us, ⁓ ask about service fees. Now, I don't think you're talking specifically numbers, but that's a possibility. But what else should we be looking at if we ask about service fees? What are the key things to watch out for?
Manasa Nadig, EA (00:07:37)
There are a couple of things that are my top priority and that would kind of raise a red flag in my head. The first one is if somebody is fees is based on the percentage of your refund or, you know, you hear these advertisements a lot about how they can get you pennies on the dollar and things like that. You know, definitely.
approach those kind of preparers with caution or don't approach them at all. That's one. And the other one is, you know, where, and this is a huge red flag, is if they are depositing your refunds into their own bank account. So just always make sure that your,
bank account is being referenced on your tax return, whether it is to pay a tax due or to get a refund. And it's not the preparer's bank account number. Now, having said that really quickly, I know that there's always discussion around the service fees, and especially in the cross-border context. So do your due diligence, but know that tax preparers
who come with experience and knowledge are going to be more expensive than others. you know, just have that in the back of your mind when you're looking at service fees.
Jane Mepham, CFP® (00:09:21)
So I think what I'm hearing is it's okay to pay. And to me, this is one of those things I honestly don't mind paying for. I don't do my own taxes. Just don't choose service just based on the fee alone. You definitely want to take into consideration a whole lot of other things. Okay, okay. I get that.
Manasa Nadig, EA (00:09:42)
Definitely. Yeah.
Jane Mepham, CFP® (00:09:45)
All right, what about this one? I thought this one was kind of interesting because I assumed everybody does it, but maybe they don't. You said, Ask if Electronic Filing is offered.
Manasa Nadig, EA (00:09:55)
Yes, this has come about over a lot of different fraud cases and other things that fraudulent tax preparers have done. So one thing is what people don't generally don't know is that if a tax professional
has more than 10 clients or is preparing more than 10 returns, which is not a lot, as you can imagine, they have to, they must file electronically. And the only reasons for not filing electronically is if they are preparing certain returns or packages in the cross border context, especially, know, if these are delinquent, streamlined.
procedures or other aspects, those cannot be filed electronically. ⁓ And there are some other reasons why you cannot do that. And you have opted out of filing electronically. Those are the only times that that tax professional will not be filing your taxes electronically. But otherwise, make sure that it's going out electronically and is not a paper return.
Jane Mepham, CFP® (00:11:19)
Okay, I can appreciate that. And then the next one, which again, I thought was kind of interesting because I always assume this is the case. You said, make sure that prepare is accessible. What do mean?
Manasa Nadig, EA (00:11:32)
Yes, yes. Yeah, so we've, I've heard cases of where, you know, somebody has signed up with a tax preparer and then you haven't heard back or you have, you're not talking to them. Yeah, you know, or there hasn't been any expectations set up as to their availability. So
You know, not everybody is available on the phone or, you know, nowadays it's really difficult to find somebody who maybe you can just walk into their office. And I mean, those are all protocols that a lot of tax firms observe, mine included. I'm a fully digital firm. so what I would advise for someone who's looking for a tax preparer is
Make sure you know what those expectations are. How quickly do they reply to emails? Are those policies stated somewhere, maybe in their engagement letter or their website or their email? You know how soon they'll reply to your messages, maybe over a secure portal or their email. How quickly do they reply to your phone messages and things like that? Just make sure.
that your tax preparer is accessible to you and find out how they communicate and how soon you can expect to return messages and things like that, yes.
Jane Mepham, CFP® (00:13:08)
So really, I think what I'm hearing you say is good customer service is what I'm hearing, right? Yeah. Okay. All right. So we're halfway through the episode. We've talked about, let's see, the top five things so far is check prepare qualifications, check on the preparer history, ⁓ ask about service fees, ask if electronic filing is offered, make sure the preparer
Manasa Nadig, EA (00:13:15)
Sort of, yes.
Jane Mepham, CFP® (00:13:37)
Hera is accessible. All right, let's take a quick break because we have a very special message for you. And then when we come back, we'll have Manasa address the other five items on the list.
Jane Mepham, CFP® (00:14:01)
Okay, we are back. We're talking about how to choose a good tax preparer or tax professional. And before the break, Manasa walked us through the five top items. And like I said, she made us a great list. So Manasa, I'm going to continue and I'm going to go through the next five. Cause again, I do have some questions and I think it'd be good if you can sort of just explain it. So
The next one you said is provide all records needed. Talk a little bit more about that.
Manasa Nadig, EA (00:14:36)
Definitely. So, you know, when we are talking about a good tax preparer and what I would expect that tax preparer to do, especially if you are new to them, is make sure that they are requesting your previous tax returns as well. ⁓ And why we say this is there could be carry forwards from previous tax
returns, right? Like you could be carrying forward capital losses or passive activity losses and all of that that needs to be taken into account on your present return. So that would be one good thing to make sure that they do that. And then also make sure that they are looking at your entire picture, you know, where are all
the sources of your income from. ⁓ And in a cross border context, what are all your foreign sources of income from? ⁓ And once they have asked you all these questions about your records, make sure that you are providing those records to them, right? We're looking at all of these due diligence requirements that a preparer has to do. But in this set,
In this particular point, I would say that you as the taxpayer also has equal responsibility. If you miss on providing some records to your tax preparer, then the responsibility is on you that you have missed that income item or maybe an expense item which could hurt or not in a
in the big picture. And another thing here is when ⁓ we're talking about records, remember when Jane was saying, when we started this episode, it's as much your responsibility as it is ⁓ anybody else's because you're the one who's ultimately signing off on this return and saying that you have provided everything and under penalties of perjury.
Manasa Nadig, EA (00:17:01)
This is a true return. So that's one thing. And another thing is if you have missed anything, reporting anything to the IRS, then the statute of limitations remains open on that return and it doesn't close. So the IRS can come back and audit you for as long as that is open. that's the reason why the...
say, okay, one of these points on looking for a good tax preparer is somebody who will actually give you a tax organizer or give you a questionnaire that collects all of these different sources of income and make sure that interview is robust in the sense they pick up everything that's going on in your life.
Jane Mepham, CFP® (00:17:49)
Okay. So ⁓ how many years, how many, how many, how far back do you want them to provide you the tax returns? it one year, two years, three years or?
Manasa Nadig, EA (00:18:01)
Good question. So, you know, just now when we're talking about the statute of limitations, so really, a statute of limitations is something that's kind of like a clock on a return. So if you have filed a tax return and it's accurate and everything has gone through, then at three years from the time that you have filed that return, the statute of limitation closes.
And that means that the IRS really has said now that that's all done and dusted and it's filed away. Now, if you have missed reporting some income, then up until a certain period of time, that statute of limitations remains open. That means the clock on that return does not run out. It just keeps ticking.
And also another thing that I want to talk about here is, you know, there are certain income that the payer reports directly to the IRS. And those are the ones for which you get statements, you know, your W-2s, your 1099s and all of that good stuff. ⁓ And if you have not given those records to your preparer and it's not on your return, then really this is all going through a computer.
Jane Mepham, CFP® (00:19:08)
you
Manasa Nadig, EA (00:19:25)
where the IRS is matching, whether your return has these documents that they have. And if it's not there, then boom, there's a CP 2000, which is basically an IRS letter that there's an income that has been missed. yeah, and it's always kind of worrisome when you get a correspondence from the IRS. yeah.
Jane Mepham, CFP® (00:19:44)
Okay, okay, okay.
Jane Mepham, CFP® (00:19:52)
But if you have a good tax preparer, they would help you figure this thing out and probably represent you in front of ⁓ IRS. Is that accurate?
Manasa Nadig, EA (00:20:00)
Mm-hmm.
Manasa Nadig, EA (00:20:06)
Absolutely, absolutely. So that's where we go back to the Circular 230, which is the representation rights, yes.
Jane Mepham, CFP® (00:20:07)
Okay, okay, Yeah, okay.
Jane Mepham, CFP® (00:20:15)
Okay, okay, this is good. And then you talk the next question, you talked a lot about signatures. Tell us more about the signatures.
Manasa Nadig, EA (00:20:27)
Yeah, how much time do we have? ⁓ Yeah. ⁓ Yeah, no, this this ⁓ is something that has been there's a few court cases in there. There are some fraudulent preparers who've been, you know, arrested and there's a whole lot of other stories to it. But suffice it to say, when we're talking about signatures, there are three things that you have to remember. One is
Jane Mepham, CFP® (00:20:29)
⁓ Okay, make it quick. No, I'm kidding. ⁓
Manasa Nadig, EA (00:20:56)
Never, ever sign a blank return. You cannot sign a return which has all zeros on it. So don't do that. Or if there is a double thing going on here, like a double jeopardy or whatever, you are actually, your preparer is giving you a blank paper return, then definitely just run away from there. So that's one thing. The second one is,
Again, going back to responsibility, right? Review the return before signing. Understand everything on your return, ask questions, and make sure that everything has been reported accurately. I don't mean that you have to sit and count, you know, do the math on whether the addition is right, because you're assuming that they're using a software to do this, so the math will be right.
But do review the entire return and make sure everything that you have provided is on there before you sign it. And the third thing is that make sure that the preparer signs the return as well and their PTIN is included on your form 1040 or whichever is the one that you're filing. Yeah.
Jane Mepham, CFP® (00:22:16)
Okay, so ⁓ one thing I've realized of what we have the CPAs or EAs in the past ⁓ and some of the ones that I really liked, especially it wasn't even in the cross border context is where ⁓ the tax professional invites me and the client to a meeting where we actually review the return before it gets filed.
Would you say this is a nice to have or something that every tax preparer should do? And of course, I know there's some who won't have, you know, the FA and the tax preparer, but would you say this is a nice to have or they really should do this? What are your thoughts on that?
Manasa Nadig, EA (00:23:03)
So this is so interesting that you're asking this question because very recently in another forum where we are all EAs and CPAs, we were talking about this. ⁓ And I think that it's also a client-based thing. let's say if I am a client of a tax professional with whom I've had a longish relationship ⁓ and I have
a good knowledge and a good kind of handle on what to expect on things, and they've been doing my taxes for years, I might just not require a review anymore, you know? I might just look at the two-year comparison myself and say, hey, I think I have a handle on how my taxes are doing. But having said that, you know,
If you have a review from your tax professional, that's actually a great thing. Now, this review doesn't have to be face to face. It doesn't have to be on a video call. Maybe they can record something for you and upload it. And it's there for you to reference and ask questions. So it's always good practice to have somebody do that. Yes. Yes.
Jane Mepham, CFP® (00:24:25)
Okay, so good customer service is what we are saying. Yeah, okay. I have a question. You mentioned special cross border context, but actually before we go into that, let me skip to one and then I'll come back to this where you said be wary of out of the box solutions to reporting. ⁓ What do you mean?
Manasa Nadig, EA (00:24:27)
Yes. Yes.
Manasa Nadig, EA (00:24:51)
So, you know, if you remember, we were talking about this earlier, there was this tax preparer. Apparently, he had studied law, but he had...
failed his bar exam. ⁓ And as recently as the last week of October of 2024, he was sentenced to 15 years of after, you know, touting not only that he claimed that he was a tax attorney, even though he was not, and then he claimed that he was an expert at international and cross border filing, which he was not, but.
what he was doing was he was offering like these really lack of a better word, outrageous ways of getting away from paying taxes. So when something smells fishy, it probably is. At that time, I think it's a good idea to maybe get a second opinion.
You know, if you're reading on various different forums or you've spoken to people or you've done your homework and you are expecting that something has to be reported or you may have to pay taxes on this, but you know, this person is now saying that you don't have to or they are offering other solutions. And you know, you and I have had these other discussions, you know, sometimes.
It doesn't even have to be a preparer. It could be another professional offering these outrageous solutions to get out of doing something. So in that sense, I would say, yes, be wary of these out of the box solutions to reporting.
Jane Mepham, CFP® (00:26:48)
Okay, okay, I get what you're saying. And I think, you know, we should probably link that case so folks understand what we're talking about. Okay, so two more things that you added to this. And I thought these two were interesting. One, you talked about this special cross border context. And I know that's what you do. I know that's what I do with my financial planning practice.
Manasa Nadig, EA (00:26:57)
Yeah.
Jane Mepham, CFP® (00:27:14)
Could you talk about what you'd be looking for if somebody is looking for a cross-border tax preparer?
Manasa Nadig, EA (00:27:21)
Yes, So, you know, like, just like you said, you know, when we, you and I are working in this cross border space, there are all of these people that we have to collaborate with, right? So the first one, definitely collaborate with the financial advisor or the CFP ⁓ and make sure that you're both on the same page on the US side of things.
On the foreign country side of things, if they have accountants in that country, collaborate with them because there are nuances of that, of taxes in that other country, which you may not understand at all if this is the first time you're dealing with that country or you may have missed something, you know, so you just want to make sure that you are collaborating. So if you are
looking for a tax preparer, make sure that they can collaborate with your financial advisor and accountants in the other countries. And then ask, do your due diligence, do some homework ⁓ and ask questions about cross border implications that you might have and foreign reporting requirements that you might have. And, you know, get a sense of how knowledgeable they are because
especially in this cross-border context, enough can't be said about penalties, right? There's a $10,000 penalty for something, there's a $25,000 penalty for something else, and 25 % of your foreign gifts and inheritances can be penalized if you don't report it. So in that sense, you know, just make sure that you are getting that
the feedback and I know this is kind of a catch-22 here, right? You have gone to this cross-border expert because you are not completely aware of it. So how do I make sure that they know what they're doing? So in that sense, I think that as a taxpayer, you have to do some due diligence on your part where you have to acquire some knowledge of it, especially
Manasa Nadig, EA (00:29:47)
if your return is going to be as complex as that.
Jane Mepham, CFP® (00:29:52)
Yeah, and I think this is probably where it does help to interview a couple of different preparers or professionals. It does help to maybe ⁓ look at their work, like even look at their body of work. What do they talk about? What do they write about? And now with social media and all the stuff out there, it's really easy to see some of what they address.
Manasa Nadig, EA (00:30:15)
You
Jane Mepham, CFP® (00:30:21)
⁓ But I do think, yeah, due diligence is important. And I think some of those referrals, as well as don't rush it and see what it is that they're promising. You don't go for the person that, to your point, is promising the greatest refund. You really want somebody that's going to do it right by you. OK, those are nine items. was one more that was, I thought, interesting. So talk about this. You said report a
Manasa Nadig, EA (00:30:39)
Mm-hmm.
Jane Mepham, CFP® (00:30:49)
abusive tax preparers to the IRS? Tell us more.
Manasa Nadig, EA (00:30:55)
Right. So, you know what, there are some red flags that you might miss, but there are some red flags that you are definitely aware of that is happening. Maybe you file tax returns with this professional and you never got a copy of your tax return. That would be a huge one, right? Or...
You know, you're now a victim of excessive IRS correspondence, which kind of points to the fact that maybe your tax preparer missed reporting a whole lot of things that you had actually provided them, you know, the information. ⁓ And maybe you are getting again these excessive IRS correspondence or maybe even one IRS correspondence.
but now the tax preparer is not responding to your emails and your phone calls, et cetera. Of course, this is huge. If you're reporting somebody to the IRS, that has to be taken with measured circumstances, and you should be pretty conservative in this approach. But out and out, if you think that this person is who
is not doing a good job and has really the other out of the box solutions that we were talking about earlier, then there is a way that you can report them to the IRS that you suspect that these are fraudulent tax preparers and there is an IRS form for you to do it ⁓ and you can use that and do it anonymously as well so you can report somebody.
Jane Mepham, CFP® (00:32:51)
Okay, hopefully the tax preparers you end up talking to don't the relationship doesn't come to this. But again, we want you to be careful. So let's see in this second bit of it, we've talked about ⁓ provide all records needed signatures, be wary of out the box solutions to reporting special cross border context as well as if
required, you can report abusive tax preparers to the IRS. ⁓ And with that, I think we've addressed the top 10 questions that you want to ask your tax preparer. We're coming to the tax season, so this is probably a good one to hang on to as you go about finding, you know, a new cross-border CPA or EA if you need one. ⁓ And with that, thanks so much for tuning in today's
⁓ Please go to our website, theimcafe.com, theimcafe.com. ⁓ Give us a like, give us a follow and please share this episode with others who may be looking for the same information. Until then, you heard it from Manasa. Thank you and bye.
Manasa Nadig, EA (00:34:10)
Bye.