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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Speaker 1 (00:06):
Welcome to the International Money Cafe podcast, the show where we filter out the noise on cross-border taxes, finances, and life in the us. I'm your host Jen, me from Certified Financial Planner, founder and owner of Elgon Financial Advisors.
Speaker 2 (00:21):
And I'm your host, man Nadi, enrolled agent, owner and founder of M and Tax and Business Services. Join us on this journey as we explore the unique challenges faced by inbound outbound families and businesses on taxes, compliance, and financial planning. Let's get to the show.
Speaker 1 (00:43):
Welcome to another episode of the International Money Cafe podcast. In today's episode, we are 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 ask a 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 at list together for me? 'cause I wanna share this with somebody who's looking to get a new tax professional in their life. And man was amazing. She's very detailed and she came up with this great list of the 10 things to look for if you are looking to choose a new tax preparer. So what I've asked Mana to do, if she could walk us through the 10 tapes and as we go along, I have some questions, I'm gonna throw those questions at her, I'm sure she's gonna be awesome with it. So mana, are you ready for this?
Speaker 2 (02:09):
I'm ready. As ready. As ready can be?
Speaker 1 (02:12):
Yes. Awesome. I mean this is what you do for a living, right?
Speaker 2 (02:16):
I know.
Speaker 1 (02:17):
So when I think of a tax professional, I think of somebody that one can obviously 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 and really somebody that should make your life very, very easy. Okay, so mana, 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.
Speaker 2 (02:56):
Yes, yes. So here's a quick background. So there's Circular two 30. 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 two 30 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 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 P 10 number, which is basically an acronym for Preparer Tax ID number. And it is an optional requirement to have this P 10 number. And if a tax professional has this number, then you can look them up on the IRS's website. So that's the one about prepare qualifications. Jane.
Speaker 1 (04:43):
Okay, you had it here. I'll move on to the next one. <laugh>, you also said, and I had a few questions around this check on the preparer history. What exactly do you mean by that? Manasa.
Speaker 2 (04:59):
So you know, there are certain places where you can volunteer to put your information up and you know, 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 it's, 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 know, you can definitely look them up and you should look them up if you have any doubt in your mind as to their circular two 30 qualifications.
Speaker 1 (06:11):
Okay. Okay, let's move on <laugh>. 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. So you said to us ask about service fees. Now I don't think you are talking specifically numbers, but that's a possibility. But what else should we be looking at if we ask about service fees? What, what are the key things to watch out for?
Speaker 2 (06:41):
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, you know, 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, their 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, you know, there's always discussion around the service fees and especially in the cross border context, you know, so do your due diligence but know that tax preparers who come with in experience and knowledge are going to be more expensive than others. So, you know, just just have that in the back of your mind when you are looking at service fees.
Speaker 1 (08:20):
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 wanna take into consideration a whole lot of other things.
Speaker 2 (08:41):
Okay. Definitely. Okay. Yeah,
Speaker 1 (08:42):
I get that. Alright, what about this one? I thought this one was kind of interesting 'cause I assumed everybody does it, but maybe they don't. You said ask if electronic filing is offered.
Speaker 2 (08:54):
Yes, this, this has come about over a lot of different fraud cases and other, you know, things that fraudulent tax preparers have done. So one thing is what people don't generally don't know is that, you know, 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, you know, if these are delinquent streamline procedures or other aspects, then 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, you know, electronically and it's not a paper return.
Speaker 1 (10:14):
Okay, I can appreciate that. And then the next one, which again I thought was kind of interesting 'cause I always assume this is the case, you said make sure that prepare is accessible.
Speaker 2 (10:27):
Yes.
Speaker 1 (10:27):
What do you mean <laugh>?
Speaker 2 (10:29):
Yeah, so 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 are 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's 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 and so what I would advise for someone who's looking for a tax preparer is make sure you know what those expectations are. You know, how quickly do they reply to emails? Are those policies stated somewhere maybe in their engagement letter or their website or their email? Do 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.
Speaker 1 (12:01):
So really I think what I'm hearing you say is good customer service is what I'm hearing, right? Yeah,
Speaker 2 (12:08):
Sort of. Yes. Yes.
Speaker 1 (12:10):
Okay. Alright. So we, halfway through the episode we've talked about, let's see the, the top five things so far is check, prepare qualifications, check on the prepare history, ask about service fees, ask if electronic filing is offered. Make sure the preparer is accessible. Alright, let's take a quick break 'cause we have a very special message for you and then when we come back we'll have mana address the other five items on the list.
Speaker 2 (12:47):
Hey dear I'm C listener. Let me tell you a little story. Coincidentally, when I started my practice, it was the same year in which FATCA was passed into law. FATCA stands for Foreign Account Tax Compliance Act. The government started to crack down on those who had financial assets overseas and were not compliant in disclosing these funds to the US government. The FinCEN Fbar filing requirement has been around since 1970, since the Bank Secrecy Act was passed. Well, even though it has been more than 10 years since these laws were passed, we still have many, many US taxpayers who may have a filing requirement but are completely unaware of it. I'm talking about that joint account with your dad with over 10 k back home. So this is in fact our most frequently asked question. We've put together a comprehensive free ebook which goes over the most important compliance requirements for overseas financial assets. And we want you IMC listener to have this ebook completely free. All you need to do is go to our website, www the im cafe.com and scroll to the bottom of the homepage and enter your first name and email address and you will be able to download this handy ebook. Now, hurry, go get your free and fabulous download.
Speaker 1 (14:34):
Okay, we are back. We are 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 mana, I'm gonna continue and I'm gonna go through the next five. 'cause again, I do have some questions and I think it'll be good if we can sort of just explain it. So the next one you said is provide all records needed. Talk a little bit more about that.
Speaker 2 (15:09):
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, uh, capital losses or passive activity losses and all of that that needs to be taken into account on your present return. So that, 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.
Speaker 2 (16:23):
Right? We're looking at all of these due diligence requirements that a preparer has to do. But in this particular point I would say that you as the tax payer also has equal responsibility. You know, if you miss on providing some records to your tax preparer, then the responsibilities on you that you have missed that income item or you know, maybe an expense item which could hurt or not in the big picture. And another thing here is when we are talking about records, you know, remember when Jane was saying when we started this episode was it's as much your responsibility as it is anybody else's because you are the one who's ultimately signing off on this return and saying that you have provided everything and under penalties of perjury 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. So that's the reason why we 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.
Speaker 1 (18:13):
Okay. So how far back do you want them to provide you the tax returns? Is it one year, two years, three years, or?
Speaker 2 (18:23):
Good question. So, you know, just now when we are 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 is 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 you, 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. Okay.
Speaker 2 (19:18):
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 twos, your 10 90 nines 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 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, you know, there's an income that has been missed. So,
Speaker 1 (20:04):
Okay. Okay.
Speaker 2 (20:05):
Yeah, and and it's always kind of worrisome when you get letter from a correspondence from the IRS. So Yeah.
Speaker 1 (20:12):
But if you have a good tax preparer, they would help you figure this thing out and
Speaker 2 (20:20):
Mm-hmm <affirmative>
Speaker 1 (20:21):
Probably represent you in front of IRS. Is that accurate?
Speaker 2 (20:25):
Absolutely. Absolutely. Okay. So that's where we go back to the circular two 30. Yeah. Which
Speaker 1 (20:31):
Is okay,
Speaker 2 (20:31):
You know, the representation rights. Yes.
Speaker 1 (20:34):
Okay. Okay. This is good. And then you talked the next question, you talked a lot about signatures. Tell us more about the signatures.
Speaker 2 (20:45):
Yeah, how much time do we have <laugh>? Uh, okay, make it quick. No, I'm kidding. <laugh>. 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 are talking about signatures, there are three things that you have to remember. One is never ever sign a blank return. You know, you cannot sign a return, which is all zeroes on it, so don't do that. Or if it's, you know, there is like a double thing going on here, like a double jeopardy or whatever, you know that you are actually your preparers 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?
Speaker 2 (21:46):
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 P 10 is included on your form 10 40 or whichever is the one that you're filing.
Speaker 1 (22:30):
Okay. Yeah. So one thing I've realized, I've worked with other CPAs or ease 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, 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 are some who won't have, you know, both the FA and and the 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?
Speaker 2 (23:16):
So you know, this is so interesting that you're asking this question because very recently in another forum where we are all, you know, EAs and CPAs, we were talking about this and it, I think that it's also a client based thing. So if, 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 you know, have somebody to that. Yes, yes.
Speaker 1 (24:35):
Okay. So good customer service is what we're saying?
Speaker 2 (24:39):
Yes.
Speaker 1 (24:39):
Yeah. Yes. 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 <laugh>?
Speaker 2 (24:58):
<laugh>? So 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, uh, ways of getting away from paying taxes. So when something smells fishy, it probably is, you know, at that time I think it's a good idea to maybe get a second opinion. You know, if you are reading on, you know, various different forums or you've spoken to people or you've done your homework and you are expecting that something is going has to be reported or you may have to fi pay taxes on this, but you know, this person is now saying that you don't have to or they're offering other solutions and you know, you and I have had these other discussions, you know, if 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.
Speaker 2 (26:41):
You know? So in that sense, I would say yes, be wary of these out of the box solutions to reporting.
Speaker 1 (26:49):
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 the the special cross border context and I know that's what you do. I know that's what I do with my financial planning practice. Could you talk about what you'd be looking for if somebody is looking for a cross border tax prepare?
Speaker 2 (27:22):
Yes, 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 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.
Speaker 2 (28:42):
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, you know, 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? You know? So in that sense I think that as a taxpayer you have to do some due diligence on your part where you know you have acquire some knowledge of it, especially if your return is going to be as complex as that.
Speaker 1 (29:47):
Yeah, and I think this is probably where it does help to interview a couple different preparers or professionals. It does help to maybe look at, 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, you know, social media and mm-hmm <affirmative> and all the stuff out there, it's really easy to see some of what they address. 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 gonna do right by you. Okay? Those are nine items. There was one more that was I thought interesting. So talk about this. You said report abusive tax, prepare us to the IRS. Tell us more,
Speaker 2 (30:48):
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 ha you file tax returns with the STA with this professional and you never got a copy of your tax return. That would be a huge one, right? Or you know, there you are 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, you know, if you are reporting somebody to the IRS, that 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.
Speaker 1 (32:37):
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 of the box solutions to reporting special cross border context as well as if required you can report abusive tax. Prepare us to the IRS. And with that, I think we've addressed the top 10 questions that you wanna ask your tax preparer. We are 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 year if you need one. And with that, thanks so much for tuning in today's episode. Please go to our website, the i am cafe.com, the i am cafe.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 had it from Anna. Thank you and bye bye.
Speaker 3 (33:56):
Thank you for listening to the International Money Cafe podcast. The content is for informational and educational purposes only, and should not be used as a substitute for professional advice. Seek the advice of your qualified service provider with any questions you may have regarding your cross border finances and tax needs.