Beware of Unlicensed Tax Preparers
We’re finally wrapping up 2020 tax season and just like every year we find ourselves helping clients clean up messes left behind by tax preparers and well-intentioned bookkeepers from years past. If there is one single piece of advice that I could give to business owners it would be to invest time and money in the best accounting and tax service providers you can afford. After all, the purpose of your business is to make money, and if your money isn’t being handled properly by licensed professionals, you may find yourself in deep trouble.
Did you notice that I said licensed professionals? That’s right, there is a license for this work. Enrolled Agents (also known as America’s tax experts) CPAs, and attorneys are the only tax preparers licensed by the IRS. Yet there is a whole industry of tax preparers who operate without a license. What would you think about going to a doctor or hiring an attorney who had lost their license? Most of us wouldn't even hire someone to trim our trees who isn't licensed. Yet, somehow, there are thousands of unlicensed tax preparers in communities all over the country. I’m not here to suggest that every unlicensed tax preparer is going to mess up, or that they are in the business for the wrong reasons. Of course, there are plenty of well meaning and unlicensed tax preparers. But how does a consumer tell the good unlicensed tax preparers from the bad? The concept of licensure is meant to bring clarity to that exact question.
If your taxes are fairly simple and only include a single W2 from your employer, the likelihood of them being filed correctly is at its highest. However, as your personal income and business taxes become more and more complex it is more critical than ever that you hire a licensed and experienced tax professional. It is not uncommon for our office to bring on new clients who have landed in hot water with the IRS due to improper filing by another tax professional. We’re always happy to help our clients navigate these complicated and expensive mistakes. But we can’t help but remind people how much it can cost them to hire the unlicensed and inexpensive tax preparer in the first place.
Another benefit of hiring a licensed tax preparer is their ability to help you pay the right amount in taxes. We know how to ask key questions and dig down to come to the best tax outcome allowed by law. Here’s a recent example from my business. We recently had two partners who sold their stock in a closely held corporation in a series of 3 transactions. The initial result was a $1.3M capital gain for each but after we researched and asked questions and read every document involved in the sale, we were able to adjust the capital gains down to $600k each. Which added up to a tax savings of several hundred thousand dollars!
There is a lot to take in here, and I know this can all feel a bit overwhelming. But, we believe that you can relieve yourself of those overwhelming feelings by hiring the right accountant. Taxes are complicated and foreign to many people and that’s why there is an entire industry of licensed tax preparers just like Fix-It Accounting who can help you navigate the IRS. Who you hire can make a world of difference for your financial outcomes. If you’re looking for a licensed and experienced tax preparer that you can trust, call our office today.