Tax Compliance FAQ

1.) Should you hire a CPA, tax attorney, or Enrolled Agent?
     a. Enrolled Agent-Certified by the Internal Revenue Service, used when someone needs just a return prepared or representation before IRS up to and below the level of Tax Court. Is tested on the knowledge of the Internal Revenue Code in the qualifying examination and has continuing education requirements annually.
     b.  CPA-Tax preparation is just one facet of the CPA's work. In addition, a CPA provides monthly write up services to the preparation of internal profit & loss statements, reviews or audits financial statements prepared by entity management, advises management on industry trends, etc. Has to be licensed by the state where professional services are performed and has continuing education requirements annually. Tax representation before IRS can be up to most levels, but not Tax Court.
     c. Tax attorney-can prepare returns (usually the most complex business, estate, and gift tax returns) and can represent taxpayer before IRS up to and including Tax Court.
     d. Therefore, it depends on the individual's financial situation and service needs as the Enrolled Agent is probably the least expensive of the three and the Tax Attorney the most expensive.

2.) Should I go to an audit by myself?
     a. NO! This why you hire on of the above as they understand that the IRS is looking for the most innocent slip of the tongue by the taxpayer to find other income sources not disclosed or an error in taking a deduction.

3.) Do you pay a proposed assessment amount billed by the IRS or the state revenue department without talking to your accountant/tax prepare?
     a. As in 2.) above the answer is NO! Let the individual who prepared the tax return review the correspondence and their return copy for the validity of the proposed increase in tax liability.
        1. The increase may be due because a W-2 statement wasn't attached, a schedule missing, or some other reason that can easily be corrected without additional payment.