Reduce Your Risk of Tax Problems by Knowing the Qualifications of Your Tax Accountant

It’s a little unsettling to think that in many U.S. states, there aren’t any licensing or educational requirements to be an accountant. There are plenty of marginally qualified tax preparers and accountants out there who lack the in-depth knowledge and experience to provide consistently sound tax advice. Unless your tax returns are extremely simple and do not involve tax deductions, real estate transactions, or unpaid taxes, it’s generally unwise to settle for an inexperienced tax accountant. The ideal accounting service is one at which your taxes will be prepared by a trained professional with an accounting degree and who has passed the Uniform CPA Examination. If you’re in the market for tax and accounting services, it pays to know exactly who is going to be preparing your taxes and what their qualifications are.

Working with a CPA, instead of a less qualified tax accountant, is one of the surest ways to make sure you’re getting sound advice and competent tax preparation services. CPAs are required to pass the rigorous Uniform CPA Examination, which greatly increases the likelihood that they’re knowledgeable and diligent. Before they’re granted CPA licenses by their state boards of accountancy, aspiring CPAs must also live up to high standards in the areas of education, experience, and ethics. In effect, when you hire a CPA to provide you or your business with accountant services, it’s as if that individual has been screened and approved by a professional review committee. That’s no guarantee that the CPA you choose will never make an error or give you bad advice, but you’re definitely reducing your risk of tax problems when you deal with CPA firms.

Many CPAs are surprisingly affordable as tax preparers, and the value you get makes it well worth it. Not only do most CPA firms provide top-quality advice on reducing your tax liability and avoiding IRS audits, but they can provide you with audit representation if your tax return is singled out by the IRS. Only CPAs, enrolled agents, and tax attorneys are authorized to represent you before the IRS. The main advantage of hiring the services of a CPA is that they can help you both prevent and resolve tax issues that might arise during the course of your professional or business life.

If you ever find yourself in the position of owing more money to the IRS than you can afford to pay, there are a variety of ways CPA firms can help you. Many offer tax resolution services, which can assist you in reaching an IRS tax settlement or a payment installment plan with the IRS. For people who owe back taxes and are facing issues like wage garnishment, levies, and liens, the IRS penalty abatement services many CPAs offer can help get those costly penalties lifted or reduced. Having a tax accountant in your corner who also happens to be a qualified tax advocate can be a major advantage whenever you find yourself in the choppy waters of late tax returns, income tax problems, and IRS audits.

Potential Tax Settlement Options for Paying Back Taxes Include an Offer in Compromise

Many people who have fallen seriously behind in the payment of their federal taxes often hire tax attorneys or a CPA to help them resolve their problems with back taxes. Another approach involves working with enrolled agents, who are professionals licensed to settle debts with the IRS.

One IRS tax settlement strategy that is available to people with unpaid back taxes is to submit what’s called an offer in compromise. This potential solution to catching up on back tax can allow a person to settle their IRS tax debt for less than the full amount owed. Depending on the circumstances, the IRS considers it a legitimate option for people who can prove that they’re unable to pay their full tax liability or that doing so would cause them serious financial hardship.

The Internal Revenue Service’s Web site lists the forms, application fees, and steps for submitting an offer in compromise. A well-prepared submission that takes into account the ability to pay, income, expenses, and asset equity stands a good chance of approval by the IRS. As stated on its Web site, “We generally approve an offer in compromise when the amount offered represents the most we can expect to collect within a reasonable period of time.” One major eligibility hurdle is that the applicant can not be involved in an open bankruptcy proceeding. Another potential stumbling block would be a determination that the IRS back taxes could be paid in installments.

While it is possible for an applicant to submit the required forms, the $150 application fee, and the initial 20% payment on their own, many people choose to get tax help from a tax relief attorney or another qualified tax advocate. Among the advice that the IRS offers to people seeking tax resolution services is to make sure the adviser is qualified. According to the IRS, anyone who charges a fee to assist in the preparation of an offer in compromise must have a current preparer tax identification number (PTIN). It’s also important to know whether a tax consultant can represent you before the IRS if the agency has questions. A tax professional needs to be a CPA, an attorney, or an enrolled agent to be allowed to fully represent you before the IRS in a collection matter.

Although business tax problems and having to pay back taxes can be stressful, fortunately there are tax debt reduction solutions and help with back taxes that can enable individuals and small companies to resolve their debt to the government and get on with their lives.

How the Tax Code Works

Taxation is a principle that runs back thousands of years. Taxation has been in use as a way of financing kingdom, communities, and government as far back as history itself. However, the current U.S. tax code as we know it was introduced in 1913. The code has however, been significantly altered and expanded over the years. Every year since 1913, there are tax laws that are altered, added, or removed from the tax code. The tax laws have significantly been altered 28 times since 1913. Major alterations include the Kennedy and the Cater era between 1954 and 1963, the Clinton era, and the more recent Bush tax cuts. Today, the tax law comprises of over 4,500 pages of rules and guidelines.

Congress Makes the Laws

Congress is the federal body that is assigned the role of formulating and passing tax laws that govern the operations of IRS. Congress passes tax laws for different reasons. Some laws are passed for social reasons. For example, a tax law to provide relief to victims of bad weather, such as hurricanes and storms, is intended on helping the victims cope with the catastrophes. On the other hand, Congress passes some laws for political reasons. For example, many laws that provide relief and special treatment to oil companies and media houses are seen as being passed for political reasons. The oil companies provide major funding for political campaigns while media coverage is fundamental when campaigning and for continuous public perceptions and therefore, Congress will normally favor such groups to seek a return favor. Congress also passes laws for economic reasons. Many laws targeted at providing relief to small businesses, such as the bonus accelerated depreciation on cars bought for business use, is targeted at enhancing economic business, especially for small businesses that are fundamental for the American economy. Congress also passes laws to manage a specific economic state. The stimulus package law for example, was targeted at reviving the economy after the economic regression of 2007-2008, while the Bush tax cuts were introduced into the tax code to stimulate the economy after the War in Iraq.

The IRS Interprets and Makes Regulations

Once Congress makes the laws that form the tax code, the IRS then interprets these laws and forms regulations that enable implementation of the modified tax laws. Congress provides power to the IRS to be the primary interpreter of the tax law to present guidelines and regulations to the taxpayers. The IRS tax regulations are much bulkier than the tax code itself and run over 16,000 pages. Besides these regulations, the IRS also provides revenue and letter rulings and revenue procedures to provide further guidance to taxpayers and tax professionals.

The Role of Tax Professionals

The Tax Professionals are comprised of tax advocates, tax preparers, accountants, auditors, and finance consultants. Their primary role in the tax system is to advise and assist taxpayers to understand, apply, and optimize on the tax code. The tax code can be far too vast and too complicated for the average taxpayer. Therefore, these professionals help the taxpayer to plan, apply, and comply with the tax laws and at the same time, take advantage of the opportunities posed by the law. Most taxpayers (over 70%) use the services of a tax professional to prepare and file tax returns. Tax advocates can also help in tax cases escalating to IRS decisions to take a taxpayer to court. Tax professionals also help in negotiating Offers in Compromise and Installment Tax Payments with the IRS.

The Court System

The final authority in the interpretation of tax code is with the court system. The court settles disputes that arise between taxpayers and the IRS in the interpretation of the tax law. They seek to interpret the tax code based on the intent of Congress when it passed the tax law in question. The courts that participate in tax related disputes include Federal district courts, Tax Court, the U.S. Court of Federal Claims, and U.S. bankruptcy courts. For disputes that exceed $50,000.00, a taxpayer can appeal the decision of these courts in a Circuit Court of Appeal and further, with the U.S. Supreme Court.