Baruch College Tax Law Professor Steven Melnik Offers Helpful Taxation Tips
"Choose Your Tax Preparer Wisely"
Steven V. Melnik, Associate Professor of Tax Law with the Department of Accountancy in the Zicklin School of Business at Baruch College, is also the Academic Director of Graduate and Undergraduate Tax Areas and Chairman of Continuing Education Seminars for CPAs and Attorneys. Professor Melnik is an expert in a variety of business related areas including: tax, estate, and Medicaid planning (elder law); asset protection and preservation and IRS audits.
Tax season is upon us and Professor Melnik offers some helpful tips for people who are looking for a tax preparer.
“If you decide to seek professional assistance with preparation of your tax return, there are important things to consider,” Melnik said. “A wrong selection can send you and your return spiraling down a hole. It is important that you choose someone that is honest, professional, and provides excellent service, because you will be held legally responsible for what is reported on your tax return, even when prepared by someone else.”
Professor Melnik offers the following tips for people who are looking for a tax preparer:
1. Check the preparer’s qualifications and credentials.
The IRS requires that all tax preparers obtain a Preparer Tax Identification Number (PTIN) in order to prepare tax returns. When you pay someone to prepare your tax return, be sure that your return includes their PTIN in the section labeled “Paid Preparer Information.” You should also research the preparer’s history in order to determine whether they have any derogatory remarks or disciplinary action.
Conduct independent research in order to determine whether the preparer has been sanctioned previously for preparing fraudulent returns. The most common method is to use the Internet and search for the individual’s name, or name of the company. A lot of information is available beginning with a search on Google about individuals and companies. You may use this method as a good starting point in conducting your research.
2. Inquire about the preparer’s fees.
Most preparers will offer their service at a flat rate per return. Avoid preparers who require a percentage of your refund for their services. Why? This is an indication that they may inflate your refund in order to receive a larger fee.
If you are due a refund, make sure that the refund is deposited directly into your personal bank account, or that the check is sent to your mailing address. Do not allow any of your refund to be deposited into the account of your preparer unless there is a valid reason and you are convinced that your preparer is trustworthy. There have been instances when a preparer recommended that the taxpayer deposit their refund into the preparer’s account, and the preparer disappeared without a trace and kept the refund for themselves. It’s wise to have all moneys sent directly to you.
3. Ask if the preparer offers electronic filing.
The IRS requires that all paid preparers who prepare more than ten returns per year must file the returns electronically, unless the client elects to file a paper return. Make sure that your preparer offers electronic return filing as it often ensures that your return will be prepared accurately, and processed securely and in a timely manner. If your preparer does not offer electronic filing, it is likely that they are not as experienced as they appear to be, and your return may be more susceptible to inaccuracies. Take a pass.
4. Make sure that the tax preparer is accessible.
You should never retain the service of a preparer that you are not able to contact when needed. In some cases, you may need to contact your preparer even after the tax filing deadline. Your preparer should be available year round in the event that you have questions or concerns about your tax return. Yes, they have vacations and emergencies, but should always leave their practices, meaning clients, in the hands of a qualified preparer that can answer questions or handle an emergency in their absence.
Generally, tax preparers will try to respond to your inquiries within a stated period of time, Ãƒâ€šÃ‚Âsuch as within 24 hours or 48 hours. The preparer’s response time may vary, but generally, tax preparers will try to respond within a reasonable time.
5. Research the tax preparer’s reputation with clients.
Conduct independent research in order to determine whether the tax preparer has other clients in your line of business or occupation. You need to ask this upfront in your initial interview. A preparer that has other clients similar to yourself is likely to understand your line of business or occupation and be more knowledgeable of how to accurately prepare your tax returns. Also, if you know other clients who have used the tax preparer in the past or presently, ask them whether they have been audited in the past as a result of any tax preparer errors. A reputable tax preparer should receive referrals from past clients and have a great reputation with their clients.
6. Inquire whether the tax preparer represents clients in audits.
When a tax preparer represents clients in an audit, this is an excellent indication that the preparer will stand behind his or her work. They are also more likely to have experience in auditing and be able to provide competent representation. A tax preparer that has represented clients in previous audits will likely know the type of documentation the IRS is requesting, and may also be able to detect potential audit risks that may result from items listed on your tax return. Caution: It is highly recommended that you hire a tax attorney in matters requiring oral advocacy or litigation.
7. Determine how long the preparer has been in the business of preparing returns.
Experience is an important qualification for a tax preparer. You want someone who has prepared returns on a full time basis for at least a few years not anyone who is so green that his or her expertise primarily comes from the more academic versus a more practical “in the trenches” approach that a few years of doing returns and representing taxpayers in audits creates. And not someone who does this on a part-time basis or adjunct to their regular job that is outside of tax matters.
My recommendation is that he or she should be preparing taxes for a minimum of five years, has audit experience, and works with clients who are similar in needs. Of course, you always need to have that “gut” feeling that the person you are dealing with is someone who you trust and with whom you can openly confide your financial dealings and positions.
8. Never ignore signs of foul play.
In some cases, a preparer may ask you to do things that raise a gigantic red flag. For example:
- Asks you what amount of refund you would like to receive.. A tax preparer cannot inform you of your refund prior to preparing the tax return. If you are asked how much of a refund you would like, this is a clear indication that your tax preparer will prepare a fraudulent tax return.
- Asks you to sign a blank return. Do not sign a blank return under any circumstances. Do not sign a return without reviewing the return. Be sure to ask questions about any items that you find may be questionable. “When in doubt, check it out!”
- Asks you to deposit your refund into their account. A reputable tax preparer will not require you to deposit your refund into their account absent a valid reason that should be disclosed to you, nor will they ask for a percentage of your refund. If you are asked to do this by your tax preparer, it is likely that you will be the victim of fraud.
About Baruch College:
Baruch College is a senior college in the City University of New York (CUNY) with a total enrollment of more than 18,000 students, who represent 164 countries and speak more than 129 languages. Ranked among the top 15% of U.S. colleges and the No. 4 public regional university, Baruch College is regularly recognized as among the most ethnically diverse colleges in the country. As a public institution with a tradition of academic excellence, Baruch College offers accessibility and opportunity for students from every corner of New York City and from around the world. For more about Baruch College, go to http://www.baruch.cuny.edu/.
Manny Romero, (646) 660-6141, email@example.com
Mercedes Sanchez, (646) 660-6112, firstname.lastname@example.org
Evelisse Luciano, (646) 660-6134, email@example.com