As a hard-working honest business owner, you do your best to pay your taxes, but no more than you have to. You’re more than willing to pay your fair share, but you also know that you won’t be paying anything if your business isn’t profitable. So, you work with a tax professional to identify areas of potential savings, and to make sure you’re getting all of the credits and deductions to which you’re entitled.
Yet sometimes your tax professional puts you in danger. It could be that they’re being outright dishonest, and providing the IRS with false information. In other cases, it could be a case of simple ignorance or human error.
You need to be sure your tax professional is doing things the right way. Here are some tips you can use to keep on top of things and avoid a painful audit:
- When selecting a tax professional, beware of promises that sound too good to be true. It’s as true when it comes to tax preparation as it is with anything else. If a tax professional makes grand promises that don’t sound possible, there’s a pretty good chance they’re not. If they say they can get you a larger refund than any other tax professional, be cautious. Sometimes this is just bravado and marketing, but other times it’s because they’re willing to cut corners or take risks with your taxes that shouldn’t be taken.
- Be aware of legal tax preparation charges. The IRS has rules about how much a tax preparer can charge to prepare your tax return. If they charge a percentage fee of your return, they’re violating IRS rules.
- Check references and reviews. In today’s social media conscious world, it’s easy to find customers that have had experience with a given tax professional. You can also check out the business’ history with the Better Business Bureau. Your state’s board of accountancy can verify CPA credentials. If someone claims to have a given credential but doesn’t, you need to avoid them at all costs. Their dishonesty will likely show up in their work for you, as well.
- Make sure your tax professional is accountable. There are some built-in mechanisms to make sure that tax preparers are held responsible for their actions. For example, if a tax professional fills out your return, they’re required by law to sign the return, as well as provide identification information to the IRS. If your tax return doesn’t have these things, you will have little or no legal recourse against the fraudulent tax preparer in the event of an audit.
- Know what real tax preparation work looks like. Your tax professional should be asking you for a number of different items when preparing your tax return. This should include any and all supporting documentation. You’ll need to provide receipts, proof of various deductions or credits, pay stubs, and probably full access to your accounting software package. If the tax preparer tells you not to worry about documentation for a given deduction, be cautious. Some deductions (in small amounts) don’t require a receipt, but most do.
- Review your return before you sign it. You should spend at least a few minutes with your tax professional before you sign your return. Look for anything that doesn’t make sense to you on the return. Be sure to ask about anything that doesn’t look right. Raise and questions or concerns that you have. Once you sign the return, you become legally responsible for what it says. Never sign a blank tax return.
- Pick a tax professional who’s there year round. Some tax professionals appear during tax season and disappear afterwards. You don’t want a tax professional that’s not going to be available in the event of an audit. Ideally, your tax professional will be someone that you can meet with periodically throughout the year, who can help you make business decisions that will ultimately benefit you from a tax perspective.
- When in doubt, get a second opinion. If you’re worried that your tax professional may have made errors or been dishonest on your return, get someone else to review the return. Another tax professional may be able to look at your return and identify any problem areas, or answer any questions that you don’t feel your original preparer answered truthfully.
You’re responsible for what it says on your tax return, regardless of who prepares it. Make sure your tax professional is someone that you can trust, and that’s working hard to reduce your overall tax burden.