Thursday, November 4, 2010

The IRS Has Made It Difficult For Your Accountant to Help You

The IRS Has Made It Difficult For Your Accountant to Help You

Author:佚名 Source:none Hits:125 UpdateTime:2008-10-19 0:01:15


Every business owner thinks he pays too much in taxes, and in reality, most actually do. These
days your accountant has to "play it safe". This is not reducing your tax bill. Many times a tax preparers work on a typical return is subject to interpretations of the tax code. New legislation may force preparers who hope to lower a clients tax bill to be less aggressive with respect to these interpretations, or else they may risk substantially increased penalties. Furthermore, if a tax preparers client insists on an aggressive deduction, the preparer may include a form explaining the circumstances. This could eliminate
the potential preparer penalty, but it is a certain red flag for the IRS.
This should anger taxpayers who feel strongly about particular deductions. Whats more, these penalties do not apply to taxpayers preparing their own returns. This could prompt a taxpayer to tell preparer: "who needs you; Ill do it myself ". The remainder of this article explains why your accountant is reluctant
to be aggressive anymore, and is less likely to give you the benefit of the doubt on tax deductions.
The new law alters the standard from a "realistic possibility" that a preparers position will be sustained to a "more likely than not" standard, or more than 50% likelihood. Instead of paying just $250 if an interpretation is disallowed, the preparer will now be penalized the greater of $1000 or half the income derived by the preparer. Thus, if a preparer charges $500 to do a routine 1040, he or she faces losing the
income on two such returns, and if "willful or reckless conduct" is found, the penalty jumps from $1000 to the greater of $5000 or half the income derived by the tax preparer. But if the taxpayer prepares
his or her own return, these "crimes" may ring absolutely no penalty. another new wrinkle not sitting well
with preparers expands these penalties beyond income tax returns to other tax work: estate & gift tax returns, excise tax returns, exempt organization returns, and employment tax returns.
If an accountant allows a taxpayer to deduct what the accountant may think is a listed transaction, the accountant has to file a form with the IRS to alleviate a potential $200,000 penalty to the accountant.
This form is likely to get the business owner audited. So what does the business owner do? He can forget about the deduction, prepare his own return, or he can retain an accountant that is not afraid to fight with the IRS. Unfortunately, all of these options are difficult or worse. The tax code is complex and very few
accountants understand most of it. And the IRS has recently made the accountant a policeman. Most accountants are honest, knowledgeable and cautious. They try to do what is best for their clients, but
the IRS has recently made that almost impossible. Also, every year, the tax laws are changed to one extent or another, and accountants are constantly challenged to remain current, knowledgeable, and proficient.
In light of this, you may want to test your accountants knowledge. You may want to ask him the following questions:
1Why havent I been using a 412(e)(3)
plan or a captive insurance company
to reduce my taxes and other expenses?

No comments:

Post a Comment