November 22, 2023 • 15 mins
What if choosing the right tax preparer could be the difference between an improper return and a hefty $7,000 refund?
This is exactly what happened to one of our listeners, and we're here to share this eye-opening tale while delivering the know-how to ensure you're making the best choices in your tax preparation. I'm going to guide you through critical questions you should be asking your preparer, such as their PTIN number and state-issued document, and if they're equipped to handle your specific tax needs.
I'll also delve into the roles of CPAs and attorneys in tax returns, and spotlight the importance of building a strong relationship with your tax preparer for the best financial outcomes. Taking a magnifying glass to your tax affairs is crucial and I want to make it easy.
The Common Sense Millionaire is here to arm you with the knowledge, tools, and support to steer you towards achieving your financial goals.
Thank you for listening to The Millionaire Mindset Podcast with George Dines.
To connect with George visit www.georgedines.com
To Schedule a call with George visit: https://georgedines.com/contact/
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Welcome to the Common Sense Millionaire, where we
work to promote your financialadvancement in knowledge process
and education so that you andyour family become financially
secure.
This is the place I shareCommon Sense Action Steps that
you can take today to assistyour financial advancement.
So sit back, grab a drink andlet's get started.
(00:23):
Common Sense Millionaire hereand we're going to talk about
tax preparers.
How do you choose a taxpreparer?
So I have to start first withCrazy Story number one.
Now, individual approaches needsome assistance with their tax
preparation and, as I alwaystell new clients or potential
(00:44):
clients, I need to take a lookat your previous year tax return
.
So I meet with the individual,I get the previous year tax
return and we had a discussionabout where they were now versus
where they were in the prioryear.
And it comes up that thisperson owned a rental property.
(01:06):
I said what do you mean?
You have a rental property.
I see here that you have aproperty here that has some
revenue from rent but there's noexpenses.
The individual is like well,what are you talking about?
I said, well, you have amortgage on their property.
They say, yes.
I said, well, the mortgageinterest is deductible.
(01:27):
I said did you do anyimprovements to the property?
He said yes, well, we need totake a look at those
improvements and see if they canbe depreciated, or actually can
we use special depreciation totake it all out in one year.
The client is looking at me likeI'm nuts.
I said this is horrible.
(01:50):
This is not right.
I said well, wait a second.
You have kids and these kidsare too old to be included as
dependents on your return.
I asked are they in college?
They're like no.
I said well, they can't belisted as dependents.
There's special rules for thatand, just as a note, the IRS is
(02:13):
really focusing on fraud that'sjust related to dependents.
So you've got a problem.
I looked at that return.
I said you know what?
You actually paid money to thefeds on this when you really
could have gotten a refund.
And the guy looked at me like Iwas nuts.
Again, I said no, you can get arefund on this and in fact,
(02:36):
after reviewing the return indetail, the gentleman was able
to get a $7,000 refund.
Okay, so I'm like all right,who the heck did this return?
And that's where this comesfrom in terms of who do you have
and what do you know about theperson who's doing your tax
(02:57):
return.
Part of the problem is that thetax preparation industry is not
really regulated.
There are only four states inthe United States that require
tax preparers within thosestates to actually take a test,
have significant training andhave follow-up continuing
(03:17):
education over the years.
That's only four that'srequired.
The ones I really am involvedwith are California, maryland
and New York.
Those are the states that Itypically have worked with.
Those states do not play.
If you do not do what you'resupposed to do, especially with
(03:40):
state filing, your name goes onthe list and your ability to
process Maryland or New York orCalifornia returns is taken away
from you.
The feds do not have federaloversight.
However, in order to be a taxpreparer, you have to have what
they call a PTIN number.
If you do not have a PTINnumber, that means that you
(04:02):
cannot process federal taxreturns.
It's illegal.
How many times have I seenpeoples whose name is on the
return as being a preparer butthey're not in the PTIN database
or the state database?
You've got to ask them.
Every tax preparer gets a PTINdocument from the IRS and if the
(04:25):
state regulates tax preparers,they will send you a document
saying that you're eligible toprepare state taxes.
That's the first thing that youneed to ask.
Second thing, especially ifyou're in a particular state
that regulates, you can goonline and check out the tax
preparer to see have they hadany adverse actions against them
(04:46):
for improper tax returnpreparation On the federal side.
You can go and put the name ofthe preparer that you're working
with into the PTIN database tosee if that name comes out as a
properly registered federal taxpreparer.
So often people don't do thisand this leads to situations
(05:11):
where I can get an amendedreturn file for an individual to
get back money that they areproperly owed.
In the example that I just gavea little while ago, that
individual is not registered inone of the state databases as an
authorized preparer in thatstate.
(05:34):
Two, you want to make sure thatyou're working with someone that
understands your situation.
If you have a business, a lotof people don't want to be
bothered with that because it'sa lot of extra work.
You're going through documents.
Hopefully the client has bankdocuments that you can go
through.
A lot of people don't want todo that.
(05:56):
So if you have to ask, do youdo business tax returns and you
have to ask what type ofbusiness tax returns do you do?
It's okay if somebody is justdoing simple LLCs, which is part
of the 1040.
Now is that individual alsoengaged with what they call an S
(06:18):
corp or a C corp, thosespecific entities?
Then you kind of want somebodywho has worked with those entity
structures understand what thedeductible items are and
understand what needs to be done.
We're not going to go intodetail of all of those in this
particular situation becausewe're just talking about tax
(06:39):
repairs.
So ask them do you do S corp?
Do you do C corp?
Do you do partnership returns?
If that person does not, youprobably want to think about
whether or not that is theperson for you.
So the person for you.
There's a lot of CPAs are outthere.
(07:00):
Cpas they are not regulated fortax prep.
Your CPA, you just sail throughthe system.
They got a good lobby.
If you are an attorney, you canbe a tax attorney and you can
still those process returns, allof that.
(07:20):
But tax preparation is really apersonal type activity where
you want to be able to develop arelationship with someone so
that when the relationship getsto the point where the tax
preparer, if they're legit, hasto say you know what.
You can't do this, that youjust kind of work through the
situation and not think that theperson is just trying to give
(07:42):
you a hard time.
It is very, very personal.
The other thing when looking attax repairs is I always get
asked about recommendations.
Can you give me someone's phonenumber or contact information
so I can ask them how you didand how you performed them on
(08:03):
that return?
And actually the answer is no.
Under the law, I cannot shareany client information with
anybody else, so that,unfortunately, is not a way that
you can work it Now.
For me, recommendations comefrom the other side, so I have
clients who are extremely happywith the work I've done and they
(08:26):
refer people to me to work with.
That works fine, but you reallycannot use the information that
the preparer has to approachany of their other clients.
That is just not going to workat all and that violates one of
the federal requirements that wesign and agree to.
(08:51):
Also, please be aware there area lot of preparers out there who
will guarantee that you aregoing to get a certain amount of
money back.
If that happens to you, pleaserun away and run as fast as you
can and try and find somebodywho can give you a realistic
expectation of what yourliability which is really the
(09:13):
thing that people are worriedabout the most what that
liability amount is.
Please, nobody can guaranteeanything unless they're doing
something to make sure that theguarantee is there.
Also, make sure that yourpreparer understands the child
tax credits and the othercredits.
This is an extremely importantarea right now, with the IRS
(09:37):
cracking down on bad thingshappening in the tax credit area
, so you want to make sure thatperson understands it.
You also want to make sure that, in relation to tax credits,
that you have the data tosupport what's going to be on
that return.
That's extremely important.
There are a lot of deductionsthat you can get, but if the
(09:59):
person you're working withdoesn't understand it, or if you
don't have the documents tosupport it legally, that
individual cannot include thatinformation on the return.
And trust me, the IRS, withtheir data analytic tools now,
with the additional funding thatthey're getting from Congress,
they're going to put a heck of alot of importance on artificial
(10:24):
intelligence, analyzingtransactions to search for fraud
.
That's extremely important.
Please be careful.
Now the other side goes as wellis that you may come to the
prepare and ask the prepare CanI get you know?
(10:44):
I talked about it.
It goes two ways.
A prepare cannot give yousomeone else's information, okay
, and so the referral thing kindof works.
Kind of strange, because it'sone way.
I really you know you have todevelop a relationship,
relationship of trust, and thereare questions you can ask how
(11:05):
many returns do you do?
How many business returns doyou do?
How many escort returns do youdo?
That doesn't match up with you.
You probably need to move on tosomebody else.
That's just the reality of thesituation.
The other question I get iswhat about the well nationally
(11:27):
known tax preparation companies?
Okay, my joke always was if youused one of those companies,
I'm sure I could probably find acouple of few thousand dollars
that you would do.
That was not included and thathas really kind of turned out to
be true in a lot of cases, andpeople are extremely happy when
(11:51):
the amended filing goes in andthey get the money back.
Now I also recommend that ifthe amount of money coming back
is closer to what the fee isgoing to be, then it doesn't
make sense to just pay fornothing and that's okay.
But it will mean that if you'reworking with me, we'll catch
(12:13):
that and make sure that we takecare of that in the future.
Okay, also, the feds also do notwant paper.
They want e-filing, electronicfiling.
Why?
Because that goes directly intotheir database and it quickens
(12:33):
the receipt of any refunds thatyou may be due.
You don't want to turn paper in.
In certain circumstances, ifyou are really behind in filings
, there is a time limit whereyou have to file with paper.
You just don't want to filepaper.
It slows everything down.
(12:54):
It especially slows activitydown at the state level.
You want to make sure thatyou're e-filing and that that
person can e-file for you.
And then, another thing thatI've seen as well you make sure
that the person who signed yourreturn is the person who e-filed
your return, because that'sreally the slick part.
The person who signs it is not,or who prepared it and signs
(13:17):
the return as the preparer, I'veseen is not the person who
submitted it to the feds or tothe state, and that's where that
individual is using someoneelse to prepare it.
That is not either approved bythe feds or approved by the
state.
So you want to be careful withthat and make sure that you are
(13:39):
making sure that you'remonitoring what's going on with
your return.
The bottom line here is thatit's kind of on you in terms of
due diligence.
The lobbies out there for bothtax preparers and the big tax
preparation companies are a lotmore powerful than you and these
folk listen to them more thanthey're going to listen to us as
(14:03):
individuals.
So it's really upon you to dothe due diligence to make sure
that the person you're workingwith is actually who they are
and that they are authorized todo returns in either the state
that you live in, if the stateis regulated, and with the
federal government.
If you need help with this andI understand this is kind of
(14:26):
crazy, but if you need help justcontact us and we'll be glad to
help you.
Either search for your preparerthat you might want to work
with in the state database or ina federal database, and we'll
show you exactly how to do thatvery quickly so you can move
forward.
You've been listening to theCommon Sense Millionaire, where
(14:46):
you can learn how to go fromzero to a million using common
sense solutions to everydayfinancial issues.
Make sure and subscribe to stayconnected for more content,
tools and help so you canadvance towards your financial
goals.
If you need assistance or havequestions, leave a comment or
you can email me atgeorgeatcomonsensemillionairecom
(15:06):
.
Welcome to the Common Sense Millionaire, where we
work to promote your financialadvancement in knowledge process
and education so that you andyour family become financially
secure.
This is the place I shareCommon Sense Action Steps that
you can take today to assistyour financial advancement.
So sit back, grab a drink andlet's get started.
(00:23):
Common Sense Millionaire hereand we're going to talk about
tax preparers.
How do you choose a taxpreparer?
So I have to start first withCrazy Story number one.
Now, individual approaches needsome assistance with their tax
preparation and, as I alwaystell new clients or potential
(00:44):
clients, I need to take a lookat your previous year tax return
.
So I meet with the individual,I get the previous year tax
return and we had a discussionabout where they were now versus
where they were in the prioryear.
And it comes up that thisperson owned a rental property.
(01:06):
I said what do you mean?
You have a rental property.
I see here that you have aproperty here that has some
revenue from rent but there's noexpenses.
The individual is like well,what are you talking about?
I said, well, you have amortgage on their property.
They say, yes.
I said, well, the mortgageinterest is deductible.
(01:27):
I said did you do anyimprovements to the property?
He said yes, well, we need totake a look at those
improvements and see if they canbe depreciated, or actually can
we use special depreciation totake it all out in one year.
The client is looking at me likeI'm nuts.
I said this is horrible.
(01:50):
This is not right.
I said well, wait a second.
You have kids and these kidsare too old to be included as
dependents on your return.
I asked are they in college?
They're like no.
I said well, they can't belisted as dependents.
There's special rules for thatand, just as a note, the IRS is
(02:13):
really focusing on fraud that'sjust related to dependents.
So you've got a problem.
I looked at that return.
I said you know what?
You actually paid money to thefeds on this when you really
could have gotten a refund.
And the guy looked at me like Iwas nuts.
Again, I said no, you can get arefund on this and in fact,
(02:36):
after reviewing the return indetail, the gentleman was able
to get a $7,000 refund.
Okay, so I'm like all right,who the heck did this return?
And that's where this comesfrom in terms of who do you have
and what do you know about theperson who's doing your tax
(02:57):
return.
Part of the problem is that thetax preparation industry is not
really regulated.
There are only four states inthe United States that require
tax preparers within thosestates to actually take a test,
have significant training andhave follow-up continuing
(03:17):
education over the years.
That's only four that'srequired.
The ones I really am involvedwith are California, maryland
and New York.
Those are the states that Itypically have worked with.
Those states do not play.
If you do not do what you'resupposed to do, especially with
(03:40):
state filing, your name goes onthe list and your ability to
process Maryland or New York orCalifornia returns is taken away
from you.
The feds do not have federaloversight.
However, in order to be a taxpreparer, you have to have what
they call a PTIN number.
If you do not have a PTINnumber, that means that you
(04:02):
cannot process federal taxreturns.
It's illegal.
How many times have I seenpeoples whose name is on the
return as being a preparer butthey're not in the PTIN database
or the state database?
You've got to ask them.
Every tax preparer gets a PTINdocument from the IRS and if the
(04:25):
state regulates tax preparers,they will send you a document
saying that you're eligible toprepare state taxes.
That's the first thing that youneed to ask.
Second thing, especially ifyou're in a particular state
that regulates, you can goonline and check out the tax
preparer to see have they hadany adverse actions against them
(04:46):
for improper tax returnpreparation On the federal side.
You can go and put the name ofthe preparer that you're working
with into the PTIN database tosee if that name comes out as a
properly registered federal taxpreparer.
So often people don't do thisand this leads to situations
(05:11):
where I can get an amendedreturn file for an individual to
get back money that they areproperly owed.
In the example that I just gavea little while ago, that
individual is not registered inone of the state databases as an
authorized preparer in thatstate.
(05:34):
Two, you want to make sure thatyou're working with someone that
understands your situation.
If you have a business, a lotof people don't want to be
bothered with that because it'sa lot of extra work.
You're going through documents.
Hopefully the client has bankdocuments that you can go
through.
A lot of people don't want todo that.
(05:56):
So if you have to ask, do youdo business tax returns and you
have to ask what type ofbusiness tax returns do you do?
It's okay if somebody is justdoing simple LLCs, which is part
of the 1040.
Now is that individual alsoengaged with what they call an S
(06:18):
corp or a C corp, thosespecific entities?
Then you kind of want somebodywho has worked with those entity
structures understand what thedeductible items are and
understand what needs to be done.
We're not going to go intodetail of all of those in this
particular situation becausewe're just talking about tax
(06:39):
repairs.
So ask them do you do S corp?
Do you do C corp?
Do you do partnership returns?
If that person does not, youprobably want to think about
whether or not that is theperson for you.
So the person for you.
There's a lot of CPAs are outthere.
(07:00):
Cpas they are not regulated fortax prep.
Your CPA, you just sail throughthe system.
They got a good lobby.
If you are an attorney, you canbe a tax attorney and you can
still those process returns, allof that.
(07:20):
But tax preparation is really apersonal type activity where
you want to be able to develop arelationship with someone so
that when the relationship getsto the point where the tax
preparer, if they're legit, hasto say you know what.
You can't do this, that youjust kind of work through the
situation and not think that theperson is just trying to give
(07:42):
you a hard time.
It is very, very personal.
The other thing when looking attax repairs is I always get
asked about recommendations.
Can you give me someone's phonenumber or contact information
so I can ask them how you didand how you performed them on
(08:03):
that return?
And actually the answer is no.
Under the law, I cannot shareany client information with
anybody else, so that,unfortunately, is not a way that
you can work it Now.
For me, recommendations comefrom the other side, so I have
clients who are extremely happywith the work I've done and they
(08:26):
refer people to me to work with.
That works fine, but you reallycannot use the information that
the preparer has to approachany of their other clients.
That is just not going to workat all and that violates one of
the federal requirements that wesign and agree to.
(08:51):
Also, please be aware there area lot of preparers out there who
will guarantee that you aregoing to get a certain amount of
money back.
If that happens to you, pleaserun away and run as fast as you
can and try and find somebodywho can give you a realistic
expectation of what yourliability which is really the
(09:13):
thing that people are worriedabout the most what that
liability amount is.
Please, nobody can guaranteeanything unless they're doing
something to make sure that theguarantee is there.
Also, make sure that yourpreparer understands the child
tax credits and the othercredits.
This is an extremely importantarea right now, with the IRS
(09:37):
cracking down on bad thingshappening in the tax credit area
, so you want to make sure thatperson understands it.
You also want to make sure that, in relation to tax credits,
that you have the data tosupport what's going to be on
that return.
That's extremely important.
There are a lot of deductionsthat you can get, but if the
(09:59):
person you're working withdoesn't understand it, or if you
don't have the documents tosupport it legally, that
individual cannot include thatinformation on the return.
And trust me, the IRS, withtheir data analytic tools now,
with the additional funding thatthey're getting from Congress,
they're going to put a heck of alot of importance on artificial
(10:24):
intelligence, analyzingtransactions to search for fraud
.
That's extremely important.
Please be careful.
Now the other side goes as wellis that you may come to the
prepare and ask the prepare CanI get you know?
(10:44):
I talked about it.
It goes two ways.
A prepare cannot give yousomeone else's information, okay
, and so the referral thing kindof works.
Kind of strange, because it'sone way.
I really you know you have todevelop a relationship,
relationship of trust, and thereare questions you can ask how
(11:05):
many returns do you do?
How many business returns doyou do?
How many escort returns do youdo?
That doesn't match up with you.
You probably need to move on tosomebody else.
That's just the reality of thesituation.
The other question I get iswhat about the well nationally
(11:27):
known tax preparation companies?
Okay, my joke always was if youused one of those companies,
I'm sure I could probably find acouple of few thousand dollars
that you would do.
That was not included and thathas really kind of turned out to
be true in a lot of cases, andpeople are extremely happy when
(11:51):
the amended filing goes in andthey get the money back.
Now I also recommend that ifthe amount of money coming back
is closer to what the fee isgoing to be, then it doesn't
make sense to just pay fornothing and that's okay.
But it will mean that if you'reworking with me, we'll catch
(12:13):
that and make sure that we takecare of that in the future.
Okay, also, the feds also do notwant paper.
They want e-filing, electronicfiling.
Why?
Because that goes directly intotheir database and it quickens
(12:33):
the receipt of any refunds thatyou may be due.
You don't want to turn paper in.
In certain circumstances, ifyou are really behind in filings
, there is a time limit whereyou have to file with paper.
You just don't want to filepaper.
It slows everything down.
(12:54):
It especially slows activitydown at the state level.
You want to make sure thatyou're e-filing and that that
person can e-file for you.
And then, another thing thatI've seen as well you make sure
that the person who signed yourreturn is the person who e-filed
your return, because that'sreally the slick part.
The person who signs it is not,or who prepared it and signs
(13:17):
the return as the preparer, I'veseen is not the person who
submitted it to the feds or tothe state, and that's where that
individual is using someoneelse to prepare it.
That is not either approved bythe feds or approved by the
state.
So you want to be careful withthat and make sure that you are
(13:39):
making sure that you'remonitoring what's going on with
your return.
The bottom line here is thatit's kind of on you in terms of
due diligence.
The lobbies out there for bothtax preparers and the big tax
preparation companies are a lotmore powerful than you and these
folk listen to them more thanthey're going to listen to us as
(14:03):
individuals.
So it's really upon you to dothe due diligence to make sure
that the person you're workingwith is actually who they are
and that they are authorized todo returns in either the state
that you live in, if the stateis regulated, and with the
federal government.
If you need help with this andI understand this is kind of
(14:26):
crazy, but if you need help justcontact us and we'll be glad to
help you.
Either search for your preparerthat you might want to work
with in the state database or ina federal database, and we'll
show you exactly how to do thatvery quickly so you can move
forward.
You've been listening to theCommon Sense Millionaire, where
(14:46):
you can learn how to go fromzero to a million using common
sense solutions to everydayfinancial issues.
Make sure and subscribe to stayconnected for more content,
tools and help so you canadvance towards your financial
goals.
If you need assistance or havequestions, leave a comment or
you can email me atgeorgeatcomonsensemillionairecom
(15:06):
.
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