Preparation of tax returns naturally requires client data in order to apply the rules learned in tax preparer education. One of the challenges for professional tax practitioners is dealing with imprecise figures provided by clients.
Accomplishing registered tax return preparer jobs does not require auditing the information that taxpayers convey. However, some verification of numbers is necessary before recording them on a tax return. This is why rtrp training teaches the sources of information that individuals routinely posses for accurate preparation of tax forms.
Unfortunately, tax return preparers must sometimes collect numbers from people with the assumption of accuracy. The figures are accepted at face value and are not verified in tax preparer work. Still, a rtrp does demand specific quantities from taxpayer records. An indication of unsubstantiated claims occurs when individuals replace actual amounts with statements such as “the same as last year” or “the maximum allowable.”
Nevertheless, professionals with a rtrp license are permitted to perform some mathematics for clients. For example, a tax preparer may accept such client information as “45 miles per week for 52 weeks” in order to determine business miles. But some questioning of this type of statement is reasonable. A tax professional receiving this response should inquire about whether the taxpayer was driving to the same locations every week for business purposes. If not, then the notion of driving exactly 45 miles every single week appears dubious.
The best procedure for a tax preparation business is explaining to taxpayers about presenting different types of income. Just about any format for revealing income is acceptable as long as the categories are grouped separately. That is, a total is required for each income producing activity.
Tax deductions are listed with associated income. Too much tax preparer time is wasted with pages of expenditures that mix together tax deductions for a business, rental property, and employee expenses. Tax practitioners can easily eliminate this by pointing out to clients that the extra time delays completion of the tax return and adds to their cost.
This is also an opportunity to explain to clients their record keeping obligations. They should understand, for instance, the necessity of keeping a record of business miles. In addition, time saving instructions to clients include an explanation that they don’t need to present the supporting documentation for preparation of the tax return. A tax preparer only needs the total. Taxpayers benefit from an explanation that they should provide such computations as unreimbursed medical expenses instead of delivering all their medical bills.
Very few issues involve calculations that are best conducted by the tax preparer. One of these cases is when people buy or sell real estate. A tax practitioner can determine the tax implications from the closing statement faster than pointing out which settlement costs are tax-deductible.
However, in most matters, taxpayers should convey sums of various tax categories rather than transaction listings. The most common problem in this regard is cost basis. Tax return preparers cannot guess at a client’s cost basis. And, if taxpayers want to present historical account statements, they will learn that the price for their tax return is likely to at least double.
Irs circular 230 disclosure
Pursuant to the requirements of the internal revenue service circular 230, we inform you that, to the extent any advice relating to a federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the internal revenue code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.