Taxpayers often assume that the job of their tax return preparer is to simply prepare and file their tax returns based on the information you have provided. However, this is a common misconception, as many return preparers are tax professionals or CPA’s that can not only prepare their client’s return based on the information provided, but also inform the clients about what they could have done differently to minimize taxes, or ask the right questions required to file a complete return.
In this article, AG Tax analysts have summarized a few points that tax return preparers should be practicing to ensure good client service, which may also prove useful for taxpayers who have yet to choose their tax practitioner.
Ask Clients To Maintain Records
Sometimes tax return preparers simply claim deductions without asking the clients for the necessary bills and/or receipts, either because the amount is too small or because the return is being prepared in a hurry. Whatever the reason may be, it often leads taxpayers to believe that documentation and maintaining records is not required as the tax return preparer can manage the situation. However, this is incorrect as tax return preparers should ask their clients to maintain documents for all qualifying expenses that they wish to claim on their tax return to avoid their return from being flagged and subject to audit.
Inform Clients About The Deductions and Credits For Which They Qualify & Maximizing Them
Sometimes due to approaching deadlines, tax return preparers may file the client’s return without analyzing it or the client’s tax situation. This may prevent the taxpayer from taking advantages of deductions and credits for which they may qualify. A bit of extra analysis by the tax preparer, and informing the client about qualifying deductions/credits is a trait of a good tax return preparer.
Help Clients Choose A Credit Which Is More Beneficial Over Another or Avoid Claiming Certain Credits
There are times where a client qualifies for two different credits for a particular expense, and although Credit A would make more sense over Credit B, the tax preparer chooses Credit B based off of the client’s instructions. As a tax professional, it is good practice to inform the client about potentially more favorable tax credit or deductions, or to avoid a credit altogether because it may jeopardize future tax returns and claims. These issues should always be kept in mind when preparing a tax return.
Obtain Information From Clients Regarding Non-Taxable But Reportable Income And/Or Non T4 or W-2 Income
Clients may forget to report certain types of income, assume certain income was not subject to taxes, or have income for which they misplaced the slip, etc. If not noticed and taken care of in time, this situation could result in the client receiving a reassessment/audit notice. It may be difficult to prove that it was an honest mistake, and missing this information on the tax return could result in paying penalties and interest. A good tax preparer should be inquiring about all possible income sources such as self-employment income, tips received, interest and/or dividends received, or even debt forgiveness, to have a clear picture of the income that is required to be reported on the tax return.
Inquire About Clients’ Un-reimbursed And Deductible Expenses
Often there may be certain medical expenses, insurance premiums, or other work-related expenses which may generally be reimbursed by the employer, or deducted on the tax return. Many times, the client may not remember or hold any record of such expense, thus missing out on an opportunity to reduce their taxable income. A good tax return preparer should always inquire about such expenses and ask clients to maintain complete records of such expenses.
Ask Clients About And/Or Keep Note of Their Carry-forwards, Depreciating Assets, & Capitalized Expenses
Often when one switches tax return preparers, the new tax return preparer may not have access to previous losses or credits carried forward which may be used to reduce income, gains or taxes in the current tax year. If it is close to the deadline and the tax preparer is in a hurry to complete all the tax returns by the filing deadline, the inexperienced or inattentive preparer may not bother to ask the client about obtaining carry-forward information from previous years’ tax returns. Also, the current tax return preparer may not know the depreciation method used by the previous tax return preparer, or may feel that a particular expense should be capitalized instead of claiming it as an expense in the current year. Knowing this, it is crucial to choose a good tax preparer and maintain that relationship, as tax information can be lost when switching preparers.
Finding a good tax accountant is like finding a good investment, and taxpayers should spend time in carefully choosing one. If you do not know where to start, speak to colleagues and friends or search the internet for independent reviews of the tax preparers before selecting one.
AG Tax LLP Can Help
If you wish to discuss further on the above issue, or have any tax-related queries or need assistance with tax planning or filing please contact AG Tax. Our tax professionals are highly-experienced with U.S. and Canadian tax laws and can provide you the right guidance to handle your tax situation.
Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to U.S., Canadian, and other international tax laws. We can assist with:
- Canadian Personal and Corporate tax returns
- Cross Border Taxation and Business Planning
- U.S. Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- Estate Planning, Inheritance tax advice
Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.