When gambling winnings are covered in an enrolled agent study course, the tax consequence revealed for a winning lottery ticket is normally just an immediate rise in reportable gross income. For a waitress at the Waffle House in Grand Bay, Alabama, another tax situation has occurred after years of legal maneuverings. Tonda Lynn Dickerson and her coworkers received lottery tickets from a regular customer named Edward Seward on March 6, 1999. Seward occasionally went to Florida for the ticket purchases. Gambling is illegal in Alabama. He shared envelopes of tickets with Dickerson and other Waffle House employees. When Dickerson opened her envelope, it contained a winning ticket. The prize was valued at $10 million over 30 years or $5 million immediately. At this point, an enrolled agent review of the situation was warranted. But, first, Dickerson needed legal counsel. Not only was Dickerson happy to receive the winning ticket, so were her coworkers and Seward. It turns out that the coworkers had an informal agreement to share the jackpot if anyone ever ended up with a winning ticket from Seward. But Dickerson did not recall that arrangement. She kept all the money. Her soon former coworkers sued over the alleged sharing agreement. Dickerson prevailed because contracts related to illegal gambling are unenforceable in Alabama. However, even at this point, Dickerson was not ready to turn her situation into an enrolled agent job for tax advice. Instead, more legal troubles followed. Seward claimed in court that Dickerson had promised to buy him a new pickup if he ever supplied a winning lottery ticket. Seward argued that Dickerson had fraudulently misrepresented herself to him and her coworkers. Sewardâs case never made it to court because he lost on summary judgment. Still, Dickerson could not yet focus on the tax aspects of her lottery winnings with an enrolled agent. She was busy with the legal mess of Sewardâs appeals through the court system all the way to the Alabama Supreme Court. Seward lost in that ultimate appellate venue. Dickerson had succeeded in all the court trials. By this time, she had shared the lottery winnings with her family. She deployed a technique used for protecting assets from creditors by creating a corporation. The S corporation â" with the bold name 9Mill â" is a structure well known from EA study materials. Tax on S corporation income is assessed on the individual shareholders. Dickerson was able to easily gift shares of 9Mill to her family without having to transfer individual assets purchased with the lottery money. She kept 49 percent of the corporate stock and gave the remainder to her parents and siblings. The tax problem this created for Dickerson was beyond her courtroom trouble with former coworkers and Seward. An attorney for the Estates Division of the IRS noted the situation with 9Mill. Dickerson received a notice for delinquent federal gift tax of $771,570. The gift assessment was $2,412,388 â" the present value of 51 percent of the lottery winnings. The Tax Court reduced the taxable gift to $1,119,347. This is the point where Dickerson really needs an EA instead of just a lawyer. An enrolled agent can at least assure that the $10,000 annual gift tax exclusion is applied for each family member who received shares of the S corporation. Plus, some amount of lifetime exclusion is available based upon the rules in place during 1999. 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.
05/31/2012
Corporate Decision Making Role Await Accountants After Completion of CPA Courses
An individual planning to become a certified public accountant is going to find career paths at corporations that are providing a broader role for finance professionals. Organizations are evolving to give executives in finance departments a greater influence on company-wide direction. To attain posts with such decision-making impact, accountants need to distinguish themselves with the high-level designation awaiting completion of CPA exams. These are the leaders in a move to enhance collaboration between corporate finance and other business sections. Research by the Chartered Institute of Management Accountants found that new trends are arising for the finance function. People working with the systems that measure costs are becoming more closely involved in contributing to process efficiencies. However, the traditional accounting mechanisms for financial compilation and auditing are unchanged from the models learned in CPA exam study. The transformation is occurring in how results are disseminated throughout an organization and the contribution made by accountants in that model. As a result, although finance departments persist as separate business units, the staffs integrate more with other business segments. This means that accountants are required to possess communication and management skills in addition to the rudiments learned during CPA exam courses. That is now true for work in a corporate environment as much as a CPA practice with public contact. Large commercial enterprises are especially demanding more input from accountants about reducing costs with the use of technology, outsourced services, and shared service centers. This is driving a decentralization of finance professionals to provide wide support assessments throughout a corporation. As senior management relies more heavily upon finance executives, this frequently moves corporate CPAs away from transactional accounting operations. In order to improve the rendering of a strategic function, the Chartered Institute of Management Accountants and the American Institute of Certified Public Accountants created the designation of Chartered Global Management Accountant. As accountants move beyond the vital foundation of technical training in CPA courses, they require new skills as corporate managers. Achieving these abilities entails learning the common language of senior executives. The result is better framing of company goals and improvement in strategic analysis of various corporate initiatives. This wave of change causes the accountants of the future to deliver much more than accurate compilation of transactions. It means becoming critical influences on overall company success. 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.
Next Top Auditing Jobs After CPA Exam Might Be Working for the IRS
Accountants with a dual interest in both audit and tax matters covered in their CPA exam books might consider career opportunities with the Internal Revenue Service. Thatâs right, the IRS is engaged in a recruiting effort that rivals the demands by Big Four accounting firms. Working for the IRS probably doesnât seem like a dramatically intriguing position at first glance, but a deeper understanding of the talents demanded may render a different decision. The IRS needs skilled accountants to locate companies shifting profits overseas to avoid federal taxes. This is not an easy assignment. It requires a multitude of knowledge acquired in certified public accountant training. To prepare for the issue receiving the greatest IRS scrutiny, accountants should educate themselves about transfer pricing. This is an easily understood concept from CPA study. Transfer pricing typically involves a US corporation with a number of foreign subsidiaries. The entities move assets among themselves. In addition, the sister companies pay for services from each other. As long as the prices paid are armâs length, the payments between related companies are no different than payment arrangements between unrelated corporations. In actual practice, the transactions are occasionally structured so that companies located in a high tax country â" such as the US â" overpay for items from low tax nations. This reduces the taxable profit of the US organizations. Entities in the low tax countries end up with the profits. However, uncovering instances of transfer pricing is proving more difficult than technically describing the process. Consequently, the IRS is seeking to curb transfer pricing schemes by hiring top quality accountants who have passed the CPA exam. The Organization for Economic Cooperation and Development issued a report on Transfer Pricing Simplification Measures in June of 2011. This has apparently stirred the IRS into action by creating an elite team of tax auditing specialists. A position of Transfer Pricing Director was created to lead the effort. His job is attracting talented accountants after they pass CPA exam requirements. Also involved in the task of curtailing transfer pricing abuses are the Large and Mid-Size Business Division Deputy Commissioner as well as the Director of the Office of Associate Chief Counsel, Advance Pricing Agreement Program. Both individuals are attorneys. The former previously worked in international tax law and was a principal at Deloitte Tax, where he focused on cross-border issues. The Advance Pricing Agreement Program is moving away from an office with the IRS Chief Counsel to a post under the Transfer Pricing Director. The lawyer with that job will report to the lawyer with the deputy commissioner position, who in turn reports to IRS Commissioner Doug Shulman â" a man known for taking tax enforcement efforts very seriously. 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.
Passing CPA Exam Provides Accountants With Tools to Aid Taxpayers
Instead of engaging in complicated tax schemes, the best avenue for individuals is hiring the services of an accountant that follows the basic rules learned for passing CPA exam requirements. Accurately filing returns and reporting all income is a simple formula for avoiding IRS difficulties that these taxpayers recently encountered. A couple from Tennessee is facing prison time after guilty pleas on two counts of willful failure to file tax returns. The penalty for each count is one year in jail and a fine of up to $100,000. The couple had a fairly basic tax situation covered in CPA study material. Warren Palmer worked in the construction industry from 2004 to 2006. Angela Palmer was a mortgage broker during 2005 and 2006. She also earned extra income giving music lessons. Instead of relying upon an accountant to apply the expertise developed in CPA exam study, the Palmers created The Liahona, LLC to conceal income in offshore bank accounts. They filed no tax returns for 2005 and 2006. In addition to forthcoming sentencing, Angela Palmer agreed to pay restitution to the IRS in the amount of $58,646.85 and Warren Palmer is paying $70,877.45 of restitution. Although a New Hampshire man managed to actually file his tax returns, he was sentenced to 18 months in prison for falsely reporting his income from 2003 through 2006. Joseph Minai was order to pay $206,022 of restitution to the IRS plus a $10,000 fine. The taxpayer worked for a technology company and accurately reported his income from that job. However, like many individuals in the tech field, he also performed local consulting work. Minai should have used a professional with CPA training to find legitimate tax deductions related to his endeavors as an independent contractor. Instead, he simply omitted the self-employment income from his tax returns. The unreported amount totaled more than $700,000. The avoided tax on that income is approximately $200,000. But his punishment is much more costly. An entrepreneur in Carson City, Nevada, pleaded guilty to tax evasion for significant underreporting of his income from 2005 to 2007. Bradley H. Herndon faces 5 years in prison and a fine of up to $250,000. The businesses he operated included a Carson City nightclub and two Laundromats in Reno. These operations entailed collection of substantial cash payments. Like many taxpayers receiving cash payments, Herndon decided to divert the cash to personal use instead of reporting it as business income. In fact, he reported business losses over the three years of $74,883. The IRS discovered that he failed to report income totaling $279,223. Herndon also went to a lot of trouble to conceal his illegal acts by altering documents or preparing false ones. This prevented his accountant from applying the tax elements studied in CPA review for accurate reporting to the IRS. 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.
New Rules for Enrolled Agents to Help People Owing Tax After the Payment Deadline
For 2011 tax returns, the Internal Revenue Service has provided additional help to individuals struggling with tax liability. The newly named Fresh Start initiative is familiar to every enrolled agent tax preparer working for taxpayers who need special assistance addressing IRS penalties. Among the people targeted for the new program are those who have been unemployed at least 30 consecutive days during 2011 or in 2012 up to the April 17 filing deadline. Also eligible for penalty relief are self-employed persons with at least 25 percent income reductions in 2011. Many enrolled agents may have already helped such individuals file their tax returns on time even if tax owed remains unpaid. Penalty relief applies to failure-to-pay assessments. Failure-to-file penalties remain in effect at the customary rate of 5 percent per month of the unpaid taxes up to a maximum of 25 percent. This is the same penalty learned in an enrolled agent study course. The relief penalty is limited to taxpayers with income not exceeding $200,000 on a joint return and $100,000 for others. In addition, the tax balance due for 2011 must not exceed $50,000. The IRS has created Form 1127A for eligible individuals to request penalty abatement. Completing these forms is expected to comprise a large volume of enrolled agent jobs over the coming months. A granting of relief by the IRS under the Fresh Start program gives a taxpayer until October 15, 2012, to pay a 2011 tax liability in full without penalty. This six-month grace period will replace the normal failure-to-pay penalty studied during enrolled agent exam preparation of 1 percent per month of the tax due up to a maximum of 25 percent. Even when a penalty is eliminated, the IRS still charges interest on unpaid taxes. In addition to penalty relief, the IRS has increased the threshold for taxpayers eligible for installment payment agreements from $25,000 of back taxes to $50,000. Taxpayers seeking to capture streamlined installment agreements may also extend payments to 72 months instead of the former limit of 60 months. Enrolled agents may advise some taxpayers to reduce their 2011 tax balances to $50,000 in order to take advantage of the new installment agreement terms. Streamlined installment arrangements are available by completing an online process. Taxpayers owing more than $50,000 must still apply for an installment payment option by completing Form 433-A or Form 433-F. The new Fresh Start initiative is also aided by recent IRS efforts to file fewer tax liens during collection efforts. 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.
05/22/2012
Divergent Rulings Stir Controversy for CPA Exam Review on Tax Impact of Telecommuting
A recent court case has the accountant community in a stir because of the significant impact on CPA study about state income tax. Usually, a state collects tax on the earnings of people with jobs at companies located in the state â" even individuals who reside in other states. Now, a court in New Jersey has declared that a business located in another state owes tax in New Jersey for employing someone who resides there. At the heart of the matter is determination of where work is conducted by a telecommuting employee. Previous court rulings have determined that an employee telecommuting to work from home is working in the state where the business is located. The new court decision twists that around by claiming that the business has established nexus in the employeeâs state of residence. This impacts the allocation of income among various jurisdictions studied to become a certified public accountant. The court judgment means that New Jersey will collect its business tax on any company with an employee arrangement like Telebright Corp. That company is incorporated in Delaware and has offices in Maryland. The web application business permitted an employee to conduct her job under an employment contract by telecommuting from her New Jersey home. This triggered the New Jersey court to rule that Telebright was doing business in the state. By having an employee create computer code that became part of the corporationâs web-based service, the employment from New Jersey makes Telebright subject to that stateâs tax. Consequently, Telebright needs to hire someone with CPA courses covering division of income among multiple states. This is normally accomplished by applying a formula that weighs a companyâs percentage of sales, property, or payroll. Because all states do not deploy the same calculation, a company could run into a situation of counting the same wages for multiple
states. The court ruling omitted any reference to the employeeâs taxable income. But, presumably, New Jersey is entitled to tax on that as well. The employee cannot conceivably have Maryland earnings as a telecommuter while simultaneously causing Telebright to have a presence New Jersey. This issue entails the topic of tax home from CPA exam courses. A person commuting to another state for work owes income tax to that state as a non-resident. The employee includes income from telecommuting days. Thus, even income earned by the individual while working from home in her state of residence is taxed by the state where the business is located. Conversely, the logic in the New Jersey case is that the business has adopted a presence in the employeeâs state of residence. New Jersey will apparently tax income of residents in other states earned on the days they telecommute to jobs at New Jersey companies plus tax companies located in other states with telecommuting employees in New Jersey. Determining nexus is usually encountered in CPA exam review material when addressing a foreign company. For example, a business has some allocation of income to an area where its employees manufacture components that are assembled in another region. A single employee is usually sufficient for most political entities to declare nexus for a company. 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.
states. The court ruling omitted any reference to the employeeâs taxable income. But, presumably, New Jersey is entitled to tax on that as well. The employee cannot conceivably have Maryland earnings as a telecommuter while simultaneously causing Telebright to have a presence New Jersey. This issue entails the topic of tax home from CPA exam courses. A person commuting to another state for work owes income tax to that state as a non-resident. The employee includes income from telecommuting days. Thus, even income earned by the individual while working from home in her state of residence is taxed by the state where the business is located. Conversely, the logic in the New Jersey case is that the business has adopted a presence in the employeeâs state of residence. New Jersey will apparently tax income of residents in other states earned on the days they telecommute to jobs at New Jersey companies plus tax companies located in other states with telecommuting employees in New Jersey. Determining nexus is usually encountered in CPA exam review material when addressing a foreign company. For example, a business has some allocation of income to an area where its employees manufacture components that are assembled in another region. A single employee is usually sufficient for most political entities to declare nexus for a company. 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.
CPA Course Lesson on Tax Liens That Accountants Should Know
A career in the tax industry awaits any accountant who wants to face a variety of situations covered in CPA exam study. In addition to preparation of tax returns, some unusual areas of tax advice often arise. One of these matters concerns tax liens and former spouses. A recent decision by the United States District Court for the District of Idaho demonstrates the impact of tax liens. Joseph and Carol Filicetti reached a divorce settlement in 2005. The division of assets left Carol with the marital residence. One of the details covered in CPA exam material is that no income tax effect is incurred by the property settlement in a divorce. However, a twist in the settlement required that Carol split any equity received from sale of the home within three years of the date of entry for the decree. After the expiration of the three-year period, Carol was entitled to retain all proceeds from any sale of the property. An accountant may occasionally need to examine divorce decrees in order to apply accurate tax reporting on divided assets. For example, a CPA course addresses the tax impact of selling real estate jointly owned by former spouses. Any taxable gain or loss is shared based upon the retained interests of the separate individuals. But this was not Carolâs problem. In fact, she faced no personal income tax consequence of selling her residence. Instead, Carolâs difficulty appeared as a result of Joe not paying his income tax liability for 2005. The IRS filed a tax lien against any property owned by Joe. This included his interest in the home that then comprised Carolâs personal residence. Carol sold the home more than three years after entry of the divorce decree. Apparently, however, Carol was required to record the divorce decree with the county recorder in order to perfect her rights to the real estate. She waited until October 2010 to conduct this filing requirement. Meanwhile, the IRS had already filed a notice of federal tax lien in September 2008. Carol discovered the tax lien when she attempted to sell the house. Any professional who has become an accountant should know how to explain to Carol the impact of a federal tax lien. It means that the IRS is entitled to the same rights as the property owner. The government is the first party paid from sales proceeds. Carol needed assistance from an attorney with knowledge derived from CPA training. Her lawyer argued that the tax lien was invalid. The IRS thought otherwise. The court ruled that the lien was valid because at the time of its filing Joe had a contingent right to proceeds from sale of the property. Regardless, Carol sold the home after the expiration of Joeâs claim to any sales proceeds. The result was that the court awarded the IRS what Joe was entitled to obtain at the time of the property sale â" which was absolutely nothing. 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.
Plenty of Demand for Tax Accountants Following CPA Exams
Business owners encounter a combination of difficulties that create vulnerability to tax problems. First, unlike wage earners, they lack the benefit of income tax withholding. Second, they are frequently uncertain of their anticipated income and therefore uncomfortable remitting estimated tax payments. Their best route to addressing this matter is having an accountant that meets CPA requirements as a trusted adviser. Therefore, plenty of professional opportunities await accountants who want to utilize their knowledge to help small businesses. Attracting business owners as clients is easiest for accountants who complete CPA testing. Earning that top designation in the accounting field garners instant respect among operators of small businesses. They know that having the help of a tax expert to identify the right amount of tax on time is far better than ignoring tax payments. Tax avoidance â" even on a small scale â" is unlikely to save money for a business owner. The right choice is relying upon an accountant to capture all legally eligible tax deductions. Accountants select small business tax work as a professional specialty soon after their CPA exams. They know after years of study that their accounting strength rests with small business issues. Entrepreneurs need CPAs to assure accurate tax reporting and avert trouble with the IRS. Tax collection enforcement by the IRS reaches both large and small business operations. Accountants present the superior defense by deploying their expertise mastered in courses for CPA certification. A few business owners recently learned of the heavy price for resorting to the alternative of tax evasion. James L. McCarthy of Easton, Connecticut, pleaded guilty to tax fraud after court evidence showed he engaged in a scam with two companies he controlled. One of the businesses deposited payments for work performed by the other entity, which was a corporation. This resulted in understated income for the incorporated company. The scheme permitted McCarthy to obtain money for personal use that rightfully belonged to the corporation. He could have avoided the substantial fine and prison time he faces by relying upon an accountant specializing in small businesses. An accountantâs study for CPA certification includes all the intricacies of corporate taxes and personal income for the owner. In Albuquerque, state contractor Shelda Sutton-Mendoza is similarly charged with tax evasion involving her corporation. The indictment against her alleges that she filed false corporate and personal income tax returns. One example of the claim against her is that a corporation tax return for 2005 reported $0 taxable income, but the IRS has evidence that the business earned $248,389. Whenever business owners seek intelligent ways to address their tax situations, they have plenty of demand for tax experts possessing CPA qualifications. 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.
Advantages of Tax Preparation by Accountants that Pass CPA Exam Requirements
While most people dread dealing with anything concerning income tax, plenty of others are actually eager to accept the annual challenge. These are the individuals who take pride in conquering their own tax returns. But occasionally this satisfaction is blind to the advantages delivered by accountants who have mastered tax details to pass CPA exam requirements. Even tax preparation software has limitations. It only processes the data thatâs entered. The prompting for information by tax software is not always clear. For example, capturing the tax impact of various items from pass-through entities calls for assurance from a tax expert. This expertise about the tax forms involved in unusual situations demands the involvement of an accountant with courses for CPA certification. In addition, accountants are trained to know what expenses are tax deductible and when certain tax credits are applicable. Preparation for obtaining the CPA designation entails studying a large number of sample CPA exam questions that address these many scenarios. As a consequence, CPAs know how to aid taxpayers in avoiding mistakes that cause costly IRS penalties while still benefiting from all legally eligible tax deductions and credits. Accountants can actually help people recognize if they are likely to encounter an advantage from professional tax preparation. This is accomplished by showing individuals the complexity level of their tax returns. Business activities are an area that typically necessitates input of knowledge gained from study for CPA credentials. Business owners simply have a multitude of potential tax deductions. Moreover, several distinctive tax reporting forms are often required. For example, home office deductions and depreciation of capital goods are separate from other business expenses. Tax software doesnât know to compute these
expenditures separately unless the user applies applicable tax rules. In addition, taxpayers with extensive investments normally benefit from accountants who have met CPA requirements. Hiring a tax professional assures gathering accurate cost basis, which tax software does not automatically know. Even retirement plan withdrawals are tricky for taxpayers who have basis in their contributions. These are just a few examples of how individuals can benefit from paying for tax preparation by a CPA. Other advantages include the ongoing annual tax CPE that keeps accountants aware of tax law changes. Plus, a CPA is prepared to defend the tax treatment of any item in the event of an IRS audit. As CPAs working in the tax industry develop their high level of skill, they can easily underestimate how much more they know than the general public. They should not permit themselves to take for granted that their ability is common. CPAs must remain vigilant in remembering to explain the advantages they offer. 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.
expenditures separately unless the user applies applicable tax rules. In addition, taxpayers with extensive investments normally benefit from accountants who have met CPA requirements. Hiring a tax professional assures gathering accurate cost basis, which tax software does not automatically know. Even retirement plan withdrawals are tricky for taxpayers who have basis in their contributions. These are just a few examples of how individuals can benefit from paying for tax preparation by a CPA. Other advantages include the ongoing annual tax CPE that keeps accountants aware of tax law changes. Plus, a CPA is prepared to defend the tax treatment of any item in the event of an IRS audit. As CPAs working in the tax industry develop their high level of skill, they can easily underestimate how much more they know than the general public. They should not permit themselves to take for granted that their ability is common. CPAs must remain vigilant in remembering to explain the advantages they offer. 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.
Escalating IRS Enforcement Means Career Opportunities Following CPA Exam Courses
As the IRS increases its enforcement efforts with more audits, many individuals are turning to accountants who can demonstrate their tax expertise by passing the CPA exam. Professional representation during an IRS audit is available from a CPA regardless of whether the accountant prepared the tax return. Therefore, an IRS audit might trigger a personâs initial contact with a CPA. Representing someone during an audit is certain to create a sustainable professional relationship for ongoing tax work. Many CPAs prefer to utilize the tax skills they sharpen during CPA exam courses for representing taxpayers before the IRS. The focus of these CPA practices is therefore individuals with substantial income. This is the group targeted by the IRS. One in eight people with million dollar incomes were audited during the most recent government fiscal year. The IRS has not only increased audit examinations over recent years. A rise has also occurred in tax liens, levies, and seizures over the past decade. The rate of increase in these IRS measures far exceeds gains in tax return filing. The growth of tax returns during the last decade was only ten percent. Meanwhile, during the same period, tax liens increased 144 percent, tax levies 456 percent, and seizures 231 percent. The message is that accurate tax preparation by accountants who study for CPA certification is vital. Failure to correctly remit voluntary tax payments is unlikely to evade IRS detection. Accountants who complete CPA exam preparation and pass the testing requirements are also eligible to represent taxpayers in resolving the stringent IRS enforcement actions. An IRS tax lien is placed on property and prevents the owner from selling or borrowing against the asset. This enforcement effort also impacts the credit rating of the affected taxpayer. Tax levies are a procedure for the IRS to obtain a tax payment from wages, bank accounts, investments, IRAs, and even amounts due from business customers. The increase in tax levies by the IRS is indicative of the difficulty taxpayers face who file inaccurate tax returns or fail to properly defend themselves from challenges by the IRS. Seizures by the IRS are the capture of physical property. The IRS can seize a home, automobile, or other personal property. When items are taken outright in seizures, they are sold at auction to satisfy the tax amount owed. Taxpayers have the right to appeal liens, levies, and seizures. An accountant who has passed the CPA examination is also qualified to help taxpayers with appeals after any of these IRS processes are initiated. 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.
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