FAQs: Taxes & the IRS
If you are being audited
by the IRS, can either a CPA or an accountant represent
you effectively?
Certified Public Accountants
(CPAs) and accountants are authorized to represent
taxpayers being audited by the IRS as long as they are
also an authorized as an Enrolled Agent (EA).
A CPA will have passed a
scrupulous examination and will be professionally
competent. CPAs are also required to undertake a program
of continuous training, adhere to a rigorous set of
professional standards, and undergo reviews by their
peers
What is an “EA”?
An EA has technical expertise
in taxation and is authorized by the U.S. Department of
the Treasury as a tax practitioner. As well as
audits, an EA is authorized to represent taxpayers for
tax collections and for appeals before the IRS.
How do I know when to consult a CPA?
If you want to do your own
tax returns, then be prepared for some very meticulous
work, as mistakes can prove to be very expensive.
You’ll find it necessary to understand the various tax
forms and calculations they require in order to submit
an accurate Form 1040. In addition, staying
current with changes in the tax laws is imperative, as
they change from year to year.
If you are computer literate,
specialist tax software programs are available to help
reduce your workload—but you still have to know enough
about what you’re doing to input your information
accurately. The software, then, can only take you
so far if your return is even slightly complex.
If this is the case, you would be wise to employ the
services of a CPA. Areas for concern might include:
- Ownership of a vacation
home or rental property.
- Self-employment and
small business ownership.
- Marriage and divorce.
- High income earning.
- Residence in a state
with high levels of income tax.
- Being subject to
Alternative Minimum Tax (AMT)*.
*AMT is now affecting more
and more ordinary, middle-class taxpayers in the U.S. It
was originally created to guarantee that the wealthy
paid their fair share of taxes.
How
much tax should be deducted from my paycheck?
The answer depends upon a
number of factors. One of the most critical is your tax
liability from the previous year. If you did not pay
enough in taxes previously, then you could be subject to
an underpayment penalty. If this could be your
situation, you should consult an accountant for
assistance in calculating how much you will need to have
deducted—or pay in estimated tax payments if you are
self-employed.
How can an accountant
assist me as a taxpayer?
As well as giving you
professional advice on your tax situation and preparing
your tax return, a CPA will be able to, if needed,
represent you before the IRS and help you to develop
future strategies to minimize your tax liabilities.
If you have IRS issues, then make sure you have
a good relationship with a smart Austin accounting firm