Benefits of Using a Tax Professional


Title 26 of the US code governs taxes. It’s millions of pages long, and doesn’t make for light reading. Imagine bedding down with a propped up pillow and 5 King James bibles and Tolstoy’s War and Peace. You get the picture.

Rather than tackling this complex body of regulations yourself, a tax professional can serve as your legal guide. There are numerous benefits of using a tax professional.

A qualified tax accountant can make tax time uncomplicated and trouble-free. Too, after your taxes are filed, if you find you have a debt owed to the IRS, a tax professional can represent you and mediate a resolution with the IRS on your behalf.

If the IRS is trying to collect a debt from you, keep in mind that there are no options available to any tax professional, CPA or attorney that are not available to taxpayers directly. This is an important point, because many large tax representation firms will lure you with pledges of “pennies on the dollar” or “one time tax settlements” that the IRS supposedly is offering, as well as promises to lift wage and bank garnishment and remove liens.

Unfortunately, the majority of these companies have only a few tax lawyers and the rest are Unenrolled Agents or simply individuals that have been trained by the company to solicit information as third party designees.

Many of the largest companies have been in the news for failing to provide promised results, and others have had class action lawsuits brought against them for their inability to resolve taxpayer’s debts, all the while billing their clients large sums of money for actions that were never performed. Roni Lynn Deutch’s tax resolution firm is currently facing such a lawsuit.

The IRS has only one program that a taxpayer can take advantage of to settle their debt for a reduced amount. Called ‘Offer in Compromise,’ it allows for large or unmanageable tax balances to be settled for less than what is owed. Any of the “penny of the dollar” proposals offered by tax firms is actually referring to this program.

The Offer program is designed by taxpayers to do themselves. This is true regarding all of the options available, such as requesting a short-term extension to pay, setting up a monthly payment plan, or deferring your debt due to financial hardship.

That being said, a qualified and experienced tax professional can navigate through these steps easier than you, since they know what to expect, what the IRS is going to ask, and the best course of action to take.

The key to choosing a tax professional is to check their credentials, their experience (many are former IRS collection or revenue agents – always a plus) and then do a little digging to see how satisfied their previous clientele were.

Find out if they are an attorney, a CPA, an enrolled agent, or an unenrolled return preparer. Attorneys and CPAs of course must be licensed and recognized by the state in which they choose to practice in. However, an individual can practice law or accounting in many different areas or have a generalized, broad legal background. How familiar are they with tax law? How specialized are they in return preparation?

Enrolled Agents are the only group who receive their training and credentials directly under IRS oversight. The IRS Office of Professional Responsibility oversees such education, and these individuals have specialized training in the tax code.

Unenrolled return preparers are not recognized by the IRS as having the credentials to practice before them. Unenrolled preparers can prepare tax returns (as can anyone really) and they can only represent a taxpayer with regard to a return that they prepared, and only in relation to any tax debt that has not been turned over to IRS collection.

If you hire a tax professional to represent you, they will ask you to sign either Form 2848 or Form 8821. Both forms grant the third party permission to contact the IRS on your behalf and speak for you.

Form 2848, Power of Attorney and Declaration of Representative, requires a designation level to be noted. If you don’t know already, you can find out the level of credentials for your representative this way. Form 8821, Tax Information Authorization, is used by anyone who simply wants to be authorized to solicit information about your tax balances. They cannot represent you or take actions on your behalf; the form only allows for information to be disclosed.

Many large firms authorize multiple Form 8821 designees to perform all the research and groundwork, and then the attorney comes in at the end of the process to seal the deal. Meanwhile, you have paid out thousands for actions that you could have, and should have, taken yourself by contacting the IRS directly.

Overall, if you have a complex tax return, or find yourself facing considerable tax problems, then a tax professional can be invaluable as long as you hire the right person by checking out their qualifications.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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