Why Tax Preparers Should Have Tax Representation Skills

Image result for images of tax representationThe tax profession is a rather wide profession.  One can provide a variety of tax services to their clients as well as specialize in specific industries and other areas of tax law.  In fact, a common division amount tax professionals is choosing between providing either tax preparation services or tax representation services.   However, from experience, having a good foundation in tax representation only strengthens ones tax preparation.

Of course, many tax preparers are likely asking “How does tax representation knowledge help me prepare tax returns?”  Well, consider this.  A self-employed client provides you their tax documents, such as a profit and loss statement showing revenue and expenses, assets purchased for the business, property taxes, mortgage interest, and various other documents.   You prepare the return, review it with the client, and file it.  A year or so later, the client calls and says they have a letter from the IRS, the infamous CP2000, saying they owe more taxes.

If you’re a tax preparer who doesn’t provide representation skills, you might be quick to refer them to someone else.  But let’s just say you’re not that type of tax preparer.  So you ask to see the letter and you find out that the IRS is basing the additional tax assessment on a 1099K from Groupon.  So you tell your client to provide you with the monthly Groupon statements.  You total them up and realize Groupon was charging the client about 1/3 of the collected revenue as a fee, the notorious “marketing fee”, and depositing the net amount into the client’s bank account.  However, Groupon reported the gross revenue amount on the 1099K and of course, the client never expensed the 1/3 taken by Groupon taken as an expense.  After you prepare an amended return, you see the client doesn’t owe anything.  You then write and send a response on behalf of the client and the issue is resolved.

So how does this experience help a tax preparer?  Well, first it maintains credibility with the client.  If the client had been referred to someone else, it could have been viewed as the preparers fault and she may have lost a client.  Additionally, it demonstrates the tax professional’s skills, such as analyzing the IRS proposed assessment, proposing a solution, and working it to resolution with the IRS.  Finally, based on the experience, a professional tax preparer would learn and develop some additional due diligence steps moving forward, such as:

  • Ask clients if they accept credit card or other forms of payment where 1099Ks are issued and request all 1099Ks;
  • Reconcile all 1099Ks received by a client to total revenue reported by the client to make sure all reported income is on the return;
  • If the tax preparer sees a Groupon 1099K, she would likely ask for Groupon statements to compute the “marketing fee” for Groupon.

Of course, this is just one example.  Additional representation skills can help you better prepare those returns with incorrect 1099 MISC and other types of third party forms, assist clients who owe taxes but are not able to pay, and various other common taxpayer issues that arise during tax season.  When you have done this often enough, your clients will actually listen when you tell them to ignore various IRS press releases, such as “You don’t need your Form 1095 to file your 2015 tax return.”  We know you have  more than your share of clients who got IRS notices for that misinformation.

For more of tax tips and ideas, REGISTER NOW to attend the Tax Alliance Conference in Plano, TX June 6-8, 2017.

Join Our Mailing List


By submitting this form, you are consenting to receive marketing emails from: Tax Alliance Conference, Kyle Coleman, Dallas, TX, 75248, http://www.taxalliance.org. You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact

Leave a Reply

Your email address will not be published. Required fields are marked *


By submitting this form, you are consenting to receive marketing emails from: Tax Alliance Conference, Kyle Coleman, Dallas, TX, 75248, http://www.taxalliance.org. You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact