1.
What
questions should I ask my prospective Tax
Accountant?
The tax industry is constantly changing and tax professionals
are subject to various federal and state regulations, not
only domestically but globally. Tax Accountants come from a
wide a variety of backgrounds and have different attitudes
about the US tax system. One should seek an experienced,
competent professional who specializes in the areas you need
help with and someone who believes in helping you minimize
your taxes. Referrals are your best bet. Ask everyone you can
think of: family, friends, business owners, financial
advisors and attorneys. Be wary of the professional who
promises you big refunds or that says you can deduct
everything. You, not the accountant, are ultimately
responsible for the information on your tax return. Here are
some questions you can ask to help ensure you find an
experienced, trustworthy tax accountant:
What
licenses or designations do you have?
How long
have you been in the tax business?
What tax
issues do you specialize in?
Do you
have the knowledge and experience to handle my tax
situation?
What are
your fees?
Do you
outsource any of your work? Do you perform the work personally?
If not, what is the review process? Who signs the
returns?
How long,
approximately, will it take to finish my taxes?
What's
your privacy policy? Will you share my tax information with any
third-parties?
Do you
believe I'm paying too much, too little, or just the right
amount of tax?
How many
hours of annual continuing professional education do you and
your staff obtain related to taxation?
2.
Do you
outsource any tax, accounting or consulting
services?
We realize the business world is constantly evolving and has
become a global community so we may utilize all available
tools and resources including outsourcing, particularly if it
helps the firm with cost containment. Presently, we do not
outsource any firm services.
3.
How can I be assured of the confidentiality when I interact
with you?
Professional standards have long recognized that a member CPA
"shall not disclose any confidential information without
the specific consent of the client". The main exception
to that rule occurs when the CPA is responding to a
"validly issued and enforceable subpoena or
summons" or complying "with applicable laws and
governmental regulations". The Internal Revenue Code is
even more specific in prohibiting disclosure. It can be
deemed a misdemeanor for any tax return preparer to release
any tax information obtained or generated in the course of a
preparer-client relationship, unless the preparer has express
client consent, or a court order has been issued. Further,
our firm has internal procedures designed and equipment
installed to ensure that all private documents are routed
through a secure server so that your information is not
compromised in any manner.
4.
Who monitors or scrutinizes the quality of your
firm?
In order to be admitted or retain their membership in the
American Institute of Certified Public Accountants (AICPA)
firms who are engaged in the practice of public accounting in
the United States or its territories are required to enroll
in an AICPA approved practice-monitoring program if the
services performed by the firm are within the scope of the
AICPA's practice-monitoring Standards and the firm issues
reports purporting to be in accordance with AICPA
professional standards. CPA firms that perform audits or
issue reviewed or compiled financial statements are required
to undergo a peer review every three years to maintain their
firm license to practice public accounting. The Peer Review
Program is designed to educate the firms, assist them in
further enhancing the quality of performance in accounting
and auditing services and allow the firm to communicate with
their colleagues on the objectives of the accounting
profession. The firm experienced their last peer review for
the year ended April 30, 2007 which resulted in an
"Unmodified Report" certifying that Chokshi, Mund
& Raczkowski, P.C.'s policies and procedures conform
to AICPA professional standards for quality accounting and
audit services.
5.
Who are the various tax preparers in your
industry?
The Federal tax law is administered primarily by the Internal
Revenue Service, a bureau of the United States Department of
the Treasury. The U.S. tax code is known as the Internal
Revenue Code of 1986 (title 26 of the United States Code). It
is considered to be a labyrinth and is ever constantly
changing and becoming more complex. Complexity generally
arises from two factors: the use of the tax code for purposes
other than raising revenue, and the feedback process of
amending the code.
More than sixty percent of Americans hire a tax preparer. The
Selecting the right preparer could make the difference
between sitting at home and sleeping at night enjoying the
advantages of knowing that your tax return has been prepared
accurately and your tax liability minimized or contemplating
in an Internal Revenue Service (IRS) office, nervously
explaining every expense you have claimed for at least the
past three years, if not more.
There are different types of tax preparation professionals,
with varying levels of education, experience and
appropriateness to your personal tax situation. Our industry
is not government-regulated. Anyone can print a business card
and call him or herself a tax preparer. Here's an
overview of the most common tax preparation professionals in
our industry:
Tax Preparer from Chain or Local Outlets
The professionals at the national tax preparation chains or
similar businesses are trained to some extent, but their
training and experience could be at any level. Many of these
preparers are paid not much more than minimum wage plus
commission, and may be preparing tax returns as a second job.
If your return is a fairly basic, then this could be an
appropriately inexpensive option. These preparers can
accompany you to a meeting with the IRS if the need arises to
help you explain information on your return. However, only
enrolled agents, attorneys and CPAs have legal standing to
represent a taxpayer before the IRS. If there is any
complexity to your return, or tax situations specific to your
industry or personal circumstances, this might not be your
best option.
An Enrolled Agent (EA) is licensed by the federal government,
and will be either a former IRS employee (must have worked at
least five years at the IRS in certain positions) or will
have passed a comprehensive IRS exam.
The IRS requires EA’s to complete 72 hours of
continuing professional education, reported every three
years, to maintain their EA status.
If there are questions about your return, an EA can represent
you with the IRS. Many EA limit their work to a given tax
area, so you should inquire about an agent's area of
expertise.
Certified Public Accountants
While all CPA’s are accountants, not all accountants
are CPA’s. To become a CPA one must have a college
degree in Accounting or related field or obtain the
appropriate educational background. A CPA has passed a
state's qualifying exam for accounting and is required to
continually obtain continuing professional education.
CPA’s may or may not be an expert on matters of
taxation. However, if considering a CPA, be sure to inquire
about his or her experience in tax matters, and how he or she
keeps up with changes in the tax law. Also, a CPA can
represent a taxpayer before the IRS.
A Tax Attorney must have a Juris Doctor (J.D.) degree and be
admitted to the state bar. Those are the minimum requirements
for practicing law. They have chosen tax as their field of
specialization. A Tax Attorney may be a specialist on the
latest tax laws and in tax disputes, but generally is less
qualified in the preparation of actual returns, so inquire
about experience and knowledge in this area. Their services
are especially in demand when confronted with potential
criminal issues, concerns with protection of privilege and
other complex services.
The IRS has recently announced that it will impose
professional standards on paid tax preparers starting in
2011. These standards will include passing an exam, meeting
continuing education requirements of at least 15 hours per
year, registering with the IRS, and paying an annual
registration fee. However, CPA’s, Enrolled Agents and
Tax Attorneys will be exempt from these requirements, given
the professional standards to which they already are
subject.
6.
What type of services can a CPA provide to financial
statements?
Public Accountants are qualified to provide a range of
services related to financial statements. Among the services
are reviews and compilations, which are less comprehensive
than audits, which generally are required for publicly owned
companies. Statements on Standards for Accounting and Review
Services are issued by the Accounting and Review Services
Committee, which is the senior technical committee of the
American Institute of Certified Public Accountants designated
to issue pronouncements in connection with the unaudited
financial statements or other unqualified financial
information of a nonpublic entity. Following provides a brief
background relative to the levels of services for financial
statements.
Compilation
The most basic level and least expensive of service is a
compilation. As the name suggests, an accountant will compile
information supplied by the business or management and
present it in financial statement format. The data reflects
management’s representations of the business’s
financial condition, with the accountant offering no
explanation or analysis of the data or any degree of
assurance as to its accuracy. Procedures required by the
accountant for a compilation are limited but include
familiarity with the accounting practices of each
client’s particular industry, a general understanding
of the client’s business transactions and the form of
its accounting records, and determining whether the form and
content of the financial statements are appropriate and if
there are any obvious material errors. Accountants are not
required to make inquiries or perform other procedures to
verify, corroborate or review information supplied by the
entity.
Review
The next level of accounting service is a review and more
expensive than a compilation but less than an audit. Here the
accountant will ask the client about certain aspects of the
financial statements and test management assumptions by
applying analytical procedures as well as identify any
potentially questionable items or trends in the financial
statements. With a review the accountant provides a limited
degree of assurance as to the accuracy and reliability of the
financial statements; specifically that no material changes
are necessary for the statements to comply with generally
accepted accounting principles (GAAP). If it is determined
that the statements do not conform to GAAP, this will be
disclosed in the accountant’s report. A review is less
in scope than an audit in as much as a review does not
involve obtaining an understanding of internal control,
assessing control risk, testing accounting records and
obtaining corroborating evidence to support the financial
information depicted in management’s financial
statements.
Audit
The most comprehensive level, expensive and time consuming
service an accountant can provide with regard to financial
statements is an audit. This provides the highest level of
assurance from an accountant that the information presented
in a client’s financial statements is fairly stated.
The accountant will express his or her opinion as to the
accuracy and reliability of the financial statements,
specifically whether they are free of material misstatements
and presented fairly in accordance with GAAP. The independent
accountant/auditor will test the financial transactions and
internal control systems upon which the financial statements
are based, following standards administered by the American
Institute of Certified Public Accountants. He or she will
also confirm the client’s stated assets and liabilities
with outside parties, review and evaluate internal controls,
and inspect all transactions and their supporting
documentation. It’s important to note that while the
accountant will express an opinion as to the fairness of the
financial statements and the statements themselves are the
representation of management, not the accountant. There are a
number of different reasons a company might want to hire an
accountant to perform an audit, including to satisfy
requirements in loan documents or help a potential lender
evaluate credit, to satisfy regulatory agency requirements,
or to provide detailed financial information to owners,
executives, and shareholders