More than 78 million taxpayers paid someone to prepare their federal tax return in 2016. Generally, anyone who prepares or assists in preparing a federal tax return for compensation must have a Preparer Tax Identification Number (PTIN). They must sign in the paid preparer's area of the return and give the taxpayer a copy of the return. Since 2012, anyone who prepares and files 11 or more Forms 1040, 1040A, 1040EZ or 1041 during a calendar year must use e-file.
Most tax return preparers provide outstanding service, but they have differing levels of skills, education, and expertise. Another important difference is their ability to represent taxpayers before the Internal Revenue Service.
Representation rights, also known as practice rights, fall into two categories: Unlimited and Limited Representation.
Return preparers with unlimited representation rights can represent their clients on any matters including audits, payment/collection issues, and appeals. Those with limited representation rights can only represent clients whose returns they prepared and signed, but only before revenue agents, customer service representatives.
1. Understanding
Your Tax
Professional
A O T A X P L A N N I N G T E A M
C L I E N T S E R V I C E S @ A O T A X . C O M
A O T A X . C O M
S Y E D H U S S A I N
2. Topics
• Why this topic and presentation?
• Who are the Tax Professionals?
• What your tax professional needs
from you?
• What do you need to do
regarding taxes?
• Tax Payers Bill of Rights
3. Why this topic and presentation
More than 78 million taxpayers paid someone to prepare their Tax Return’s in 2016.
Generally, anyone who prepares or assists in preparing a federal tax return for compensation
must have a Preparer Tax Identification Number (PTIN). They must sign in the paid
preparer's area of the return and give the taxpayer a copy of the return. Since 2012, anyone
who prepares and files 11 or more Forms 1040, 1040A, 1040EZ or 1041 during a calendar year
must use e-file.
Most tax return preparers provide outstanding service, but they have differing levels of
skills, education and expertise. Another important difference is their ability to represent
taxpayers before the Internal Revenue Service.
Representation rights, also known as practice rights, fall into two categories:
Unlimited and Limited Representation.
Return preparers with unlimited representation rights can represent their clients on any
matters including audits, payment/collection issues, and appeals. Those
with limited representation rights can only represent clients whose returns they prepared and
signed, but only before revenue agents, customer service representatives, and similar IRS
employees, including the Taxpayer Advocate Service.
5. What is an Enrolled Agent (EA)?
From National Association of Enrolled Agents:
Enrolled agents (EAs) are America's Tax Experts. EAs are the only federally licensed tax practitioners who
specialize in taxation and also have unlimited rights to represent taxpayers before the IRS.
From IRS:
An enrolled agent is a person who has earned the privilege of representing taxpayers before the Internal
Revenue Service by either passing a three-part comprehensive IRS test covering individual and business tax
returns, or through experience as a former IRS employee. Enrolled agent status is the highest credential the
IRS awards. Individuals who obtain this elite status must adhere to ethical standards and complete 72 hours of
continuing education courses every three years.
Enrolled agents, like attorneys and certified public accountants (CPAs), have unlimited practice rights. This
means they are unrestricted as to which taxpayers they can represent, what types of tax matters they can
handle, and which IRS offices they can represent clients before.
7. Income Limits for 2017.
Income limits
◦ plus exemption amount of $4050 per qualifying family member
Contractors & business owners must file taxes if income is over $400
8. Questions?
Are you married?
Can someone claim you as a dependent?
Do you have any dependents and did they earn
any income, including investment income?
Are you a Citizen/Resident or Non-resident?
Are you an Employee or Contractor?
Employee – Complete W-4 and receive W-2
Contractor – Complete W-9 and receive
1099-MISC
9. Questions
Did you pay any estimated
taxes?
Are you a business owner?
Other information
Health insurance
Home ownership
Retirement savings (outside of
employers’ plans)
14. 1099—MISC Instead of W-2 If you received a 1099-MISC,
you cannot file a 1040-EZ.
15. Tax Documents
Income
W-2 for wages
1099-MISC and other revenues for
Business/Contractor
SSA-1099 for Social Security Payments
1099-R for pensions and IRA distributions
Investments:
1099-INT for bank and bond interest
1099-DIV for dividends and some capital gains
1099-B for stock sales (capital gains)
Other income
W-2G for gambling winnings
1099-G for unemployment and state tax refunds
16. Tax Documents - Continued
Deductions
1098 for mortgage interest paid
1098-T for tuition paid
1098-E for student interest paid
Health Insurance
1095-A, 1095-B, and/or 1095-C
19. Other Information
Name, Address, Birthdate, Social Security Number,
Spouse (if married), & Dependents
Real estate and excise tax paid
Asset sales
Home
Art or other collectibles
Childcare expenses
Donations (with proof)
Foreign bank account, business ownership, and other
assets
21. For Everyone
Tell the truth and do not withhold anything
Complete your W-4 correctly
Tax Professional can help
Keep records
Check your tax return
Ask questions
Sign the return (spouse must also sign)
Pay Estimated taxes if necessary
23. Record Keeping
Tax returns and related tax documents – 4 years or longer
Documents regarding assets – as long as you own it plus 4
years
Example: your home and the new siding
Brokers keep stock records unless you change brokers
Contributions to IRAs – until IRA is closed (NOT
transferred)
For traditional IRAs, this is a state tax issue, not federal.
For ROTH IRAs, this affects state and federal.
Unreimbursed employee expenses – becomes part of tax
return docs
Businesses – as long as you own it plus 4 years
If no NOL or assets, then only 4 years
24. Record Keeping – Asset Example
Purchase home with spouse in June 1980 for
$120,000
Sell home in 2017 for $760,000
Gain of $640,000 but only $500,000 is exempt
Expense to sell home $40,000 (realtor fees, etc)
Invested in home
2003 new roof for $6,000
2006 new kitchen for $15,000
1988 new tile flooring $7,000
1996 new bathrooms $15,000
1984 garage addition $30,000
26. For Everyone
Tell the truth and do not withhold anything
Complete your W-4 correctly
Tax Professional can help
Keep records
Check your tax return – your responsibility even
if you hire a tax pro
Ask questions
Sign the return (spouse must also sign)
Pay Estimated taxes if necessary
27. Estimated Taxes - Examples
Example 1:
Investments generating lots of interest,
dividends, and capital gains
Wages taxed according to W-4 without
your adjustment
Example 2:
Contractor or business owner
No withholdings through wages
because not an “employee”
29. Estimated Taxes Due Dates
April 15
For income earned Jan-Mar
June 15
For income earned Apr-June
Sept 15
For income earned July-Sept
Jan15
For income earned Oct-Dec
30. Your Tasks –
For Contractors & Business Owners
Expenses
Rent
Home office
Utilities
Wages
Costs of Goods Sold (CoGS)
Supplies
Insurance
Etc.
Travel
Automobile
Track mileage
Standard or actual
Hotels
Airfare
Meals
50%
Include dinners
names and purpose
32. IRS – Tax Payers Bill of Rights
• The Right to Be Informed
• The Right to Quality Service
• The Right to Pay No More than the Correct Amount of Tax
• The Right to Challenge the IRS’s Position and Be Heard
• The Right to Appeal an IRS Decision in an Independent Forum
• The Right to Finality
• The Right to Privacy
• The Right to Confidentiality
• The Right to Retain Representation
• The Right to a Fair and Just Tax System
34. U.S Individual Income Tax Return 1040A
Use if:
Taxable income below $100,000
Are not claiming any Health Coverage Tax Credit
Do not own a small business
Do not want to itemize