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What Doctors Need to Know about Preparers

Staff Writers

Most doctors and medical professionals are not thinking about tax season right now. But, according to Executive-Post supporter Rachel Pentin-Maki; RN, MHA “now may be the best time to rethink your relationship with your tax-preparer.”

All Tax Preparer’s not equal!

All tax return preparers are not the same. They possess varying levels of expertise and hold different credentials. If you are thinking about hiring a new tax preparer to do your 2008 return next year, you may want to begin your search soon so you have sufficient time to investigate and evaluate your options.

Specialty Needs

If you are aware of any significant tax issues when doing your return, find out if he or she has expertise in this area. For example, a recently divorced single father will want a tax return preparer that is knowledgeable about the tax ramifications of divorce and how it affects his return. Similarly, if you’ve recently sold a rental property at a loss, you’ll want a preparer who can advise you on reporting that loss.

Of course, medical specificity is paramount. An accountant who has many doctor-clients is a good start, but does he/she really know anything about activity based medical cost accounting?

Experience Counts

It’s usually wise to select a preparer who has been in the tax business for at least several years. However, should you opt to go with a less experienced preparer, be sure that individual has access to more experienced professionals who can address any complex tax issues that may arise during the preparation of your tax-return?

Types and Stripes

The complexity of your return, and not necessarily the amount of your income, should guide you in selecting a tax preparer, and resulting professional fees. Essentially, there are five types of preparers:

Certified Public Accountants (CPAs)—

These accountants have passed a rigorous examination which includes an entire section on tax issues. Many specialize in taxes and are experienced in handling complicated tax issues. In addition, if they are members of the American Institute of CPAs [AICPA], they must meet stringent continuing education requirements to maintain their memberships.

Commercial Agents—

These individuals work for large national organizations. They usually work only during tax season and have been trained by the organization. Most are form-driven. They are not, however, required to have a minimum level of education, nor have they passed an exam administered by a regulatory body.

Enrolled Agents—

These tax return preparers must pass a two-day examination given by the Internal Revenue Service or meet an lRS experience requirement. In addition, members of the National Association of Enrolled Agents or its state chapters must take at least 30 hours of class work in tax matters each year.

Public Accountants—

Many public accountants are tax advisers. These individuals have not taken the exams and are not obligated to meet the experience requirements of CPAs. In some states, public accountants must be licensed, but in others, anyone can claim the title.

Tax attorneys—

Like CPAs, tax attorneys must meet continuing education requirements and are subject to regulations by the states where they practice. Most tax attorneys don’t specialize in tax return preparation. Instead, they tend to be more involved in tax planning and tax litigation.

Fees

Some tax return preparers work for a fixed fee while others charge hourly rates. In either case, be sure to clarify in advance how much or on what basis the preparer will charge you to do your return. Keep in mind that it’s up to you to provide the preparer with the information necessary to do your return. Unorganized or missing files and receipts are likely to result in more work for the preparer and higher costs for you.

Assessment

Keep in mind, too, that only enrolled agents, CPAs, and tax attorneys are authorized to practice before the IRS. This means that they can represent you throughout the entire IRS audit process; commercial agents and public accountants may not.

Conclusion

What has been your experience with the above accounting types? Is medical specificity really required? Please comment, opine and send us your “tax preparer war-stories.”

Related Information Sources:

Practice Management: http://www.springerpub.com/prod.aspx?prod_id=23759

Physician Financial Planning: http://www.jbpub.com/catalog/0763745790

Medical Risk Management: http://www.jbpub.com/catalog/9780763733421

Healthcare Organizations: www.HealthcareFinancials.com

Health Administration Terms: www.HealthDictionarySeries.com

Physician Advisors: www.CertifiedMedicalPlanner.com

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com  or Bio: www.stpub.com/pubs/authors/MARCINKO.htm

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Filed under: Accounting, Investing, Practice Management, Taxation | Tagged: Accounting in Medicine, CPAs, taxes |