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Do You Know How to Prepare an Income Tax Return?
Filing out tax forms and signing tax returns, under penalty of perjury as the paid preparer, is a responsibility that should be taken very seriously. The IRS has several penalties that may be applied against negligent or uninformed tax preparers. In addition, IRS computers and auditors are searching for poorly prepared tax returns 24 x 7 x 365.
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Before opening a tax preparation business you would be advised to have acquired a certain amount of knowledge about income tax law, read up on Circular 230, Practicing before the IRS, and have actual experience preparing income tax returns. Knowledge of tax laws is the foundation of any tax preparation business. Tax law education can be obtained in many ways. You can attend college courses, online, self-study courses and classroom classes offered by H & R Block.
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A good place to start would be to go on the internet and do a search for "tax law education" or "tax law training."
Tax preparation experience is more difficult to acquire but could begin with preparation of your own tax return. This experience can be acquired on the job but I would recommend starting out with simple tax returns and gradually accept clients with more complex returns. The best way to obtain tax preparation experience is to find a full-time job preparing tax returns so you can receive the benefit of working with someone who you can learn from.
If you make a mistake you can almost count on your client being contacted by the IRS usually a few years after the return has been filed. If additional tax is owed you might be surprised to see how much interest and penalties add to a relatively small balance due of only $500. If the IRS has made a processing error you will have to identify their error, obtain a power of attorney from your client and write back to the IRS so your client won’t get stuck with a big tax bill. |
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| ©2010 Michael Johnston, CPA. All Rights Reserved. |
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