Difference between CPA and non CPA tax place

[gowent]

What is the name of your state? Pennsylvania

I perform 1099 subcontract work for a business and I also work a regular job 1040. I went out at the beginning of the year looking for a tax place
to do my taxes for the end of the year. Trying to get all the information of what to do and what not to do so to speak.

I talked with a few different tax people and they basically said for a 1040 and a 1099 work with a mileage log, gas receipts and receipts for purchases towards things you have to buy for the 1099 work at the end of the year (since I knew how much income I would bring in on both 1040 and 1099) 3 different companies said it will probably cost you around 200- 250 to do my taxes providing I had all the necessary things I talked with them about prior.

I met another tax guy and he said make sure whomever you get to do your taxes is a CPA it costs more but it is better. He said it was better to do taxes with him than the rest of them because he was a CPA. He told me "you can go anywhere to get your taxes done but the difference between a company doing your taxes and a CPA doing your taxes is if you ever get audited the CPA will handle everything for you and that is why it costs more to use a CPA. I chose to use him which cost me 650.00 to do my taxes at the end of the year.

Well, when I got audited I keep all records and copies etc. I misplaced one document, which I actually found the following day... however I called him told him I was being mail audited and that I was making copies of everything and couldn't find this one document and he told me "sorry I do not keep any records, copies anything of my clients and then he proceeded to tell me if you are being audited I can handle this for you for around 1,500.00 to 2,000.00".

I then told him I thought from the beginning you stated that the reason to use a CPA is if I get audited you handle it.

My first question is for 1099 work and a job 1040 was there a legitimate reason to pay the extra money for a CPA rather than going to a regular tax person to do a 1040 and simple schedule C. I deducted mileage and had mileage logs/receipts and about 40 receipts for items I purchased for business use, other than that nothing else. When he did my taxes, I dropped them off and in about 2 hours he called me and told me they were done and I could come pick them up.

I got audited, a mail audit for car and truck expense and Sch. C - other expenses.

What he told me is it correct about why to choose a tax place based on whether they are a CPA or not? 2nd question like I said I luckily found the document I misplaced but should this guy have had my records if I lost one document or is he correct he should not of? thanks in advance.

 

[LdiJ]

What is the name of your state? Pennsylvania

I perform 1099 subcontract work for a business and I also work a regular job 1040. I went out at the beginning of the year looking for a tax place
to do my taxes for the end of the year. Trying to get all the information of what to do and what not to do so to speak.

I talked with a few different tax people and they basically said for a 1040 and a 1099 work with a mileage log, gas receipts and receipts for purchases towards things you have to buy for the 1099 work at the end of the year (since I knew how much income I would bring in on both 1040 and 1099) 3 different companies said it will probably cost you around 200- 250 to do my taxes providing I had all the necessary things I talked with them about prior.

I met another tax guy and he said make sure whomever you get to do your taxes is a CPA it costs more but it is better. He said it was better to do taxes with him than the rest of them because he was a CPA. He told me "you can go anywhere to get your taxes done but the difference between a company doing your taxes and a CPA doing your taxes is if you ever get audited the CPA will handle everything for you and that is why it costs more to use a CPA. I chose to use him which cost me 650.00 to do my taxes at the end of the year.

Well, when I got audited I keep all records and copies etc. I misplaced one document, which I actually found the following day... however I called him told him I was being mail audited and that I was making copies of everything and couldn't find this one document and he told me "sorry I do not keep any records, copies anything of my clients and then he proceeded to tell me if you are being audited I can handle this for you for around 1,500.00 to 2,000.00".

I then told him I thought from the beginning you stated that the reason to use a CPA is if I get audited you handle it.

My first question is for 1099 work and a job 1040 was there a legitimate reason to pay the extra money for a CPA rather than going to a regular tax person to do a 1040 and simple schedule C. I deducted mileage and had mileage logs/receipts and about 40 receipts for items I purchased for business use, other than that nothing else. When he did my taxes, I dropped them off and in about 2 hours he called me and told me they were done and I could come pick them up.

I got audited, a mail audit for car and truck expense and Sch. C - other expenses.

What he told me is it correct about why to choose a tax place based on whether they are a CPA or not? 2nd question like I said I luckily found the document I misplaced but should this guy have had my records if I lost one document or is he correct he should not of? thanks in advance.

Someone like you really doesn't need a CPA. An EA or any other experienced tax professional should be able to handle your return for you and 200-250 might be a bit on the low side of things. I would guess that 225-300 would be a better range, depending on what all was involved in your return.

Our firm (and we have CPAs in our firm as well) would charge you nothing to defend your return in an audit, unless there were extraordinary circumstances and then it would depend on the amount of time involved. A simple mail in audit, for car and truck expenses and other expenses would result in our requiring you to photocopy your mileage log, photocopy your receipts for other expenses, and those would all be mailed in to the IRS in response to the audit. We are talking 15-30 minutes of time.

Now, if you did not have that documentation or alternative validation for the expenses might be necessary, again, that might be extraordinary circumstances that would require you to pay additional fees for our time. However, based on your description of the audit, 1500 - 2000 is highway robbery in my personal opinion.

 

[Zigner]

...1500 - 2000 is highway robbery in my personal opinion.

The OP got bamboozled by a slick talker.

 

[Taxing Matters]

What he told me is it correct about why to choose a tax place based on whether they are a CPA or not?

No, it's not correct. There is nothing necessarily magical about using a CPA to prepare a 1040 return over an EA or registered return preparer. (And rare is the instance you'd want to pay a lawyer to prepare a return.) The education and licensing for a CPA all involves accounting; learning taxation is extra and not all CPAs are knowledgeable about taxes. (Same with lawyers, most lawyers are not tax experts, that's not covered in law school. Lawyers who want to do tax law typically get an advanced law degree in tax.) What you want is someone (or a firm) that has experience with doing returns of self-employed persons and is in business all year around so if you have questions or need help with an audit or whatever they'll be there to assist you and who won't charge you an arm and leg to do it. A person who prepared your return is authorized to represent you with the IRS on the audit of that return. However, to appeal an audit determination or for representation in other matters before the IRS you do need either an EA, CPA, or tax lawyer.

With respect to audits and appeals the level of tax professional you need depends on the issue you have. You don't need a tax lawyer when the issue is simply providing basic documentation to back up something you put on your return. Your preparer may be able to do that for you and for not much of a fee (if any, depending on what services were included in the return prep fee you paid). But if the issue is arguing a complex issue of tax law or going to court, that's where you need a tax lawyer.

 

[davew9128]

No, it's not correct. There is nothing necessarily magical about using a CPA to prepare a 1040 return over an EA or registered return preparer.

There is no such thing as a registered return preparer, hasn't been since the Loving case in 2014.

 

[LdiJ]

There is no such thing as a registered return preparer, hasn't been since the Loving case in 2014.

Not exactly correct. All persons who are paid a fee to do tax returns MUST be registered with the IRS. There is no longer a requirement to pay a fee to be licensed and/or to be tested, but you must be registered, and your PTIN number must be included on the tax return you sign as preparer.

 

[Taxing Matters]

Not exactly correct. All persons who are paid a fee to do tax returns MUST be registered with the IRS. There is no longer a requirement to pay a fee to be licensed and/or to be tested, but you must be registered, and your PTIN number must be included on the tax return you sign as preparer.

Right, there is still the requirement to register. There is just not the regulation and oversight that existed before. The IRS is working to try to get legislation that would reauthorize IRS regulation of return preparers, but so far has not been successful.

 

[Dandy Don]

You have received excellent responses so far that I hope have answered your question.

For what tax year are you being audited?

When you first agreed to do business with this CPA, did he ask you to sign any type of contract or fee agreement with him? If there was a contract, look at the document to see if there is any mention of what his obligations are as far as representing you in any meetings with the IRS.

It's very odd for him to say that he did not keep copies of anything belonging to his clients, because if he used software to help prepare returns, he should have at the very minimum kept a copy of the return and supporting schedules he prepared for you.