SELECTING A TAX PROFESSIONAL

[Update: Check out this 7:41 MP3 podcast from QuickBooks on working with and finding an accountant.]

(Warning: This is another of my ongoing exposes on the practices of tax practitioners.  Tax professionals who are personally offended by what they read here, and may be tempted to lodge complaints against me with the State Boards of Accountancy, should be advised that everything included here is true and is protected by what remains of the First Amendment to the United States Constitution.)

Local Yokels

I have already covered the issue of selecting a tax advisor/preparer based on what the fees are, and how that is a classic example of "you get what you pay for."

Maybe it's just me, but I think that selecting anyone who is such an important part of your life (attorney, tax advisor, financial planner, stockbroker, etc.) just because s/he is located close to you may be even more ridiculous.  I guess if being able to pop in at any old time and visit with your tax advisor is an important criterion, you can overlook the person's skill level. However, you should also wonder about any tax practitioners who are just sitting around twiddling their thumbs waiting for clients to drop in. Anyone who has tried to reach me on the phone knows all too well that I do not  answer the phone, play phone tag, nor talk to anyone without an appointment. I work 12-14 hours every day and would fall even further behind if I were to allow such interruptions. With phone calls, faxes, e-mail, and snail-mail, we really haven't had any problem doing everything we need to all over the USA.

In a similar vein, the selection of a professional advisor based purely on family tradition or personal friendship is dangerous and expensive.  I've lost track of the number of people who tell me quite openly that they are paying thousands of dollars in extra taxes because their tax advisor is an old family friend or a high school pal who is afraid of anything aggressive that might attract the IRS. 

Two Heads Are Better Than One

I often hear from people who say they are waiting for their tax advisor to die or retire before they will feel comfortable switching over to someone who is more creative and aggressive.  They believe that it is necessary to have all or nothing, with one person doing everything.  That's very short sighted.  You don't have to use just one person to handle all of your tax projects and issues.  Several people use one for strategic planning purposes, and another for the actual bookkeeping and form filling. Far from being offended, I welcome the input of the clients' other advisors because I know that, as a team, we have a synergy that allows much better overall service.

Advisors, (tax, legal or financial) who refuse to work with other members of the team are doing their clients a disservice.  The scariest thing isn't a person who doesn't know something.  It's the person who doesn't know, yet thinks s/he does; or worse still, is afraid to admit his/her lack of knowledge and pretends to know everything.  A good trustworthy person will know his/her own limitations and seek advice from others who are more acquainted with those particular issues.

While I consider myself to be on the cutting edge of creative and aggressive tax strategies, I would never claim to know everything there is about taxes.  In fact, it changes so much, I don't ever expect to be able to make the claim some so-called tax experts make; to know absolutely every tax break there is.  It's best to run away from anyone making such claims.

Whose Side Are They On?

Again, the older I get, the more I learn that some of the assumptions I have always held about things are not accurate.  Specifically, I'd like to address the attitudes of tax return preparers and advisors.  I had long assumed that all other preparers and advisors had the exact same philosophy and objectives that I had when working with clients; that taxes are too high and that we will do anything legally possible to reduce the clients' tax obligations.

In my 36+ years in the tax business, I can't recall a single time where a client asked me to make sure he pays plenty of taxes because the government needs his money more than he does.  I must admit that I don't explicitly ask people if they would like to pay in more taxes.  I assume that they share my belief.  However, that is not the case with other preparers.

From talking with people, including other tax practitioners, I find that it is quite common for them to believe that the American public is under-taxed and that everyone has a moral obligation to give until it hurts.  While some of these people are former IRS employees who, as I explained a while ago, still believe in the IRS's philosophy that everyone is a tax cheat, this sentiment is also prevalent with many who never received a paycheck from IRS (although you could make the case that what they are doing now is working for IRS).  In many of these people, I detect a tone of envy.  They believe that clients who earn more than they do should pay in a lot more taxes.

I think it is important that you ask your tax advisor these basic questions.  You may be shocked by his/her response.

1.    Do you think taxes, in general, are a good thing?

2.     Do you think the American people pay enough in taxes?

3.    Do you think I pay too little, too much, or just the right amount in taxes, both income and payroll?

4.     Who is better able to spend our money, us or the politicians in Washington, DC?

5.    IRS - Friend or Foe?

While these questions sound facetious, you may be surprised at the answers.  If your preparer refuses to answer any of them, or worse yet, lies to you, I think it's pretty clear that you shouldn't be entrusting your financial matters to that person.

One woman recently told me that her and her husband's CPA told her point blank that the other local residents were subsidizing their agricultural efforts because of their tax deductions and was trying to make them feel guilty for doing this.  My question to this woman was: how can she possibly expect this CPA to do her all in minimizing their taxes, when this CPA believes that taxes saved by clients increase her own taxes?  It boggles my mind that someone would stay with a CPA who voices such opinions.

Maybe it's just me, but using a tax preparer who doesn't share my desire to minimize my taxes would be like using Doctor Jack Kevorkian to treat my illness.  Our separate goals would be too conflicting for me to feel at all comfortable.

OUTSOURCING

A growing trend in the tax profession is to outsource the actual work to less expensive workers, often in India.  You should ask any potential tax service where the actual work will be done.  If they openly reveal that they are sending work out to other countries, and you are comfortable with that, no problem.  If they refuse to disclose any outsourcing or swear that all of your work will done locally, how can you trust them for anything?

I have discussed this issue in some blog posts, such as the following:

USA Tax Work By Indians
 

Outsourcing Jobs To India
 

Is your tax return being prepared in India?

Outsourcing is the new name of the tax game

KMK

This page was last modified:
Tuesday, January 31, 2012