The Tax Factor was created to educate individuals and small-business owners about taxes. Let’s face it, nothing in life is guaranteed except death and taxes. Okay, maybe that sounded pretty depressing but the goal of this blog is to help you find the information to learn how to make taxes work for you. Taxes can be extremely complicated but knowing about deductions and credits can save you thousands of dollars per year.
Dec 10, 2012
Reasons Why You Should Love Enrolled Agents: Patrick W. O’Hara, EA
Just in case you didn't know (and I will
keep reminding you).... 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.
Let’s show how
passionate Enrolled Agents can be. You want passion? I can't hear you. Ok, I give you passion!
Patrick W. O’Hara, EAthought you might want to read this:
The value of today’s tax professional
The work of the income tax
professional has changed significantly from when I first started 22 years ago. My first year marked the
major transition from preparing returns by hand to using computer software. The
returns were printed out neatly, and mailed to the IRS. Then came electronic
filing, the revenue anticipation loan, the growth of home-use return
preparation software packages, and today, the push for the paperless office.
Should we ask ourselves though, has
this technology helped us understand taxation? Or has it dumbed us down in a
way? I raise this question specifically because this past filing season,
America’s most popular (cloud-based) tax software didn’t even resemble a form.
It was just data entry fields. You don’t see the form until you pay, and print
it out. I often get people calling my office to verify their self-prepared
calculation, because they don’t want to pay the fee until they know it is
right. Even though I am generally a nice guy and will help people out when I
can, it’s hard to even discern how the bottom line is calculated if you can’t
refer to form numbers.
Every American should understand how
the income tax system works. It’s fairly simple. All income is taxable unless
specifically excluded by the tax code. From our income we can deduct a standard
deduction based on our “filing status” or choose to itemize our deductible
expenses. Then we deduct our exemptions based on the number of taxpayers and
dependents. The resulting taxable income is taxed at the rates prescribed based
on filing status. Once we determine the tax, we claim any credits and any tax
that was withheld throughout the year. Most of us hope the credits and
withholding are greater than the tax because this means we are getting a
refund. Refunds are good, although I’ll argue if your big refund is from having
too much tax withheld from each paycheck, then you need to spend some more time
watching Suzy Orman reruns.
There is no mystique to tax
preparation. Anyone can put numbers on a form. I have no fear as a professional
letting people know this. But I find taxpayers often have trouble determining
some basic issues. Believe it or not, determining their filing status – Single,
Head of Household, Married filing jointly, or Married filing separately – can
be the biggest hurdle. Choosing whether your dependents may be a qualifying
child or a qualifying relative is another issue. These seemingly basics
selections determine how much income may be excluded, which itemized deductions
may be taken, the tax rate, and which credits are available. If you get it
wrong, you could end up either getting too much of a refund, or paying more
than you needed to. This is where hiring a tax professional can make a huge
difference, saving the client time and money along with reassurance that the
return is correct.
Last filing season I had a handful
of new clients that self-prepared returns in prior years and were unhappy with
their results. When we looked at their returns, we determined they had chosen
the wrong filing status. It is very rewarding to find the mistakes where we can
go back and file amended returns to get refunds. It is not so rewarding to
notify a new client that they filed their past returns incorrectly and may owe
money to the IRS. But it is usually better to find the mistakes before the IRS
I have found that over the years,
some of the greatest value I can provide to my clients is educating them about
the tax code and their specific tax situations. If my client will permit me, I
actually prefer to go over their return line by line so they understand how the
tax is calculated. I often emphasize the importance of tax planning and
implementation of tax savings strategies before we file the next years return.
The value of a tax professional far
exceeds putting numbers on paper. Today’s tax professional should be one of
your most trusted advisors – a value that extends much farther than the
Who is Patrick
W. O’Hara, EA?
He is the owner of a small tax practice
in Salt Point, NY and provides tax consultation, tax preparation and taxpayer
representation services. As an Enrolled Agent, he is federally licensed to
unlimited practice before the IRS and he is a Fellow of the prestigious
National Tax Practice Institute.