Personal and corporate tax returns
How to evaluate a tax preparation service?
Preparers of tax returns are better referred to as tax consultants. The need to have a good tax consultant can not be over emphasized. Savings can be thousands and in some cases tens of thousands of dollars. It may be difficult to evaluate a consultant\’s service, especially if you have been taking it for a while, but it is possible. You just need to look closely at the service features.
The most important thing in preparing a tax return is that you do not miss any deductions. A bad consultant would prepare your return based on just the papers you provide him. He would not bother to identify and procure missing papers or information; he would prefer to get it over with your work, without caring for the resulting harm to you. A good consultant would: *Help you prepare a longest possible list of your deductions. Such check lists reduce chances of omitting items *Discuss the past year’s returns before starting current year\’s (this can bring substantial tax savings in the current year). *Identify deductions that you did not even mention (consultant should find these from investigative conversing with you about your overall situation from time to time). *Stay in touch with you year round, instead of yearly, and take notes of your matters that would eventually save you taxes (e.g. we often make follow up phone calls to customers to review their Notices of Assessment received from the Canada Revenue Agency in response to filing the returns; we also often respond to customer questions on RRSP and buying/financing homes/cars. *Review details of the completed tax return with you (consultant should walk you through your return line by line). In view of this, you may now like to think if your tax specialist of last year passes the above stated 5 tests.
To defend you in Canada Revenue Agency’s reviews and audits that might come your way in future, trails should be set up properly and right at the time of preparing your return. To achieve this, the consultant should: *Attach most substantiation documents with your copy of the tax return. *Ensure that there is a substantiation document for each major deduction. *Show and explain you the research used to support your major and vulnerable deductions (ask for that if you are not shown). *Prepare an index of substantiation documents if there are too many (substantiation of income statement amounts is not attached to the return and is kept as a separate stand alone business document). In view of this, you may now like to look at the copy of your last year’s return to check if the return passes the above stated 4 tests.
Experience has shown that well prepared tax returns are less prone to triggering audits and hence called audit-preventive. A good tax return is detailed, especially your copy of the return. It includes all useful schedules even if some of these are not included in the copy for Canada Revenue Agency. An undesirable consultant would cut corners (e.g. may not care to look at your last year\’s return; may skip doing or documenting the necessary research on critical issues; may skip preparing certain schedules which are good mainly in the long run, e.g. schedules on child tax benefits, amounts to be carried forward for future returns and RRSP contributions limit for the next year). You may now like to look at your last year’s return to check how detailed it was.
Lastly a consultant should be credible and yet inexpensive. To state specifically, the consultant should: *Be inexpensive in view of the value of services, care, time and expertise extended to you. *Provide a detailed billing for the work done. *Be prepared and be capable of defending your case at the review, audit, appeal or even court level if it becomes necessary (many consultants can not help you at or beyond audit level; ask the consultant for proof or references for having worked at higher levels of defense). *Be endorsed by reputed regulatory bodies; (most designated accountants are credible; popular accountant designations are CMA, CA, CGA etc.; beware of the self proclaimed accountants).
