You can imagine my surprise when reading through my weekly NAEA E@lert and finding my own name and a link to my blog! Wow! Thanks, NAEA–and welcome to my peers visiting my site for the first time.
I was asked an interesting question the other day: “So once you have your CPA, you’re going to let the EA designation go?”
The short answer to this is, “No.”
Well, if they’re anything like me, they read about taxes and do research. (Woo! We’re a crazy bunch!) My favorite sites?
So there you have it—what I do for fun. I’m sure you wish you didn’t know.
If you’ve considered getting the Enrolled Agent designation, go for it! But then, your first question is probably going to be, “How do I study for this darn thing?”
Let me tell you what I did: I took a class. Not just any class–H&R Block’s class. You see, at the time that I was working for Block, I had a mostly free summer (besides my college classes) where I was able to study. Taking the course through Block was only $20, too–what a deal! It was after my second year in taxes that I took the Block class and passed the exam. At the time that I took the exam, there were four sections. Now, on the other hand, there are three, since two of them were consolidated. (See my previous post on EA vs. CPA.)
But looking back, the question is: do you really have to take a class? No, I don’t think so. If you have experience in all types of taxes–both business and personal–it is possible to pass. So here’s how I would approach it if I were taking it today…
Ready? Well, here’s some info to get you started, courtesy of the IRS. Good luck!
I’ve gotten questions about the difference between the EA (Enrolled Agent) and the CPA (Certified Public Accountant) and I’d like to answer those now.
The short answer to this is no. However, it really depends what characteristics you’re looking at. continue reading this article »
Every year we have clients that need tax estimates so that they don’t have to pay an underpayment penalty when they file their taxes. It’s not a difficult thing to prepare, but if you’re self-employed and your income varies from year to year, the form can be a little confusing. There are a couple of options for figuring out how much to pay. continue reading this article »
There’s a great quote from a tax court case:
“We note that a business will not be turned into a hobby merely because the owner finds it pleasurable; suffering has never been a prerequisite to deductibility.” Krebs v. Commissioner, TC Memo 1992-154
I think this points out one major thing: you can enjoy what you do. As long as you carry on as a business, you’re safe. (More on carry on as a business later…)
No, seriously, I do. I want to total up my taxes one year and realize that hubby and I owe a mil. Why is that? Well, you need to earn about $5 mil in order to owe that much. That’s a pretty sweet year by most anyone’s standards. Of course, I’d also make estimated payments so I don’t get hit with a late-payment penalty.
It’s one thing to prep someone else’s taxes and tell them they owe a mil…it’s another to have it be your own.
Federal tax estimates (quarterlies) for individuals who do not have withholding are due the following dates:
Q1: April 15, 2008
Q2: June 16, 2008
Q3: September 15, 2008
Q4: January 15, 2009
More later on how to calculate these.
I was working for a tax-prep company in my early years of preparing taxes, and was scheduled to meet with a client because he had “an IRS letter”. I was one of the few people in the office who had dealt with IRS letters.
The guy comes in with his tax documents and I asked him to show me the “letter”. He pulled out a stack of papers about a half-inch thick, and placed it on the desk in front of me.
“That’s not an IRS letter,” I said. “You were audited.”
He looked grim and nodded.
I asked to see his tax return for the year he was audited. He pulled that out and I flipped through it. I pointed to the number that looked funny to me. “You were audited for this line?”
He nodded again. “How can you tell?”
In all honesty, it was really simple. There are certain perameters that look “normal” on a tax return and then there are others that just stick out. If you have an experienced, knowledgeable tax person, they’ll be able to find these numbers without too much trouble. I truly believe that this is what tax people refer to as “red flags”. (But more on that later).
I thumbed through the papers and found the page with the audit determination on it. The guy had self-prepared his taxes with the “assistance” of tax prep software. (More on that later, too) I guess he had answered some question incorrectly in the software and *POOF* it allowed him to do truly illegal things, for his situation. When he went in to the audit, by himself, his replies to the auditor who asked about the return were, “But the tax software let me do it.”
The final result of the audit went along the lines of, “while we understand that the taxpayer did not have a large amount of tax knowledge, he should have known that there was a significant error because his refund was too good to be true.”
And it was.