Everyone wants to file his or her tax on time; therefore, he or she keeps on preparing his or her income statements throughout the financial year. In fact, timely payment of tax is a task that everyone wants to complete before due date, as proper tax filing gives a person great relief from unnecessary financial penalties that emerge due to the delay in tax filing process. Be it an individual or any business organization, every entity that earns capital is liable to pay tax; therefore, in real sense, paying tax before due date is our communal obligation. However, this obligation is not made to pester people but tax filing causes various problems for people, who do not have enough time to evaluate their income and payable tax amount. Since various tax filing firms are offering tax return outsourcing services, this process can be made simpler. In fact, these firms can help an individual or a business organization in making proper arrangements for timely tax filing. These firms not only evaluate total annual income of their clients but also help them in getting rebate by using various tax reduction methods. These tax reduction procedures effectively reduce tax burden of an individual, as these procedures evaluate taxable income by using latest tax provisions for the current financial year.

Tax return outsourcing is a service that helps a tax payee in evaluating his or her taxable income; this service is the perfect help for people, who cannot make lengthy calculations of tax filing. Since tax filing professionals of such firms posses specialization in making tax arrangements, they can better handle various sub-procedures right from tax assessment to tax filing. Tax return outsourcing services are really beneficial in making complex tax documentations much simpler, as professionals who handle this entire task never let the person worry about any arrangement.

These firms understand that CPA faces a variety of problems during tax filing session; therefore, they try to make a simple and lucid document to reduce the complexity. Basically, steps that these firms use to make final tax statement are simple to apply, secure, efficient and accurate in tracking each stage of the return. For filing your tax return, these tax return outsourcing firms organize source documents to asses your exact income for current financial year. Moreover, they go through your tax statement for the previous year, so that variations in your income can also be calculated.

In order to file your tax return, professionals of such firms prepare review notes and send them to CPA firms for clearing up; moreover, these firms also send a request to the concern CPA firm for processing that review note further. Once your review of income statement is processed and open items are cleared, tax specialists complete the return and submit it to the concern taxation body of your state or country. Since professionals of tax return outsourcing firms monitor every step of your tax filing procedure, with them you can be relaxed and can continue with your routine professional life.

With deadlines and penalties hanging over our heads, tax return preparation is indeed a scary thought. Governments impose penalties for late filing of tax returns. Tax fraud is punished even more severely. But sorting out tax codes, balancing tax liabilities with exemptions and deductions and making accurate calculations can be a real headache. If tax preparation is harrowing for individuals, imagine what it’s like for organizations. However, now there is no need to move out of you chair to file a tax return thanks to online tax filing.

Professionals in the outsourcing tax return business are quite at ease with tax return preparation. Therefore, by outsourcing tax returns you shift the burden of filing taxes onto a third-party and relax for the most part of the way. Perhaps, even devoting the time and effort freed up by the outsourcing firm to other important endeavors. All that for a small sum of money too.

Individuals and organizations, who find the procedure of preparing tax statements and filing them quite difficult, can opt for outsourcing tax return. It would be a wise move because tax preparation outsourcing firms begin work on their clients’ tax returns well ahead of the deadline thus giving clients ample time to sort the details to provide to the outsourcing firm. An early commencement of work also guarantees the client his tax return will be filed within the prescribed period.

Outsourcing tax returns is wise also because firms that specialize in the service retains trained tax preparers to do the work. These professionals know their tax laws and procedures. And their calculations are always accurate. These professionals also help you understand and utilize tax incentives and thus lower your tax liability. They help you abide by tax laws applicable to you while minimizing what you pay. Therefore, outsourcing tax returns ensures you are not overpaying taxes and help you understand all tax instructions relevant to you.

Moreover, these firms use a variety of software for their work and use the internet to file their clients’ returns. Individuals who file their tax returns online receive their tax refunds in less time than returns filed on paper. Refunds are received in even less time if instructions are given for the refund to be deposited directly into the taxpayer’s bank account.

By outsourcing tax returns, individuals and organizations gain access to answers to their tax-related questions regarding all information and documentation required, tax liabilities and rebates, and withholdings etc. You avoid tax errors commonly made such as wrong social security numbers, claiming ineligible dependents, inaccurate calculations and not filing the right forms.

Tax is the price one pays for civilization. Man has to endure with taxes as long as civilization is in existence. And as long as taxes are in existence,  Tax preparers will be in existence (abundance?) who help tax payers compute their incomes & taxes and file the tax return.

Computation of tax involves gathering of sensitive information about a person like:
1. What was the marital status of the person during the year?
2. If the person is a widow, when did the spouse expire?
3. If the person is single, was he ever married? And if yes, when did the divorce come through?
4. How many dependent children does a person have and what is the expenditure on them?
5. What are the incomes of the person from various sources and what are the expenses during the year?

All these information are highly sensitive to any person and when that person wants the help of a tax preparer, the tax preparer has to have a very high degree of integrity and trust worthiness. With such kind of responsibility as regards data confidentiality reposed on the tax prepares, is it not necessary for Law makers to impose some kind of accountability on the tax preparers?
For long, the certified members of AICPA (referred as CPAs) have been in the forefront in helping tax payers with their tax computation and tax return filing. And since the code of ethics of AICPA (Ethics Ruling No 112 under Rule 120: Integrity and Objectivity) makes it mandatory for the members to take express permission of the tax payers before disclosing the confidential data pertaining to the tax payer, tax payers usually have been comfortable with the CPAs. However, off late, many other Tax Preparers have come up to help tax payers in filing their returns and these preparers are not essentially members of AICPA. Thus the code of ethics does not apply to such people. This meant that such tax preparer could use the services of a third party service provider in preparing the tax return, thereby disclosing the confidential data of the tax payer to the third party service provider, without the tax payer getting to know that his/her information has been shared with a person he/she does not even know!
To address this loophole, the IRS has updated Section 7216, rules for tax preparers on 18th Dec’08. These updated rules would be effective from 1st January’09. Per this rule, “any person who is engaged in the business of preparing, or providing services in connection with the preparation of, returns of the tax imposed by chapter 1, or any person who for compensation prepares any such return for any other person, and who knowingly or recklessly –
(1) discloses any information furnished to him for, or in connection with, the preparation of any such return, or
(2) uses any such information for any purpose other than to prepare, or assist in preparing, any such return, shall be guilty of a misdemeanor, and, upon conviction thereof, shall be fined not more than $1,000, or imprisoned not more than 1 year, or both, together with the costs of prosecution.

Thus any tax preparer now has to compulsorily take the express permission of the tax payer before the services of a third party service provider is utilized. It thus marks a new beginning in outsourcing business as well. Tax preparers who look at outsourcing some of their work would now have to take consent of the clients before doing so. This would make outsourcing a transparent and more acceptable service.

The tax preparer would have to be highly catious about partnering with outsourcing firms. An average tax payer would not entrust his information to a person who has no liablity pertaining to data confidentiality. But the moment, tax preparer partners with a CPA or Indian CAs, tax payers would have no problem about the sharing of the information because it is public knowledge that these professionals are governed by strict code of ethics which bars them from disclosing data. Thus, it makes sense for tax preparer looking out for outsourcing partners to opt for such outsourcing firms as are owned and managed by CPAs.

Late filing of the tax return is an important issue as not only can it attract a late filing fine but also brings the accounting and finance quality into attention. Accounting & Finance for your 2008 Tax Return – Do not Be Late With nearly a fifth of smaller businesses this year being expected to hand in their 2008 tax return in late, new research shows just how deeply concerning it is that small businesses including sole traders and self employed businesses are not on top of their accounting & finance and are not getting their tax and income records organised on time. HM revenue and customs supply the choice to complete the Inland Revenue tax return forms or online self assessment which includes use of a tax calculator, so accounting & finance should be completed in good time and before the online tax filing deadline. With the 2008 tax return deadline being 31 January 2009, online self assessment in the late stages is the best way to complete and submit your business’ tax and income records. A self employed business has an option of using a tax calculator when completing the paper based revenue tax forms. The online self assessment actually uses financial software being a tax calculator to calculate your tax liability meaning the final figures are worked out by the HM revenue and customs tax accounting software system on your behalf leaving not much else for you to do. It is a far easier means of recording accounting & finance transactions, compared to using your own tax calculations which leaves far too much room for costly errors. HM Revenue and Customs Fines For Late Tax Returns The HM Revenue and Customs issues fines for late tax returns which are issued in increments of £100 the minute the deadline has passed. Failing even to hand in a 2008 tax return within 6 months of the tax deadline means you will attract yet another £100 so making sure you plan and organise your tax return well, along with completing accounting & finance details and submitting revenue tax forms (or filling out online self assessment at the HMRC website before deadline) will save you the worry that comes from being chased to pay fines that can otherwise (and very easily) be avoided. With direct experience of people at the brunt of such HM Revenue and Customs fines, it really makes a lot of sense to be prepared and take care with your 2008 tax return. Sole traders, inexperienced with accounting and finance matters may not like the paper based revenue tax forms with many small business owners mentioning how complicated the tax return forms are. The online self assessment facility is always recommended being easily accessible providing you have registered and already have passwords. Obtaining the HM revenue and customs gateway password takes 7 to 10 days as it is sent by post after the sole trader has registered to file the tax return online It is also free to use but if you do prefer the paper tax returns then login to use the tax calculator – and if you don’t already have your government gateway passwords and access then now is the time to register to allow yourself the time to prepare your tax and income details. Preparing tax and income is not exciting nor is it invigorating, however being prepared in advance means that 2008 tax returns can be filed and put away before the January deadline. The alternative to completing your own revenue tax forms is hiring a good accountant or using an accounting software package that will automatically complete the tax return form

Every self employed business is required to register the business with HMRC within three months of commencing trading. Following registration HMRC issue the unique tax payers reference and annually send out the self assessment return. The self assessment paper return is submitted by October while filing the Inland Revenue self assessment tax form online requires further registration. Filing Paper Self Assessment Tax Return Filing paper self assessment tax return is achieved by posting to HMRC to arrive by 31 October or hand into a HMRC enquiry centre. Tax office addresses can be found on the Inland Revenue website. After filing paper self assessment return the tax payable can be paid but remains due by the following 31 January tax payment deadline. The printed paper tax return sent to HMRC should be identical in format to the official HMRC version of the paper return. Substitute copies of the paper self assessment tax form are not accepted. Additional information can be sent and filed if necessary to support for example notes in the additional information section of the paper tax return. Registering To File Self Assessment Tax Return Online Before the self assessment tax return can be filed online the self employed business has to register and activate the process which can take 7 to 10 days as the activation pin number is sent by post. To register visit the Inland Revenue website home page and in the do it onlinr section click self assessment. In the new user section of the HMRC online services page click register. On the next page click individual and the following page self assessment and then follow the online tax registration instructions. When registering you will be required to provide either your post code or national insurance number and your UTR, the unique taxpayer reference. The unique taxpayer reference would have been allocated when the business was first registered as self employed and appears at the top of the full tax return and also on any Inland Revenue letters regarding your tax affairs. Following registration government gateway post the unique user ID and activation pin number which can then be used to log into the online account to complete the registration within the 28 days limit for activation. Advantages Filing Self Assessment Tax Return Online HMRC encourage filing self assessment tax return online as it streamlines their administration and carries advantages for the tax filing by self employed business enabling the online tax return to be processed quicker than the paper tax return. The HMRC tax calculator immediately calculates the national insurance and income tax liability and also offers the option to pay that tax liability online immediately. Filing the self assessment return online also offers peace of mind as an email acknowledgement is received. HMRC do not issue receipts for paper returns Filing tax returns online can be done 24 hours a day and both the tax liability and payment history can be accessed and payments made if required to avoid late payment fines. A significant advantage of filing tax return online is the additional 3 months between the paper tax return deadline at 31 October and the online tax return deadline 31 January. This time gap can be used to review the self assessment return being submitted ensuring accuracy. Reviewing the financial accounts after completing the tax form and before submission can often stimulate the memory of tax deductible expenses that may have been mislaid or forgotten which can then be deducted to reduce the final tax bill.

Tax accounting software for a private limited company in the UK includes the using accounting software to produce the vat tax return and calculate the company net profit with the tax software calculating the outstanding tax liability and producing an automated corporation tax return.

Company Accounting Software.

All types of business accounting software produce a net taxable profit being the difference between sales income received and purchase expenses. The company accounts package often does not include capital and tax allowances on fixed assets which are essential elements to enable final tax accounting which the production of the tax liability.

Since tax allowances change then not all accounting packages cope well with this aspect as either it is ignored and any claims for capital allowances need to be input manually which often requires knowledge of the tax system. In any event many systems require the current year tax allowances to be input.

Tax accounting packages do exist where the current tax rates and rules issued by the taxation authority for a specific financial tax year. Such tax accounting software either has to include an upgrade service to incorporate the different tax rules that apply each year or a new package has to be purchased for each new financial year.

Every quality tax accounting software package should calculate the corporation tax liability which is one of the most significant costs of every business. If the accounting software does not produce an automated calculation of the tax liability then the tax due has to be entered manually usually by journal entry.

Manually entering the tax liability is a function frequently best dealt with by an accountant since the transaction also involves the final completion of the company accounts and potentially journal entries to account for distributions from the after tax profit and retained profits.

Vat Tax Return Software.

It would be unusual to find a company accounts package that did not automatically generate the quarterly figures for the vat return since almost all companies are vat registered.

The vast majority of companies have a sales turnover which exceeds the vat threshold limit at which vat registration is obligatory; most companies sales turnover exceeds this threshold at which point vat registration is mandatory.

The accounting software must be capable of satisfying the requirements of the taxation authority which in regard to a vat return includes the provision of an accounting audit trail of financial transactions.

Tax Software and CT600 Corporation Tax Return.

In the UK a private limited company has to complete a corporation tax return each financial year. Known as the CT600 companies with a sales turnover which qualifies as a small company can complete the CT600 short return.

Completing even the short version of the CT600 tax return is a specialist accountancy area which few non accountants are familiar with or find easy to deal with since it demands intimate knowledge of the tax system. Completing the corporation tax return can be a daunting task for a non accountant including several hours study of the accompanying notes. It is no simple task for many accountants who do not specialise as a tax accountant.

Most accounts packages do not include tax software encrypted within the packages to produce the corporation tax return but may include an online feed to assist in the submission of ther company tax return.

Using the right tax software the CT600 corporation tax return can be completed automatically.

To do so the company accounts package has to include all the relevant tax rules and rates applicable for fixed assets and the calculation of the tax liability. Both tax rates and the rules in which tax is collected are frequently changed. It is in fact unusual if the tax rules are not changed in some part every single year. Suitable tax software is essential to perform this annual process.

The tax accounting takes the tax rates and rules automating the work of a tax accountant to produce the tax liability. The term tax software indicates automation based upon data input which the computer package then processes to produce the desired output. Company tax software produces the tax requirements of the company including both the corporation tax liability and completion of the tax return.

The Tax Governance Institute (TGI), a forum dedicated to the analysis of corporate issues relating to day-to-day and long-term tax risk management, recently hosted a live video-cast panel discussion to review the implications of the new, heightened tax return preparer penalties.

Moderated by TGI Director Hank Gutman, the panel included: Anita Soucy, Attorney-Advisor in the Office of Tax Policy, U.S. Department of Treasury, and one of the principal authors of the recently released Treasury guidance on the new tax return preparer penalties; Chris Rizek, a former Treasury associate legislative counsel and currently a member of the Washington, D.C. office of the law firm of Caplin & Drysdale; and Mike Dolan, a former deputy commissioner of the Internal Revenue Service and a member of the Washington National Tax practice of KPMG LLP.

This executive summary highlights the discussion of the heightened standards imposed on paid tax return preparers, and its influence on company policies:

Overview of the New Legislation

In May 2007 Congress approved a provision that extended the application of the income tax return preparer penalties to all tax return preparers, altered the level of confidence that must be met to avoid imposition of penalty for preparing a tax return that reflects an understatement of liability, and increased applicable preparer penalties.

Under the provision, the return preparation standard for undisclosed positions reported on any federal tax return was changed from “realistic possibility of success on the merits” to “reasonable belief that the position would more likely than not be sustained on its merits.” Effective for any tax return positions taken on tax returns due after December 31, 2007, the provision subjects to penalties return preparers who fail to meet the higher standard.

Though the new law affects only tax return preparers, uncertainty about a number of definitions, including the important question of who is a “tax return preparer,” left its scope somewhat unclear and created uncertainty among many companies regarding the effect of the law on tax advice and tax return services provided by their tax advisers. On December 31, 2007, Treasury released interim guidance—Notices 2008-11, -12, and -13—that addresses this definition and related matters. But questions remain.

Treasury Guidance

Treasury guidance issued in June 2007 deferred the original effective date of the application of the new preparer penalties and has afforded many companies and advisers more time to contemplate the effect of the law change. However, the transitional relief also engendered a number of questions concerning the timing and scope of the relief for certain tax returns and for tax advice rendered by non-signing preparers. Notice 2008-11 clarifies previous guidance deferring the effective date of the new law. Notices 2008-12 and -13 clarify other questions arising from the new preparer penalty provisions.

Anita Soucy explained that Treasury and the IRS did not have time to rewrite the entire applicable regulatory regime. The interim guidance modifies existing regulations and must be read in conjunction with them. “Folks who are not familiar with this regime need to read both the existing regulations and the notices. We [Treasury] point out where certain positions in the existing regulations are replaced with the interim guidance.”

Notice 2008-11 states that the transitional relief applies (1) to timely amended returns or claims for refund (other than 2007 employment and excise tax returns) filed on or before December31, 2007, and (2) to timely amended employment and excise tax returns or claims for refund filed on or before January 31, 2008. Notice 2008-11 also clarifies that the transitional relief applies to non-signing preparers for advice provided on or before December 31, 2007.

The new legislation also includes an amendment that imposes a penalty on a tax return preparer of any return or claim for refund who fails to sign a return when required by regulations. Notice 2008-12 provides interim guidance concerning the scope of the penalty provisions of the preparer signature requirement. The guidance identifies the return and refund-claim forms that must be signed by a tax return preparer to avoid preparer penalties under the current and contemplated regulations. Additionally, the notice states that if more than one tax return preparer is involved in the preparation of a return or claim for refund, the preparer with primary responsibility for the overall substantive accuracy of the return is the tax return preparer for purposes of the preparer signature penalty provisions. Notice 2008-13 provides guidance on several issues:

• Relevant categories of tax returns or claims for refund for purposes of section 6694

• The definition of tax return preparer for purposes of the return preparer penalties

• Standards of conduct applicable to tax return preparers for disclosed and undisclosed positions taken on tax returns

• Interim penalty compliance obligations applicable to tax return preparers

The “More Likely Than Not” Standard

The recent legislation introduces a number of new issues and questions—chief among them is the heightened standard now imposed on tax return preparers only. Mike Dolan observed that the crucial element of the code change is the replacement of the original standard with “more likely than not.” “It’s easier to say than to know exactly what it means,” he said. “The injection of the ‘more likely than not’ standard for the preparer is at the heart of the potential disconnect between the taxpayer and the preparer.”

Chris Rizek agreed, “That’s where a real problem is…Treasury is in a quandary [because] the standards now are higher for return preparers than they are for taxpayers.” He noted that, generally, unless the position involves a tax shelter, the taxpayer needs only substantial authority to avoid penalty, whereas the return preparer is now required to disclose that same position to avoid penalty.

“A lot of these issues were there in the prior statute, [but] people didn’t really pay a lot of attention to it,” said Rizek. “The standards were in the right order: the taxpayer standards were higher than the tax return preparer standards, which I think is logical because the return preparer does not have full access to all the facts the way the taxpayer does, and it’s the tax-payer’s liability that is being reported, so [he or she] should bear the ultimate responsibility for the return.”

Rizek said many of the regulatory concepts had been lingering under the old statute: non-signing preparer, substantial portion of the return, the implications of information from third parties. “These issues have been in there for a long time, but they weren’t as critical because the standard was less stringent.”

Increased Penalty

“And then there’s the penalty,” Dolan said. The penalty under the old regime was USD250for an undisclosed tax position if an income tax preparer knew, or reasonably should have known, of an understatement of liability on a return or refund claim due to a position that did not have a realistic possibility of being sustained on its merits. Under the new law, the heightened standard for undisclosed tax positions is complemented with an increased penalty. Tax return preparers are now subject to a penalty of the greater of USD1,000 or 50 percent of the preparer’s fees for undisclosed tax positions failing to meet the “more likely than not” standard.

Rizek said, “…while we don’t like to think people make their determinations based on the amount at risk, nonetheless because the fine was small and because the IRS rarely enforced it… these kinds of issues were sort of glossed over.” Now, Rizek said, “Suddenly people really went back and refocused on these things, and that’s the source of a lot of the angst that Treasury and the IRS have heard from taxpayers.”

“You’d like to think that, as a responsible practitioner, the amount of a penalty does not influence behavior. Well, the government thought it might influence behavior,” said Dolan.

Penalty Exceptions

Soucy pointed out that Notice 2008-13 contains four exceptions to the requirement that a tax return preparer should possess a reasonable belief that a tax position would “more likely than not” be sustained on the merits.

Until further guidance is issued, Notice 2008-13 states that a signing tax return preparer shall be deemed to meet the requirements of the heightened preparer penalty standards with respect to a position for which there is a reasonable basis but for which the signing tax return preparer does not have a reasonable belief that a tax position would “more likely than not” be sustained on the merits, if one of the following four conditions is met:

• The taxpayer discloses the position

• The preparer provides the taxpayer with a return that includes disclosure

• Where the position is supported by substantial authority, the preparer advises the taxpayer (and documents the advice) of the difference between the taxpayer penalty standards and the preparer standards

• In the case of a potential tax shelter transaction, the preparer advises the taxpayer (and documents the advice) of penalty standards for tax shelters and their difference, if any, from those of the preparer standards.

The fourth case would protect the preparer who was not in a position to know whether a transaction has a significant purpose of avoidance or evasion of federal income tax, Soucy said. “They may suspect a transaction has significant purpose, but ultimately the preparer cannot in all instances get into the taxpayer’s head.”

Soucy noted that Treasury and the IRS requested comments in Notice 2008-13. Treasury intends to overhaul the entire regime. In particular, it is working to clarify the rules for non-signing preparers. She said Treasury also would review the “more likely than not” standard, which was derived from the section 6662 regulations regarding the “more likely than not” requirement applicable to taxpayers for tax shelter positions.

Non-signing Preparers

Another significant question that has emerged from the new law and resulting increased focus on tax return preparer penalties is the definition of and the application of the new standards to a “non-signing preparer.”

Non-signing preparers are a problem, Rizek said. “[It] is sort of a creature of the regulations… Congress really didn’t know there was a concept of a non-signing preparer.” If law firms are caught by the rules, “it’s usually as a non-signing preparer.”

Gutman commented, “I’m sure you have a lot of tax directors who have taken advice from a lot of sources [and the tax directors] have not always seen that advice in the context of, ‘Well wait a minute, this is a non-signing preparer and now under this new standard he is going to have an obligation to disclose.’”

Part of the reason for this shift in focus, Rizek said, “…is that [preparers] used to be able to proceed relatively blithely if they were above the ‘realistic possibility’ standards.” Under the new standard, a taxpayer may have a variety of potential positions, each of which could have substantial authority but might fail under “more likely than not.” “That kind of opinion suddenly, at least theoretically, subjects the preparer to a section 6694 penalty if the position is not disclosed.”

That, Rizek explained, creates a conflict between the practitioner or the non-signing preparer and the taxpayer. To avoid penalty, the non-signing preparer would generally need the position to rise to a “more likely than not” standard—or be disclosed. But the taxpayer would need the position to rise only to substantial authority.

Soucy agreed that it is important to define preparers who do not sign the return. A determination of whether a person has prepared a substantial portion and is thus considered a tax return preparer will depend on the relative size of the deficiency attributable to the portion prepared by the preparer. The government specifically has requested comments to help draw a brighter line, she said.

Soucy noted that the government drew a distinction between signing preparers and non-signing preparers in the interim penalty compliance standards as an attempt to bridge the change in the tax return preparer penalties and the regime governing the taxpayer penalties. However, she stated that “[t]hese rules are interim in nature and we need to do a lot more thinking.”

Interplay with Circular 230 and FIN 48

Revisions to Circular 230, proposed in September 2007, incorporated the “more likely than not” standard. According to Soucy, “The existing rule in [Circular 230 section] 10.34 had incorporated the ‘realistic possibility’ standards that existed in section 6694, and we thought there is a policy reason for directly making these two provisions related.” But she noted that in-house practitioners not now subject to section 6694 would be subject to its standard “via the back door of Circular 230, and that’s a very interesting question that I think we need to further consider.” Treasury may review the connection in those standards, particularly because other provisions could subject practitioners to overlapping penalties.

Gutman noted that FIN 48 introduced into the financial accounting world the notion of reaching a “more likely than not” standard with respect to the financial reporting of uncertain tax positions, and he questioned the interplay between the analyses performed under FIN 48 and the work that may potentially need to be performed by tax return preparers to comply with the new preparer penalty standards.

“You can’t ignore that there are two delivery processes that are going at the same objective, which is trying to determine whether or not a tax position meets ‘more likely than not,’ and I don’t have any way of understanding how those could proceed on fundamentally different tracks,” said Dolan. “They might produce a different level of transparency—a [disclosure form] 8275 or an inclusion in a footnote—but I don’t see how the process can be any different.”

Rizek said that the fact that a preparer may rely in good faith on information from a third party to believe that the position meets the “more likely than not” standard, may also allow the “tax side” to rely on analyses by the auditors, without incurring section 6694 exposure. But whether the auditors can rely on the tax practitioners is a different subject.

The question is whether the standards of the tax return preparer penalties and FIN 48 “are truly the same” and are completely objective, Soucy said. “I think in section 6694 [tax return preparer penalties] there is certainly a subjective element. So I think it certainly is questionable if people will interpret them exactly the same.”

“There may well be legitimate reasons to differentiate,” Dolan said, “but…you kind of have to go down some parallel level of analysis, because you’re getting to roughly the same kind of result.”

On one hand, Rizek concluded, if the taxpayer standard is raised to “more likely than not,” then it will be simpler for the preparer and for the external auditors. “On the other hand, simplicity is going to come along with its own risks to all parties.”

About the Tax Governance Institute (TGI)

Established by the U.S. audit, tax and advisory firm KPMG LLP, the Tax Governance Institute is an open forum for corporate management, stakeholders and government representatives to share knowledge regarding issues relating to management of corporate tax risk, including transfer pricing risk, tax considerations when converting from U.S. GAAP to IFRS and accounting for tax uncertainties in current tax law.

Income tax calculator in accounts ledger with tax income rates calculation in finance accounts 2008 tax return to produce net taxes financial profit Paye tax calculator and salary tax calculator are essential features of payroll tax calculations to calculate income tax deductions. A self employed tax calculator including income rates can also perform the tax calculations with the basis in a tax return calculator as an important element of tax preparation.

Using an income tax calculator containing the current income tax rate is useful to calculate tax and national insurance contributions although most taxation authorities have moved towards providing an online tax calculator. The UK HMRC tax national insurance calculator is an integral part of the self employed accounts submission required for the 2008 tax return and both earlier and future financial years. While taxes are finalised up to 10 months after the financial accounts year using an income tax calculation incorporated into the accounts ledger has the advantage of predicting the liability well in advance of the due payment date.

An online ni tax calculator has the facility to calculate income tax because the submission format initially produces the net profit subject to the taxation calculation. Therefore to enable an income tax calculator to be predictive and effective in the accounts ledger the accounting format also has to produce the net financial profit subject to the tax calculations and incorporate the self employed or corporate income tax rates and taxation rules. A corporation tax calculator incorporating tax allowances and corporation tax rates applicable to the financial profit.

Changes are frequently made by the taxation authority and the 2008 tax return in the UK was changed to include the new annual investment allowance and a concession for small business being able to claim all unused writing down allowances in 2008 up to 1,000 pounds. The accounts ledger needs to be organised to include changes to either the income tax rate, or corporation tax rates and collect financial transactions to enable completion of the tax return form.

2008 income tax rates and hence the tax calculator 2008 were the same in 2008 and 2007. In respect of a payroll tax calculator the wage tax calculator would have also required few changes for the UK tax calculation to calculate income tax.

Due to the credit crisis and global recession fiscal stimulus has been a common political choice. To protect business that may not have produced a profit in the 2008 tax return form an arrangement was introduced in the UK to allow business to reclaim tax rebates from earlier years. The free tax calculator included in the online tax calculation doesn’t necessarily calculate tax rebates but they are available by offsetting current year losses against financial profit earned and taxed in earlier years.

In conclusion a business tax calculator can be incorporated into the accounts ledger to predict the results determined by the taxation authority online tax calculation. The benefit being that taxes are often the single largest financial liability of business and the sooner the taxes calculation is known the sounder the business finances will be. Put the 2008 tax return submission to bed early safe in the knowledge of the liability shown in the accounts ledger up to almost a year before the tax payment deadline is reached.

How do you find a tax preparer that is right for you?

First, not all tax preparers are the same. I wrote an article about this last year titled: Tax Returns: Are They All Created Equal?

HOW DO YOU FIND A TAX PREPARER THAT IS RIGHT FOR YOU?

First, not all tax preparers are the same. I previously wrote an article about this last year titled: “Tax Returns – Are they really all created equal”, and you may be as surprised as other readers about just how much tax return preparation can vary.

In fact, I calculated the average savings I typically find from annual tax savings, reducing professional fees and audit assessments. In total, the average savings are:

- $23,750 Annual tax savings

- $5,000 Audit defense savings

- $10,000 Reduced audit assessment savings

- $50,000 Reduced legal fees

- $3,000 Reduced tax return preparation fees

This is a total average potential savings of $91,750! Your tax preparer does make a difference! How much more could you do with these savings?

Second, the right tax preparer for you depends on what is important to you. Take a minute to answer this question:

WHAT MAKES YOUR TAX RETURN SUCCESSFUL?

How you answer this question will impact what type of tax preparer you need on your team. I’ve asked this questions to clients, prospects and colleagues. I have compiled the most popular answers and what it means to you as you find the tax preparer for your team.

ANSWER #1: Paying the least amount of tax legally

Your tax preparer needs to:

- Know the tax law very well and know how to be creative legally.

- Ask you a lot of questions about your situation in order to understand your situation and goals.

- Have a review process where at least one other person reviews your return solely for the purpose of how to reduce your taxes legally.

HERE ARE SEVEN (7) QUESTIONS YOU SHOULD ASK YOUR TAX PREPARER TO DETERMINE IF IT’S A GOOD FIT:

Q1: Can you tell me about the other ___________ (your industry) you service?

A: Your tax preparer needs to know how the tax law applies to your situation. Having other clients in your industry or with similar investments indicates that the tax preparer is likely to be familiar with the tax laws that impact you.

Q2: Who will be working on my tax return?

A: It’s very common (and a good business practice) for tax preparers to have staff prepare your tax return. You want to make sure the other people working on your return have the same level of expertise.

Q3: What is your tax return review process?

A: Tax preparers who are focused on reducing your taxes will have this built into their review process. Usually it involves having another experienced tax preparer review the return solely for the purpose of finding ways to reduce your taxes.

Q4: What would you have done differently on my past tax return?

A: Show the tax preparer you are interviewing your prior year tax return. Creative tax preparers will be able to give you at least one idea of what you can do to reduce your taxes by looking at your tax return for just a few minutes. If it’s creativity you are after, this is a great question to ask! But don’t expect the tax preparer to give you all the details right then and there – that’s why you pay them!

Q5: How much can you save me in taxes?

A: While it’s difficult for any tax preparer to answer this in just a few minutes of looking at your past tax return, it is possible for them to know if they can save you taxes after spending 30 minutes with you.

Q6: What deadlines do you impose on clients?

A: This may seem like an odd question for minimizing your taxes but it has a direct impact. If your tax preparer allows you to provide your information a week before the tax return is due, it’s very unlikely that the tax preparer will have the time to focus on your return to truly minimize your taxes. Tax preparers that want to reduce your taxes want your tax return information early and will communicate that to you.

Q7: What recent tax law changes should I be aware of? A: To minimize your taxes, your tax preparer needs to know the tax law inside and out, which includes the latest changes. Your tax preparer needs to be able to answer this question without hesitation.

ANSWER #2: Minimizing tax return preparation fees Your tax preparer needs to:

- Focus on the tax work and recommend someone else for the non-tax work (such as bookkeeping).

- Request tax information in a certain format.

- Require you to input your information online.

HERE ARE TWO (2) QUESTIONS YOU SHOULD ASK YOUR TAX PREPARER REGARDING MINIMIZING RETURN PREPARATION FEES TO DETERMINE IF IT’S A GOOD FIT:

Q1: What can I do to reduce my tax return preparation fees?

A: To minimize your tax return preparation fees, your tax preparer always needs to have your fees in mind. Ask your tax preparer what you can do to reduce your fees. If you don’t get at least 2 suggestions, your tax preparer probably isn’t thinking about how to keep your fees low.

Common suggestions include:

- Have someone other than the tax preparer do your bookkeeping. I am always skeptical when a tax preparer does the bookkeeping. First, they either charge an arm and leg or if they reduce their rates to accommodate you, it means they don’t spend their time entirely on tax issues, which could indicate their tax skills aren’t up to par.

- Organize your information. Don’t bring your tax preparer a shoebox! A tax preparer that is really focused on keeping your fees down will have forms, spreadsheets and other tools available for you to use to organize your tax return information.

- Enter your information online. Many tax preparers now require clients to input their information online. Accurately entered information can help reduce fees. Caution: Information that is entered inaccurately can increase your fees!

Q2: What is your fee structure?

A: Your tax preparer needs to be able to answer this question with confidence. Any wavering could indicate that the tax preparer knows the fees are too high for you but just doesn’t want to tell you. Unfortunately in these situations, you find out too late!

ANSWER #3: Reducing audit risk Your tax preparer needs to:

- Know the tax law very well and how to properly report your activity.

- Understand the IRS’s current “hot buttons” or “red flags.”

- Offer an audit defense plan.

HERE ARE FOUR (4) QUESTIONS YOU SHOULD ASK YOUR TAX PREPARER IN REGARDS TO REDUCING AUDIT RISK TO DETERMINE IF IT’S A GOOD FIT:

Q1: How many audits have you been through and what triggered the audit?

A: The most important part of this question is what triggered the audit. If it was triggered by how something was reported, then that may be something the tax preparer had control over (and may be a bad sign for you).

Q2: What was the outcome of the audits you have been through?

A: A return can be randomly selected for audit or selected because of a certain activity (even though it was reported correctly). So it’s important to understand the outcome of the audits. Was additional tax assessed or were there no changes? Additional tax may indicate that something was not reported properly.

Q3: Do you offer an audit defense plan?

A: Tax preparers that are confident in their work will offer an “insurance” program that covers their professional fees to handle your audit if your return is selected for audit.

Q4: What is your tax return review process?

A: Although tax returns can be selected randomly for audit, many are selected due to how items are reported on the tax return. Tax preparers who are focused on reducing audit risk will have a review process that includes another tax preparer reviewing your return solely for accuracy of reporting.

Be selective with the tax preparer you put on your team. The average savings I find for my clients is over $90,000! Your tax preparer makes a difference!