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On Friday, May 15, I received the attached email Alert from the IRS Office of Professional Responsibility. The email topic, When a Practitioner Passes Away, is mostly focused directly at anyone subject to Circular 230 that practices before the IRS, typically attorneys, certified public accountants, enrolled agents and others who prepare tax returns for pay. I think it likely that every state also has their own additional laws and regulations regarding protection of your data.
Over my career, I have found myself being a subsequent tax preparer numerous times where a CPA colleague has died. Lately, I have also been involved with “orphan” clients where a firm has merged their practice with a different (typically larger) firm but the new firm has decided to no longer offer tax services to a particular class of clients or specific clients. Frequently, those orphan clients are either not expected to be profitable in the eyes of the new firm, the new firm does not have the staff to appropriately serve the client, the client has a history of actions, such as providing initial documents just before a tax deadline, not paying invoices timely, and so forth which can stress the process of providing accurate and timely tax services, or all of the above.
The nightmare situation for clients does occur when a client has just dropped off original information to the preparer, the preparer dies and there is no one to return the information and that job of returning client data falls to a non preparer volunteer executor. You may want to request any needed extension yourself if you are near a tax due date.
I agree with the article’s first point that early and often communication with your existing preparer is key to a smooth transition to a new preparer.
Your original data are yours, and as such that original data should be returned under the rules tax preparers operate under, but the time frame may not be to your liking when the tax preparer dies in possession of your original data.
The files your preparer creates, either paper, electronic or combination are typically owned by the preparer or the firm that the preparer works for. When the preparer dies the responsibility to protect your personal data continues even though the preparer has died. At some point if appropriate planning and actions have not been done to transfer the files upon the preparer’s death and followed through on, that useful client information in the preparer’s file will likely be destroyed when the statute of limitations period expires under the preparer’s obligations to maintain information for returns they have prepared. Widows and executors of deceased preparers who have client files do not want continued liability to store and protect client data.
Do yourself a favor and either give your preparer (complete) copies of the original data or upload data directly to the preparer’s portal whichever the preparer prefers instead of providing original documents. While your at it take the time to answer all questions on a tax organizer, but only you want the most accurate return at the lowest cost.
Many tax preparer’s have software that can print a “reviewers copy” that the preparer uses as part of a final review after all data has been input that includes analytical information, diagnostic information and some detail of data input that does not appear in the copy sent to the government or typically to you. You may not be a tax expert, but you may spot something the preparer did not that just does not appear correct. I think most preparers are thrilled to have clients who review and ask appropriate questions.
Another best practice is for the client to review the draft return, prior to the required formal transmittal authorization, of the prepared tax return before transmittal. You may be able to do a better job in your client review of the preparer’s work if you are doing so from a reviewer’s copy. Ask your preparer if you can have a reviewer’s copy, often sent to you as an encrypted pdf attachment by email or sometimes found on the preparer’s secure portal , of the draft return for your review if they have one.
Ultimately, the government(s) considers the taxpayer(s) responsible for what is on the return even if a mistake was made by a preparer. Please spend the time to actually review your draft return prior to transmittal. I believe it is typically always better to extend than have to amend.
I hope you do not have to ever go through the additional stress of your preparer dying with your return in process.
This good information made me, as a self-preparer, review my historical information thinking about what my survivors would need and how they would access it.
I make photocopies of all the original documents before bringing everything to my preparer because I assumed he needed to see the originals. It sounds like I could bring the copies and keep the originals? Thanks.
My understanding of the general legal & ethical requirements when acting as a paid preparer is that a preparer has no obligation to review original documents unless they believe the information provided by the client is incomplete or inaccurate. Additionally, inputting data into the preparer organizer from a W-2 for example that you are providing is overkill in my preference. In the organizer I prefer a client to just notate ” see W-2″. Most organizers have prior year sources and amounts. If source is not repeating in the current year tell your preparer in the organizer the why. Examples “Account closed in prior year”, “No IRA distribution taken in current year”. Most organizers have a series of general questions designed such that a “yes” response means the existence of a matter that the preparer will need to take action on in preparing your return such as a question about digital assets. If in doubt about how to answer the yes/no question my preference is a ? or a “call me”.
I would ask your preparer what they prefer, original or copies. If the preparer is building a paper file they may actually prefer receiving photocopies as they then do not have copy or return originals saving them time and hopefully you money as many preparers base their invoice on time spent. Every firm or preparer typically have different preferences and procedures.
There are exceptions as to the original vs. photocopy question. For example, if your return is one of the minority of returns that requires paper filing with the IRS the attachments will need to include the appropriate original government copy of W-2’s and 1099s that has federal withholding. Note by using your phone to take a picture of your W-2 and then hitting send you are transmitting your full unencrypted social security number which may not be the best idea.
Your preparer may not copy everything you provide. They may prefer, for example, a list of charitable contributions and they only copy the larger contributions acknowledgements in addition to your list. Ask your preparer what they want and what is most efficient.
Interestingly to me, many people that do provide copies to their preparer make their copies at a commercial copy center. I have seen my share of copied broker statements where the copies my firm received are pages numbered 1,3,5,7… and we are missing half of the statement.