I want you to know that I’m on your side when it comes to tax law planning strategies and compliance.
On the compliance side, tax law has some rules that force me to be on your side. For example, to avoid tax code penalties, I have to
- give you a copy of the tax return I prepared;
- sign the tax return I prepared;
- put my preparer tax identification number (PTIN) on the tax return;
- retain copies of the tax returns I prepared or keep a list of the tax returns prepared (either is acceptable) for three years; and
- retain the names, taxpayer identification numbers, and work locations of any tax return preparers I employed for three years from the end of each return period.
As a small-business taxpayer, you have to like pretty much all the penalties above, because those penalties help make sure that I’m taking care of you.
All tax law penalties that apply to me are not necessarily favorable to you. For example, I have to complete a paid preparer’s due diligence checklist and attach that to your tax return when you qualify for certain tax credits. The checklist turns me into an IRS auditor for those credits.
That sounds horrible, but it’s really not bad. After all, whom would you rather have as an auditor, me or the IRS? And with me in your corner, you get this added benefit: lower chances of an IRS audit. That’s what my signature on your tax return means.
There is one area where you can help me with your planning. By law, I’m exposed to penalties for any unreasonable position on your tax return. Positions supported by the tax law are not unreasonable. When you come to me with a new idea, please make sure (as I do with an idea) that the idea is grounded in the tax law. Even better, bring me the idea supported with tax code references.