1. Have a Web presence.  It is projected that 3/4 of the total population will be online in 2012.  That’s 239 million people searching the Internet every day. Having a presence on the web, in this day in age, is almost a necessity.  If you’re open to hiring someone to develop and maintain a website for your business – do it.   And be sure your web address is registered with the most popular search engines so that when someone searches for a tax practice in your area, your name will be one of the first to come up.

1. Be social.  Consider social media marketing.  Two-thirds of all web users will use social networks in 2012.  Facebook reports 263 million users check their account daily, closely followed by Twitter who currently welcomes approximately 200 million active daily users.  Both sites offer business owners the opportunity to make announcements pertinent to their customers and their prospects.  For example, you could offer a countdown reminder for the late-to-file tax payers, you could promote a referral program for new customers, or you could announce important industry-related news you think might affect some of your clients.

1. Know your audience.  No one knows the area you live in better than you.  Think about where you find out about what’s happening in your area – the local paper, radio, billboards, etc. – and build on that.  You can purchase ad space in a newspaper as small as a business card or as large as a two-page spread. And a 30-second radio spot that mentions your name, location, and phone number can be very effective.  Consider using repetition or a catchy jingle so people will remember you.

1. Attend local events.  Networking among other business professionals is a great way to get your name out.  Attend a local Chamber of Commerce meeting or host a meet-and-greet for professionals in your area.  Or, participate in a local job fair, volunteer for a local charity, or be a guest speaker at a local college.  Essentially, every person you meet could become a new customer.

1. Encourage referrals.  Consider offering a discount on tax prep fees for each new referral a current customer brings to you.  You may even want to consider offering some type of incentive to the taxpayer looking for a new tax preparer – maybe a 10% discount or a gift card to a local restaurant for all new clients.

No matter how you choose to market your tax practice, have something unique to say.  What makes your practice different from the others?  If it’s superior customer service, reasonable fees, or years of experience – use that.  There’s nothing wrong with bragging on yourself.  And always remember one of the most effective forms of advertising is word-of-mouth.  Always conduct yourself professionally and put your customers first – that’s a marketing tool you can use year-round.

Drake e-Training Center Webinar Schedule

Now that tax season is winding down, it’s the perfect time to start thinking about the RTRP competency test. Many of us feel the same way about the exam – Why now? Why me? If you haven’t taken an exam in years, then just going through the process of taking a standardized test is daunting. Even if you’ve prepared taxes for decades and know the material, the test anxiety can be a real burden. But, having just taken and PASSED the exam myself, I can tell you it isn’t so bad – IF you’re prepared!

To prepare for the exam, it’s important to put together a study plan. Here are some tips to get started:

1. Go online to the IRS site at www.irs.gov/PTIN and read about the exam, including what publications are involved. The IRS even provides a short video that demonstrates the testing experience and what to expect at the exam center.

2. Select a test prep study course. These courses will pinpoint the information that is being tested, saving you the time of going through all those publications yourself! Drake offers the RTRP Test Study Course and the RTRP Test Tips and Overview courses at discounted prices to our customers – just $99 and $19 respectively! Go to www.DrakeETC.com to learn more and to register.

3. Set a time frame for studying. Do not procrastinate! Sometimes it is better to schedule the exam a few months away so that it forces you to get started now.

4. To prepare for taking the multiple choice and true/false questions you’ll encounter on the exam, practice by taking a sample test. A practice test is offered with Drake’s RTRP Test Study Course and you can take it multiple times (with questions being pooled from hundreds of questions in our test bank) until you are comfortable with the questions and material.

5. Relax. You have until December 31, 2013 to pass the exam and it’s OK to fail it. You’re allowed to retake it until you pass.  But, I bet you’ll feel relieved the sooner you pass, so get started now.

By Barbara Cook
CPE Coordinator
Drake Software Education

 One of the main issues of this tax season was the new requirement regarding 1099-B reporting for brokerage transactions and the new tax form 8949. There are several issues with form 8949, but many preparers are finding that the lack of specific reporting requirements for 1099-B is proving to be extremely time-consuming on the preparer end of things. Taxpayers and preparers alike have struggled with trying to reconcile 1099-B with accurate Form 8949 calculations, which proved to be no easy task.

 Perhaps the main problem with the 1099-B is that there is no standard for how brokers report the cost basis information. This has caused countless issues with taxpayers and preparers, because the information that they need to report on the 8949 comes in all shapes and sizes on a 1099-B. One broker might fit the entire year’s numbers for a client onto one piece of paper, while another puts the same information onto thirty pages. The preparer then has the tedious task of sorting and sifting through the information the broker provides in order to report it accurately onto the 8949 form.

 Many taxpayers and preparers feel that the lack of regulations and structure with the 1099-B is contributing to the confusion. A standard way of reporting information on a 1099-B from broker to client would greatly reduce the stress and effort from the preparer’s standpoint.

Another issue that the 1099-B is encountering is the simple fact that brokers do not always know the cost basis, particularly if it was purchased from a third party or many years previous. The information the client needs from the 1099-B in order to file Form 8949 correctly may not always be available or accurate from the brokers, and then it is the preparer’s responsibility to obtain the information, and report the discrepancy on the 8949. The reconciliation with the broker’s statement may take more time than just accurately reporting the calculated basis.

            One company that has been affected is GruntWorx, which is essentially designed to gather data directly from source documents, such as the 1099B, and import that data directly into tax software. Even though the idea behind GruntWorx is to streamline the data entry process, the lack of standards on 1099-B forms is proving to make things difficult. Julie Pierce, VP of GruntWorx, stated that, “The cost basis reporting changes were certainly a challenge for many people this tax season. Here at GruntWorx our customers have shared with us on how our Trades product helped them with this very issue. After seeing the many problems people were having in finding all the information needed from the brokerage statements, we redesigned the Trades product early in the tax season to properly extract all the needed data whether from the 1099-B section, the Realized Gains & Losses section, and in some cases both. Our customers have let us know that we helped them save hours of tax prep time. We share their hopes that next year we will see more consistency in the reporting of capital gains & losses data in the brokerage statements.”

            In this manner, companies have to redesign some of their software and especially their approach to how information is obtained from clients, all because of one new form in the tax return, the 8949. Hopefully by next tax season, there will be a more regulated way of reporting information from broker to client on a 1099-B, so that it will take the guesswork out of the whole process for the preparer.

On one of many cold winter Chicago days, Kevin Cotton decided to seek sunshine and moved to Carson, California.  He had grown up in Chicago but wanted to make a new life for himself somewhere warm.  Once he settled in Carson, which is just outside Los Angeles, he met a beautiful young girl named Nikki.  Nikki’s father wasn’t ready to let her date and Kevin found himself wanting to make a good impression.

Kevin attended Rust College in Holly Springs, Mississippi, and Northern Illinois University in DeKalb.  He studied Theater Education.  He didn’t know much about taxes, but Nikki’s dad owned a tax practice and Kevin went to work for him.  He learned all about preparing taxes and helped the business grow.  Soon, Kevin and Nikki were allowed to date and this year they will celebrate their twenty-first wedding anniversary.

When Kevin’s father-in-law retired in 2006, Kevin took over Thomas and Thomas Tax Service.  He focused on growing the business without compromising the principles on which the company was built.  One thing he always wants his clients to know is that he’s going to take care of them from beginning to end.  He works hard to build their trust so they never want to go somewhere else.

At Thomas and Thomas Tax Service, Kevin and his staff prepare between 500 and 700 returns annually and e-file each and every one of them.  They prepare a handful of business returns too.  During tax season, their days often start at 8 am and end sometime around 10 pm.  They are open year-round as they also offer bookkeeping services and are sometimes called upon for referrals.

One referral Kevin is always happy to offer is to fellow tax professionals looking for a good tax preparation software program.  He says Drake Software can’t be beat.  He’s been using Drake for nearly 20 years.  He appreciates the timely phone support and broadcast emails, and the fact that he knows he can trust what he’s told.  He says, “The software is simple to learn and is incredibly user-friendly.”  He adds, “The customer service is thorough and concise.  It’s the best out there.”  Like Kevin, Drake Software wants customers to know they can trust them to provide the best service and work for them not just during tax season, but all year long.

Kevin describes himself as a trustworthy man who prefers to be informal yet professional, personable, and comforting.  He also sees the importance of having a good sense of humor.  He treats his clients like family and has the motto, “Only a family business can do a family’s business.”  Kevin attributes his successful career to a supportive family who has understood the demands of tax season year after year.

Kevin is a member of the California Society of Tax Consultants.  The CSTC is just one resource Kevin uses to stay on top of tax laws and changes. He also participates in their continuing educations programs.  Kevin knows it’s important to be aware of everything tax so that he’s sure to help his customers come out on top.  That is, after all, one of Kevin’s biggest goals – to do what’s best for the customer.

In his spare time, Kevin enjoys playing the drums and watching his kids play sports.  His daughter plays college basketball and his son plays high school football.  He likes to be at home with his family whenever possible but does enjoy traveling from time to time.  Family is very important to Kevin.

Kevin doesn’t plan to retire anytime soon.  But when he does, he hopes his clients will always remember his as a member of their families.  And should one of his kids decide to take the reins at Thomas and Thomas Tax Service, that would be great too.  If not, he hopes someone else will take it on and continue to provide the great service Carson residents rely on year after year.

In addition to an understanding and supportive family that stands by Kevin’s side each tax season, Kevin also attributes his success to his roots.  He was raised alongside four sisters by a devoted, dedicated mother who stressed the importance of education and tried to provide her children with as many opportunities as possible.  She helped build the confidence that gave Kevin the strength to move away and start a career.  She believed in him and taught him to have no fear when reaching for success.

This month, we celebrate Mother’s Day.  It’s a great time to reflect on the one who was often our biggest fan.  Happy Mother’s Day to all the inspiring and supporting moms who’ve made a difference in someone’s life.

The IRS is changing the “Permanent Mailing Address” box on the PTIN application to “Personal Mailing Address”. This change clarifies that the information is personal and exempt from public disclosure under FOIA rules.

Also, the IRS is removing the prohibition on entering a post office box in the “Business Mailing Address” box on the PTIN application. PTIN holders may now enter a P.O. Box as their business mailing address.

If you used your Personal Mailing Address as your Business Mailing Address or used a street address when you would have preferred to provide a P.O Box as your Business Mailing Address, you may want to update your contact information.  This information is not exempt from disclosure under FOIA rules and it will be released even if it is the same as your Personal Mailing Address.

For more information visit IRS.Gov.

Tips for Strategic Thinkers

If you’re thinking of branching out on your own or starting a new business from scratch, you’ll likely be able to find advice most anywhere. A lot of times, that advice will be based on others successes and failures. Hear it. Think about it. Build from it.

It’s no secret the first official step to starting your own tax practice (or any business for that matter) is to develop a business plan. And the best thing to remember when making plans for your future it to think things through and develop a strategy. Become a strategic thinker. Tax professionals are usually geared to look ahead and see that ‘what-ifs,’ so you’re already on your way.

As a business owner, especially an owner of a start-up company, you may find yourself wearing many hats. You’ll be an office manager, a data entry clerk, a maintenance worker, and at times, a food delivery guy on those long, late nights at the office. They call these growing pains. But as your business begins to grow, you will eventually trust others to do day-to-day operations and allow yourself the time to work on your business strategy. After all, a business plan isn’t done just because the welcome sign is turned on the front door. Your strategy will develop each and every day because you’re aim of success will be challenged by factors you can’t always control.

So, how do you become a strategic thinker? The kind of thinker that will help insure your company is never at risk? To be become a successful strategic thinker, you need to be able to think analytically, anticipate the future, resolve problems, learn to adapt, and interpret what’s happening. And how do you do that?

Think Analytically. Analytical thinkers question everything. Questioning most, if not all, decisions gains you a competitive advantage because if you take the time to research, you’ll be more equipped to make appropriate decisions. Challenge yourself and your employees, and never stop learning.

Anticipate. Always look ahead. Don’t become too comfortable in your environment. You don’t want your competitors to see you as vulnerable. Plan for the future, and always be aware of industry trends. Think outside the box, especially when it comes to your competition. Figure out what sets you aside and market that. If the industry is making BIG changes, be educated on those changes and network with other professionals so you’re in the know.

Resolve. When problems arise, get to the heart of the issue. The faster you know what caused the glitch, the quicker you can fix it. Always focus on your goals and remove all obstacles.

Learn. It is important to strive for excellence. Request feedback from your clients, others in the industry, and your employees – and encourage honest feedback. The success of your business will thrive on it. If you realize you’re off track, seek advice and redirect quickly. And if you see you’re doing well, celebrate your successes.

Interpret. Lack of information creates an environment open to quick decisions. When there’s a decision to be made, analyze information from several sources, question assumptions, and test several theories at the same time. Find trends from many data sources and figure out which actions will help you meet your goals.

Can you master these strategic behaviors? Yes. Keep your eyes open, seek advice, set expectations, and ALWAYS ask questions…after all it is your tax business, run it with a strategic mind!

Circular 230, Regulations Governing Practice before the Internal Revenue Service, applies to all paid tax return preparers. These regulations affect the way tax preparers practice and the decisions they make. Not following the rules and regulations of this important IRS publication has cost many tax return preparers both money and their right to prepare tax returns or give tax advice.

Why the spotlight on Circular 230? Over the last few years, the sanctions for failure to abide by the regulations described in Circular 230 have been dramatically increased. To understand why, we first need to look at the “tax gap.”

The IRS defines the tax gap as the “difference between the amount of tax that taxpayers should pay and the amount that is paid voluntarily and on time.” The tax gap can also be thought of as “the sum of non-compliance with the tax law.” In other words, Congress and the IRS think taxpayers are reporting and paying less tax than they should.

And apparently, Congress and the IRS believe that increasing sanctions on tax return preparers will encourage taxpayers to more accurately report their tax liability.

With the IRS estimating that the current tax gap of $450 billion is statistically unchanged from 2001, Congress wanted to know how many tax return preparers there are and what are their levels of expertise. When the IRS could not answer these questions, Congress instructed the IRS to implement a licensing program and also legislated that all preparers for all tax returns be subject to monitoring by the IRS.

Tax practitioners fall under two separate sets of regulatory rules that can impose sanctions – both civil and criminal penalties. The first set of rules is administered by the IRS. These rules are in the Internal Revenue Code (IRC), Title 26 of the code of federal regulations. Preparer penalties may be assessed against an individual or firm meeting the definition of a tax preparer in I.R.C. §7701(a) (36) and treas. Reg. §301.7701-15.  Preparer penalties that may be assessed under appropriate circumstances include, but are not limited to, those set forth in I.R.C. §§ 6694, 6695, 6701, and 6713, which explain the required  procedures, the rules for collecting revenues,  and the penalties for such issues like understating tax liability.

The second set of penalties is administered by the Office of Professional Responsibility (OPR), which is concerned with protecting the public in matters concerned with the Treasury Department. The OPR receives its authority from Circular 230, title 31, §10. The OPR is concerned not with collecting taxes or the understatement of tax liability, but rather, with protecting the public and with a pattern of behavior on the part of the preparer.

This differentiation between the IRS and the OPR is important, because if violations do not ultimately result in the under-reporting of tax, the IRC does not provide any sanctions.  Alternatively, if there is no willful or reckless intent or gross negligence, then sanctions cannot be imposed under OPR

If, however,  a practitioner is deemed to have been reckless and to have under-reported tax liability, then the practitioner can be found in violation of both sets of rules and subject to sanctions, fines, and imprisonment.

Under prior law, individuals with specific designations were covered under Circular 230 and could represent taxpayers in matters where the IRS questioned or made adjustments to the taxpayer’s tax return or account. These individuals could also represent a taxpayer if the taxpayer wanted to institute an action against the IRS. This was considered “practice before the IRS.” The designations covered by Circular 230 include attorneys, CPAs, enrolled agents, enrolled actuaries, and appraisers.

Assisting a taxpayer in the preparation of a tax return was not considered “practice before the IRS,” however, and therefore not covered by Circular 230. The preparer may be required to sign the tax return, but could not represent the taxpayer before the IRS.

New legislation changed the definition of “practice before the IRS.” Circular 230 §10.2 (4) added language that now includes preparation of a tax return to be covered by Circular 230. Some of the changes apply to everyone authorized to practice before the IRS, and other changes pertain to a group of tax preparers who did not fall under these regulations before the change but are now subject to scrutiny by the OPR.

It’s complicated, but it’s important.

Now, more than ever, paid tax return preparers need to understand and educate themselves so they can avoid sanctions for giving false or misleading information to the IRS or for asserting frivolous positions that do not meet realistic possibility standards. Preparers need to recognize what is considered disreputable conduct resulting from improperly preparing returns, and learn to identify tax fraud schemes.

Join Drake Software for the webinar “Avoid Ethical Violations” that discusses the rules of Circular 230, and see how Administrative Law Judges apply regulations governing practice before the Internal Revenue Service in disciplinary proceedings involving practitioners.

Visit the Drake e-Training Center for additional CPE information, registration, and webinar dates and offerings.

The webinar meets the IRS annual continuing education (CE) requirement for two hours of ethics education.

By Richard Kellner, CPA
Drake Software

They are processing these remaining forms as quickly as possible and anticipate all will be completed by May 31, 2012. For those individuals who timely filed their renewal application and have an enrollment card with an expiration date of March 31, 2012, the card is valid for another 60 days or until receipt of a new card. Enrollment will not expire due to this IRS delay.

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