1. What is the difference between attorney-client privilege and accountant-client privilege?

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Attorney-client privilege is a legal protection that ensures confidentiality for communications between you and your attorney when seeking legal advice. This privilege means your attorney cannot be compelled to disclose those communications in court or to authorities.

 

Accountant-client privilege, while offering some confidentiality, is more limited. It generally does not protect your communications in federal tax matters during court proceedings or audits. However, in some states, there are protections for accountant-client communications in state matters. When dealing with sensitive or potentially legal tax issues, attorney-client privilege may provide stronger protections.

 

2. How do I decide whether to use your services as an attorney or as a CPA?

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If your situation involves legal concerns—such as an IRS audit, tax disputes, or the need for confidential advice under attorney-client privilege—my services as an attorney may be the better choice. For routine tax preparation, bookkeeping, or financial statement preparation, my CPA services are more appropriate.

 

When in doubt, feel free to discuss your situation with me, and I can help you determine which service best fits your needs.

 

3. What types of federal and state audits could I face?

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Audits typically fall into three categories:

 

Correspondence Audits: The IRS or state agency requests additional documentation by mail to verify specific items on your return.

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Office Audits: You are asked to visit an IRS or state office to provide more detailed documentation and answer questions about your return.

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Field Audits: An IRS or state agent visits your home or business to examine your records in detail.

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Each type of audit requires a unique approach, and I can guide or represent you through the process to ensure your interests are protected.

 

4. What makes a tax return more complicated to prepare and more expensive?

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Several factors can increase the complexity—and cost—of preparing your tax return:

 

• Multiple income streams (e.g., wages, business income, investment income).

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• Itemized deductions or numerous credits, such as home office deductions or energy-efficient property credits.

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• Involvement in partnerships, S-corporations, or other pass-through entities.

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• Multi-state tax filings due to business or residency in multiple states.

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• Ownership of foreign assets or income from overseas.

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• Providing all relevant documentation upfront can streamline the process and reduce preparation time.

 

5. How long should I keep copies of my tax returns?

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For Individuals: Keep your tax returns and supporting documents for at least three years from the date you filed your return. If you omitted significant income (more than 25% of your gross income), retain them for six years. For claims related to bad debts or worthless securities, keep records for seven years.

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For Businesses: Retain business tax records, including financial statements, receipts, and supporting documents, for at least seven years. However, it’s often advisable to keep permanent records, such as incorporation documents and major contracts, indefinitely.

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6. How is the IRS and states’ focus on identity theft impacting tax return processing?

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In recent years, the IRS and state tax agencies have implemented stricter measures to combat identity theft.

 

While these measures protect taxpayers, they can also slow the processing of returns and refunds. Common delays occur due to:

 

Additional identity verification steps, such as submitting PINs or responding to IRS identity verification letters.

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Cross-checks between federal and state databases to ensure the taxpayer’s identity and filing accuracy.

To minimize delays:

 

Ensure all personal information (Social Security numbers, names, addresses) is accurate on your return.

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File your tax return electronically, as this is typically faster and more secure.

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Respond promptly to any IRS or state agency correspondence regarding identity verification.

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If you have further questions or concerns, feel free to reach out. I’m here to make the tax process as smooth and stress-free as possible!