Why you want to use an Enrolled Agent when it comes to your IRS Income Taxes
The only thing we are guaranteed in life is death and taxes. Well other than eating healthy, getting plenty of exercise, and not smoking I really can’t give you too much sage advice for the former. However, being a business owner for over 15 years I do have some guidance that hopefully can help you to save you time, money and stress. By sheer luck when I opened up my first office back in the summer of 1999 I was fortunate enough to have my little real estate office next door to Enrolled Agent by the name of Randy Abril of Abril Business Services in Rancho Cucamonga, California. Most of you might be asking yourselves, “What’s an Enrolled Agent?” Great question, because I too, asked myself that same question about fifteen years ago.
Before explaining what an “Enrolled Agent” is, here’s typically how I have found how the public stratifies tax professionals. First, you have your Tax Preparers – individuals who work independently or for a firm (like H&R Block) and their sole function is to correctly prepare your tax return with the documents (i.e. W2’s, 1099’s K-1’s, etc.) and receipts you provide them. Becoming a Tax Preparer is not very difficult and as the most minimal requirements for all of Tax professionals.
Next up the ladder, you have your Enrolled Agents – who not only have a broad understanding of the tax code, meaning they can prepare your taxes and optimize your tax returns, they also have the training and licensing (after passing a 72 hour exam) to represent you before the Internal Revenue Service (IRS). That’s right, an Enrolled Agent can represent you in front of the IRS!
At the top of the ladder (in most of society’s eyes) is the ever so coveted Certified Public Accountant or more commonly known as the CPA. CPA’s will need a college or university degree in Accounting (or similar degree). Then before they can become a CPA they have to take a very rigorous multi-day exam, which they must pass, before they can officially become a CPA. Then of course there are tax attorneys who have passed their state bar exam and specialize in tax law. However, when it comes to people the public pays to prepare a tax return it’s usually going to be either a tax preparer, an Enrolled Agent or a Certified Public Accountant (CPA).
First off, I can say that I do not have a ton of experience with Tax Preparers or CPA’s. That being said, I do have a quite a bit of experience with an Enrolled Agent, actually with one Enrolled Agent, Randy Abril owner of Abril Business Systems in Rancho Cucamonga, CA. Randy Abril has prepared tax returns for my corporations, partnerships and my individual returns for about 15 years now and so far it has gone great. I have never, knock on wood, been audited on any level – corporate, partnership or personal. Despite what was previously stated, there have been some questions and requests for more information sent by the IRS on past returns; and needless to say, I never was the one who picked up the phone to call the IRS or had to deal with how to prepare each response, it was all Randy, my Enrolled Agent and each time I have come out A-OK.
Here’s a true a story and I’ll keep the person’s name out of this in order to respect their privacy. I’ll preface this very true story by providing the context that this Mr. Anonymous, like myself, is an owner of investment real estate and like any owner of investment real estate a Schedule E must be filed as part of our tax return.
So here it is, some years ago, Mr. Anonymous, who is some close to me and also a client of Randy Abril’s, received a letter form the IRS stated that Mr. Anonymous incorrectly filed his Schedule E for one property. The IRS was claiming that Mr. Anonymous declared too many expenses for this one property as Repairs expenses, when they should have been classified as Improvements. In principle, a Repair item is an expense where the entire dollar amount can be written off that same tax year. In converse, when an expense is classified as an improvement the cost is depreciated over 27.5 year period. Moving the story forward, letter from the IRS stated that Mr. Anonymous incorrectly took too large of a Repair deduction and should of allocated a greater amount to his Improvement expenses. Essentially, the IRS was saying, that Mr. Anonymous owed them approximately an additional $7,000.00 in taxes due. Shortly after receiving the IRS letter Mr. Anonymous called me and explained the contents of the and asked what he should do? Without hesitation, I urged Mr. Anonymous to immediately contact Randy Abril and have him deal with the IRS directly. Long story short, I came to find out a couple months later that Mr. Anonymous, being a Do-It-Yourselfer type did not heed my advice and choose to tackle the problem himself and decided to phone the IRS offices and his IRS case manager directly and after having one Q&A phone call session with his case manager, Mr. Anonymous received a second letter in the mail stating based on this conversation with his IRS case manager, the IRS was now of the opinion that Mr. Anonymous now owed over $36,000.00 more in total taxes due for that tax year. Mr. Anonymous was devastated and he had hard time admitting defeat, so once again, I told him to contact Randy Abril at Abril Business Systems to sort the problem out. Fortunately, Mr. Anonymous did contact Randy after hanging up with me and here’s what happened… After about 10 months, numerous phone calls, several letters and a very reasonable fee paid by Mr. Anonymous, Randy Abril was able to work directly with the IRS and get Mr. Anonymous’s additional tax bill for that year down to approximately $4,000.00. The moral of the story is that as business owners and individuals we do not only pay professionals to get us the best result, we also pay them to keep us safe from additional pain and suffering.
Throughout my 15 years of knowing Randy Abril, he has helped numerous people I know with a myriad of tax filing situations and IRS problems. Additionally, I have known people who have had all types of tax problems go to Randy and prior to knowing about Randy they were typically confused, ill-advised and/or scared of how to deal with their situation. That being said, these people who I know who either owed IRS back taxes, had not filed returns or had tax returns that were improperly filed, all became better off once they worked with Randy and came out their situations in better standing with the IRS, gain insight on how to avoid future problems and are typically much less stressed. More so, Randy is a wealth of knowledge when it comes to tax and/or financial planning advice. If you’re unhappy with your current tax professional or uncertain about your current tax situation call 909.987.9490 and ask for Randy Abril and let him know I referred you. And be warned his office is unassuming, his manor is very friendly and casual, and occasionally his desk and office can be a bit cluttered, however keep in mind, it’s the man, his knowledge of the tax code and his passion to help people is why you’re there.
I refer anyone who lives in Southern California seeking out a great tax professional to Randy Abril at Abril Business Services. I’m very fortunate to have Randy and his staff as a highly valued resource, and more importantly it gives me much more pride to call him, Friend.
Co-Owner of The Hanover Group – Real Estate Team
at Keller Williams Realty – SoCal
Abril Business Systems
Requirements to become different types of tax professionals:
Tax Preparer: http://www.wikihow.com/Be-a-Tax-Preparer
Enrolled Agent: https://www.irs.gov/Tax-Professionals/Enrolled-Agents/Become-an-Enrolled-Agent
Enrolled Agent in California: http://www.csea.org/become-an-ea/
Certified Public Accountant (CPA) in California: http://www.accountingedu.org/california-cpa.html
What is a Schedule E tax form: https://www.irs.gov/pub/irs-pdf/i1040se.pdf
Rental property – Repairs versus Improvements: http://www.nolo.com/legal-encyclopedia/repairs-vs-improvements-how-tax-deductions-differ-landlords.html