5 Tax Secrets Your Accountant Never Told You

November 14, 2010, By 13 comments

5 Tax Secrets Your Accountant Never Told You

They say that the only certainties in life are death and taxes, but while you might not be able to escape taxes, there are few certainties where Uncle Sam is concerned. In my experience, there is no murkier concept than accounting, and your accountant won't always give you the full story.

1. The word "accountant" is ambiguous.

If you want your taxes done by the best in the business, you need to hire a CPA. My entire family uses the same certified public accountant, and I can't imagine using anyone else. If you take your taxes to a storefront tax preparer service, you're not going to find a CPA.

To whom would you rather entrust your taxes? Someone who has earned certification through years of schooling and experience? Or someone who has taken three weeks of paid training and is counting the hours 'til the end of his shift?' That's what I thought. You have to do your research. Your accountant might not volunteer the fact that he's not a CPA, so do some digging.

2. Gift tax is not cumulative.

Currently, you can give up to $13,000 without having to pay gift taxes to the federal government. What your accountant might not have told you, however, is that gift taxes aren't cumulative. You can give $13,000 to your son and $13,000 to your daughter and each is excluded. In other words, the gift tax exclusion applies to each person, not to the total value of gifts you give.

Gift taxes likewise do not apply to gifts you give your spouse. Let's say you and your wife keep separate bank accounts and other financial holdings. If you hand over $30,000 to your significant other, your accountant might not tell you the gift tax doesn't apply.

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Comments (13):

George W. Someone with a CPA is authorized to perform required SEC audits; that's the only thing that the title of CPA makes a difference for. I would go to a someone who is a tax professional and has kept current with all tax law changes and issues...and that isn't necessarily a CPA. - 08/31/2011
Harry H. Enrolled Tax agent is the best to do your taxes unless your CPA only does taxes year around. CPAs are for audits. - 08/23/2011
Rachael G. Cheryl, you are completely incorrect that a CPA is only about bookkeeping. The CPA exam itself has nothing to do with bookkeeping. It's about tax, legal and audit knowledge. Those of us in tax also have advanced degrees in it. I myself have a masters degree in taxation on top of the CPA so know what you are saying before getting on a soapbox. - 06/13/2011
Van W. As you know that there are no requirements at all for CPA's to have any tax training. Most of their requirements are in the book keeping field. They have specific college requirements for Book keeping courses. EA or Enrolled agents are the only ones who have actual test requirements or training for Tax preparation. - 05/22/2011
Elliot T. Tax Attorneys normally have more education than any of the other professional tax preparers. They have to comply with all the same rules, but the difference is that they can give legal advise on taxes, and if they are willing to put their name to it can insulate their clients from some claims for penalties or fraud. In addition, although this is heavily argued, there is the "work product privilege", where if a tax attorney renders an opinion to a client, the opinion, which is prepared for possible litigation is privileged. The IRS hates this and has won a battle in the First Circuit Textron case, which allowed piercing the privilege if the opinion was for SEC compliance. Lawyers also have annual CLE requirements, and tax attorneys get their CLE from tax related courses. The ABA is a co-sponsor of the national forums held each year for IRS registered tax attorneys, CPAs and EAs. - 05/10/2011
Joel M. Accountants are trained to keep books accurately. Indeed, they are very good bookkeepers that are trained and tested (CPA's) to ensure that they do everything by the book (FASB, GAAP). And, that is the problem. They do it by the book and offer no creative solutions that could really save you some tax dollars. It is possible for someone that truly understands income tax rules to offer creative solutions that are completely legal. But you won't get this from a CPA. They weren't trained that way. - 04/20/2011
Anna S. A real good article that I came across. :-) It is good to know the tax secrets that your CPA hides from you. If you know these tax secrets it will be easier for you to file your taxes and may be you can get better deductions. For example, a large number of people don't know the fact that they can claim tax deductions on energy saving. The CPAs normally don't inform the people about tax deductions on energy savings. Claiming tax deductions on donated household items is also something which most of us don't know. So, I will suggest people to check out the internet and get to know various other tax secrets so that they can claim proper tax deductions. - 03/04/2011
Kelly E. Tip 5 is incorrect. Specialty meals for weight loss which are a substitute for normal meals can not be deducted. Eating is considered a normal expense of living and is not tax deductible. If your doctor prescribes something special IN ADDITION to your normal meals, you may be able to make the argument to the IRS but simply eating Jenny Craig or NutriSystem instead of normal meals and trying to deduct the cost will never work, regardless of doctor recommendation/prescription. Quote from www.irs.gov under allowed medical deductions: "The cost of participating in a weight-loss program for a specific disease or diseases, including obesity, diagnosed by a physician. In general, you may not deduct the cost of purchasing diet food items or the cost of health club dues " - 02/27/2011
Ben K. An EA may only have to take 24 hours of CPE, but a CPA has to have 120 hours every three years. Anyone can be an EA, but passing the CPA is harder than passing the bar. You don't have to trust me, but I have passed both in the state of TX. - 02/23/2011
Pixel C. Personally, why does the tax code need to be so complex to even need the services of these people? Seems to me accountants could find plenty of meaningful work in business rather than shuffle paper trying to comply with a tax code written by special interests in bed with the US congress. - 01/29/2011
Liz P. #1 ... If you want your taxes done by the best in the business, you need to hire a CPA. CPAs are not the only type of certified accountant! There are also EAs (Enrolled Agents), Certified Internal Auditors (CIAs), Certified Management Accountants (CMAs), Accredited Business Accountants (ABAs), and more I'm sure... Truth be told, I would rather go to an EA to get my taxes done than a CPA for several reasons ... most importantly: CPAs are licensed by the state government & each state has different requirements for obtaining & keeping their license current. EAs are licensed by the federal government and have to complete something like 24 hrs of "continuing professional education" within the federal & state TAX LAWS every year. Personally, I don't think that being a CPA makes you one of "the best in the business" with respect to taxes ... accounting is a very broad field and CPAs can operate in virtually any area of finance! Many CPAs do not specialize in taxes because of the issues encountered when practicing across state lines. Imagine working and living in two states, you CPA may not be licensed in both! If you want your *taxes* done by the best in the business, you need to hire an EA. - 01/20/2011
Bob C. um, there is a lifetime cap on tax-free gifts. It IS cumulative. - 01/17/2011
Cheryl G. Claification: CPA are schooled and experienced in Bookkeeping and making sure your P&L's are correct so your TAX professional can calculate your return accurately. MANY CPA's DON"T want to deal with a sole proprietor, Partnership or even SCorp tax return. The main difference between a CPA and a Seasoned, Registered Tax Accountant is their knowledge in Tax Law and Price!! The initals after teir name tend to mean that they can charge an outrageous amount of money for the exact type of tax return. Now that the IRS requires ALL tax preparers to be registered with them, California has had that requirement since 2002, EXCEPT CPA's, EA's and Tax Attorneys. An EA would be a better bet since their main focus IS TAXES!! CPA's main focus is Bookkeeping! - 01/16/2011

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