Tax Preparation

The Internal Revenue Service for the first time will require the nation's roughly 1 million tax preparers to register with the federal government, with a large percentage of them having to pass competency tests and stay up to date on tax laws by taking 15 hours of classes a year. The rules, announced Monday, come after a six-month study by the IRS that found a need for greater protection for the estimated 87 million people -- about 80% of all filers -- who hire a preparer or use tax preparation software to file their taxes.

Some taxpayers splurge on big-screen televisions or pay off their credit cards with their tax refund, while others, like Brandon Frank, count on it to pay rent. The 25-year-old former construction worker from Michigan and father of three may have to wait as long as six weeks before he sees his refund, because of a filing error by H&R Block. "I was counting on it for rent," said Frank, who's been unemployed since October and is attending college. "I'm probably going to have to go to one of the cash-advance places, because the money I was expecting isn't there.

Do you pay someone to prepare your annual tax return? If so, you've got plenty of company. As the U.S. tax code has become increasingly complex, roughly 80% of the nation's taxpayers have turned to paid preparers and computer software to complete their annual returns. The bad news: Paying a professional won't necessarily make your return accurate -- and it won't absolve you of liability if your preparer messed up. "Anyone can prepare a federal tax return for anyone else for a fee. There is no national standard for return preparers and no federal oversight," said Internal Revenue Service Commissioner Doug Shulman at a news conference last week.

A former manager of an H&R Block tax preparation office in Van Nuys pleaded guilty to charges that he used the identities of the firm's clients to file false tax returns and get thousands of dollars in fraudulent refunds. Damon Charles Dubose, 39, of North Hills pleaded guilty on Monday to one count of wire fraud and one count of filing false claims with the Internal Revenue Service. Dubose used his access to client records to file unauthorized tax returns for at least 12 people, generating more than $48,000 in fraudulent refunds, federal prosecutors said.

Free tax preparation assistance will be available for seniors, the disabled, students and low-income individuals through a volunteer program sponsored by Moorpark College. Students who have been trained in tax preparation by the California Franchise Tax Board and the IRS will offer help most Saturdays starting Feb. 10. The students will be supervised by licensed tax professionals. Taxpayers should bring records of income and deductions, including statements showing interest and dividends.

The American Assn. of Retired Persons and the IRS have joined forces to aid the old and those of moderate income with income tax preparation. For the 29th straight year, the association will offer its Tax-Aide Program at various spots around the county beginning Feb. 3. Volunteer counselors trained by the Internal Revenue Service will be available to help taxpayers, who need only make an appointment.

Trained volunteers from the American Assn. of Retired Persons are offering free tax preparation assistance to people 60 and older. Middle- and low-income taxpayers are eligible for the program, which will run through April 15 at various sites. Volunteers have been trained in cooperation with the Internal Revenue Service to expedite the filing process and explain the special provisions pertaining to older people.

Low-income families and individuals can receive free help preparing their taxes as part of the Volunteer Income Tax Assistance program. Trained students and volunteers will work alongside program supervisors who are familiar with new tax laws. The service is available to people whose income was less than $40,000 in 1999. Specialized services are available for senior citizens, non-English speakers and the disabled.

Tax filing season has begun, and millions of Americans are trying to decide whether to file on their own or hire a professional tax preparer. Since the tax law is more complex than ever this year, it is likely that more Americans will seek professional help. Already about half the taxpayers hire someone to complete returns for them. However, consumers should realize that there is a huge disparity in the education and skills of tax preparers.

Harbor City tax preparer James A. Mattatall has been arrested on suspicion of contempt of court for failing to comply with a judge's order to turn over names, addresses and Social Security numbers of his customers, the Justice Department said Monday. Justice officials say Mattatall charged clients $5,000 to set up sham trusts to evade taxes. The Internal Revenue Service has audited 18 of Mattatall's clients, assessing $1 million in taxes and penalties.

Dear Liz: My retired parents are in a financial crisis. They got behind on their credit cards while they were trying to pay the mortgage on their home of 41 years. That home is now in a short sale. An attorney has advised them to file for bankruptcy to discharge the credit card debt and any debt that might remain after the short sale. After the sale of the home, I need to relocate them to my state so that I can further assist them, but I'm not sure if any landlord will rent to them given their terrible credit history, which will look even worse after the bankruptcy.

Tax preparation will be more complicated this year for some small-business owners. State rules have been newly tightened because of California's budget shortfall. And talk about new ? some federal tax incentives were not passed until just days before the end of 2010. "Literally, we couldn't file individual returns that had itemized deductions a week ago because the forms weren't ready because the politicians in Washington jerked around until December to make this thing happen," said Robert S. Seltzer, a certified public accountant in Beverly Hills whose clients include small-business owners and entertainment industry professionals.

Dear Karen: I'm looking for venture capital funding for a distressed real estate business. Any suggestions? Answer: Prepare a detailed business plan that shows realistic financial projections. The plan should chart an attractive return for your investors within five years. Venture capitalists typically invest in innovative start-up companies that could someday go public or be acquired by a large corporation. "If you wanted to start a business that developed software programs for distressed real estate companies, that would be more appropriate for venture capital," said Emily Mendell, vice president of strategic affairs for the National Venture Capital Assn . "You may be better off taking investments from friends and family or angel investors whose criteria are broader.

Do you pay someone to prepare your annual tax return? If so, you've got plenty of company. As the U.S. tax code has become increasingly complex, roughly 80% of the nation's taxpayers have turned to paid preparers and computer software to complete their annual returns. The bad news: Paying a professional won't necessarily make your return accurate -- and it won't absolve you of liability if your preparer messed up. "Anyone can prepare a federal tax return for anyone else for a fee. There is no national standard for return preparers and no federal oversight," said Internal Revenue Service Commissioner Doug Shulman at a news conference last week.

The Internal Revenue Service for the first time will require the nation's roughly 1 million tax preparers to register with the federal government, with a large percentage of them having to pass competency tests and stay up to date on tax laws by taking 15 hours of classes a year. The rules, announced Monday, come after a six-month study by the IRS that found a need for greater protection for the estimated 87 million people -- about 80% of all filers -- who hire a preparer or use tax preparation software to file their taxes.

The Colorado Supreme Court ruled Monday that a prosecutor improperly searched thousands of files in a tax preparer's office while looking for illegal immigrants who had committed identity theft. In a 4-3 decision, the court termed the search a violation of privacy and upheld a lower court's order to throw out evidence against a defendant who had sued. "A taxpayer has a reasonable expectation of privacy in his or her tax returns and return information, even when that information is in the custody of a tax preparer," Justice Michael L. Bender wrote in the court's opinion.

Any student, worker or retiree who earned less than $25,000 last year and has not yet filed income taxes for 2001 can get free tax preparation and file personal income tax returns online. The new program, announced Wednesday by Rep. Christopher Cox (R-Newport Beach), is being provided by the Intuit Financial Freedom Foundation. Information on the program is available at www.quicken.com /freedom.

The owner of a Van Nuys tax preparation firm pleaded guilty to filing returns in the names of fictitious people seeking more than $322,000 in refunds, the U.S. attorney's office said Thursday. Carlos Alvarez, 41, owner of A&B Professional Services, submitted bogus W-2 forms to the Internal Revenue Service purporting to show that the nonexistent taxpayers had substantial amounts of money withheld from winnings at Southern California race tracks, along with large losses.

A plan to keep dozens of domestic-violence shelters from closing sailed out of the state Assembly late Friday night with nary a no vote. Yet hours later, the bill lay in the legislative trash heap, one of many lost to politics as lawmakers reached the deadline for completing their work this year. Republicans in the Senate blocked more than 20 bills -- all needing GOP votes to pass, many approved by the lower house with bipartisan or near-unanimous support -- to leverage a trio of unrelated demands.

There are many ways to file your annual income tax return -- more than ever this year, in fact. But virtually all of them have a cost or catch. The best way for you to file is going to depend on your income, the complexity of your situation and how good you are at following directions.