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Tax season has just gone by, and is the moment for accounting firms to reflect on their performance and look for ways to improve their services. One of the key factors that can affect the quality and efficiency of tax preparation is the talent of the tax preparer. A skilled tax preparer can uncover opportunities, ensure compliance, and navigate the complex landscape of tax laws. This is key to adding value to your clients and in the end, most surely can translate into referrals and eventually more revenue.
However, finding and hiring a skilled tax preparer has become a difficult task. According to a survey by Robert Half, 49% of senior managers find it more difficult to find qualified candidates for professional-level positions than it was a year ago. 34% of them said they have expanded their search geographically with the hope of reaching international talent.
If you are one of those accounting firms that are looking for remote talent, you need to be prepared to ask the right questions during the interview process. A good tax preparer can make a difference in your firm’s reputation, client satisfaction, and profitability.
Here are 10 questions that can help you evaluate a potential tax preparer’s knowledge and skills in various areas of tax preparation.
# 1. Can you describe a complex situation where you had to research and identify specific deductions or tax credits to minimize a client's tax liability? How did you ensure compliance with relevant tax laws?
This question is all about understanding how you apply tax rules to real-life situations and uncover money-saving opportunities for clients. It's also about the approach to hunting down information on tricky tax matters.
A solid response should show that the candidates know where to look for tax info, whether that's IRS guides, tax software, or specialist magazines. It should also give a sense of which methods the candidate chose to check the findings were spot-on and how to get the info across to the clients.
# 2. If a client's tax return is selected for an audit, what are the steps you would take to prepare and represent them? Can you provide an example of a successful audit representation?
Let's hear about the candidate's skills in managing audits and working with the IRS. Are they good under pressure, and how do they maintain their client relationships in these tricky situations?
It's time for the candidate to break down their approach to an audit. Have they had a similar experience where they went through the tax return, compiled necessary documentation, interacted with the IRS representative, and negotiated a solution? And, don't forget, we'd love to hear about that time they steered a client through a successful audit.
# 3. Can you explain how you determine whether the Alternative Minimum Tax applies to a client? What are the key adjustments and preferences involved in AMT calculations?
Peeling back the layers of the AMT – one of the trickiest parts of individual taxation – gives us a chance to see the candidate's tax knowledge in action. If a client's regular income tax dips below a certain line, the AMT ensures they're still chipping in a minimum amount.
We're looking to hear about their grasp of the AMT, its purpose, and the key elements that may activate it, like specific deductions, personal exemptions, or certain income components. The candidate should also cover the main adjustments and preferences that tweak the regular taxable income when crunching AMT figures. We're talking things like local and state taxes, mortgage interest, or incentive stock options.
# 4. Can you explain how you determine and handle passive activity losses for a taxpayer with multiple rental properties or business interests? What are the limitations and carryover provisions?
This question helps us understand how well the candidate knows their way around passive activity rules. These rules cap off deductions for losses from activities that the taxpayer isn't actively involved in, like rental businesses or other ventures where they're a hands-off owner.
We're interested in how the candidate can sort activities into passive or non-passive based on how much the taxpayer gets their hands dirty. They should also walk us through how they crunch passive activity loss (PAL) numbers by netting income and expenses from all passive activities. Let's not forget about how they deal with the cap on offsetting PALs against other income streams, like wages or interest, and the rules of the game for carrying over unused PALs to future tax years.
# 5. How do you report and calculate the deferred gains or losses in a Section 1031 "like-kind" exchange? Can you provide an example of how this has been applied in a real estate transaction?
This question tests the candidate's familiarity and competence in handling Section 1031 exchanges, which allow taxpayers to defer recognition of gains or losses when they exchange property of like kind for business or investment purposes.
A good answer should explain the basic requirements and benefits of a Section 1031 exchange, such as holding period, qualified intermediary, identification period, exchange period, boot received or paid, etc. It should also explain how to report and calculate the deferred gain or loss by comparing the fair market value and adjusted basis of the relinquished and received properties. It should also provide an example of a real estate transaction that involved a Section 1031 exchange and how it affected the tax outcome.
# 6. How do you determine the maximum allowable contributions to various retirement accounts, such as IRAs or 401(k)s? What is the process for calculating and reporting early distributions?
This question is all about digging into the candidate's skills and knowledge when it comes to retirement funds. These accounts are a crucial tax-saving tool for individuals, but they're not exactly a walk in the park, with a bunch of different rules and limits that shift based on account types, taxpayer age, and distribution purposes.
We're curious about the candidate's approach to setting the boundaries on contributions to a range of retirement savings vehicles – think traditional IRAs, Roth IRAs, SEP IRAs, SIMPLE IRAs, 401(k)s, 403(b)s, and so on. They should also share how they deal with the calculations and reporting for early withdrawals from these accounts, covering the likes of penalties, exceptions, withholding, rollovers, and more.
# 7. Can you explain how you calculate and report the tax provisions and deferred taxes for a C corporation? What are the main considerations under ASC 740 (Accounting for Income Taxes)?
This question seeks to evaluate the candidate's skills and experience in the preparation of corporate tax returns and financial statements. Given that C corporations encounter double taxation – at the corporate level and then at the individual level on dividends – the candidate must demonstrate adeptness at managing both current and deferred taxes on income statements and balance sheets.
We are interested in understanding the candidate's methodology for determining and reporting current tax expenses or benefits, incorporating the corporation's taxable income and tax rate. Additionally, their approach to calculating and reporting deferred tax assets or liabilities should be considered, particularly their treatment of the temporary differences between a corporation's book income and taxable income. Finally, their interpretation and application of ASC 740, including aspects such as valuation allowance, uncertain tax positions, and permanent differences, should be outlined.
# 8. What is your approach to preparing Form 1041, U.S. Income Tax Return for Estates and Trusts? How do you handle distributions to beneficiaries and the allocation of expenses between principal and income?
This question evaluates the candidate's skill and knowledge in preparing fiduciary tax returns for estates and trusts. Estates and trusts are separate taxable entities that must file Form 1041 if they have gross income of $600 or more during the tax year. They are also subject to different tax rates and deductions than individuals.
A good answer should explain how to determine the gross income, deductions, exemptions, credits, and tax liability of an estate or trust. It should also explain how to handle distributions to beneficiaries, such as reporting them on Schedule K-1s, deducting them from taxable income, or allocating them between corpus and income. It should also explain how to allocate expenses between principal and income based on state law or trust agreement.
# 9. How do you ensure compliance with various state sales and use tax laws for a business client operating in multiple jurisdictions? Can you describe the process of determining nexus and applicable rates?
This question measures the candidate's expertise and experience in dealing with state sales and use taxes, which are imposed on transactions involving tangible personal property or certain services. Sales and use taxes vary widely among states in terms of rates, exemptions, thresholds, filing requirements, etc. Therefore, businesses that operate in multiple states need to be aware of their obligations and liabilities in each jurisdiction.
A good answer should explain how to ensure compliance with state sales and use tax laws by registering with each state's taxing authority, collecting and remitting taxes from customers based on their location, filing periodic returns and reports, etc. It should also explain how to determine nexus (the connection or presence that triggers a tax obligation) for a business based on various factors, such as physical presence, economic presence, click-through nexus, etc. It should also explain how to determine applicable rates for sales and use taxes based on product type, destination-based or origin-based sourcing rules, etc.
10. How do you handle the reporting and taxation of cryptocurrency transactions? What are the considerations for determining the basis, gains, and losses in such transactions?
This question tests the candidate's awareness and understanding of one of the emerging and evolving areas of taxation: cryptocurrency transactions. Cryptocurrencies are digital assets that use encryption techniques to verify transactions and control their creation. They are treated as property by the IRS for federal tax purposes.
A good answer should explain how to handle the reporting and taxation of cryptocurrency transactions by recognizing income or gain when receiving or exchanging cryptocurrencies for goods, services, or other property; reporting them on Form 8949 (Sales and Other Dispositions of Capital Assets) or Schedule C (Profit or Loss from Business); paying self-employment tax if applicable; etc. It should also explain how to determine basis (the cost or value of acquiring cryptocurrencies), gains (the excess of fair market value over basis), and losses (the excess of basis over fair market value) in cryptocurrency transactions by using the first-in first-out (FIFO) method or specific identification method; tracking the fair market value of cryptocurrencies at the time of each transaction; etc.
Finding the Perfect Remote Tax Preparer
These are some of the questions that can help you find the right tax preparer for your accounting firm. However, these are not the only questions you should ask. You should also consider other factors, such as the candidate’s communication skills, work ethic, personality, and fit for your firm’s culture and values.
Hiring a remote tax preparer can be a great way to access a larger and more diverse talent pool, reduce overhead costs, and increase flexibility and productivity. However, it also requires careful planning, screening, and management to ensure quality and compliance.
If you need help with finding and hiring remote talent for your accounting firm, you can use online platforms that specialize in connecting accounting firms with qualified tax preparers. For example, Paro is a platform that matches accounting firms with vetted and experienced tax professionals who can work remotely on a project or ongoing basis. Paro also provides tools and support to help you manage your remote team and ensure successful outcomes.
Whether you use an online platform or your own network, hiring a remote tax preparer can be a rewarding and profitable decision for your accounting firm. By asking the right questions during the interview process, you can find the best talent for your tax preparation needs.
References:
160 Remote tax preparer Jobs | Glassdoor. https://www.glassdoor.com/Job/remote-tax-preparer-jobs-SRCH_KO0,19.htm.
Remote Tax Preparer Jobs, Employment | Indeed.com. https://www.indeed.com/q-Remote-Tax-Preparer-jobs.html.
81 Tax preparer remote Jobs | Glassdoor. https://www.glassdoor.com/Job/tax-preparer-remote-jobs-SRCH_KO0,19.htm.
