Managing Transitions: Best Practices for When a Practitioner Passes Away
On Friday, May 15, I received the
attached
email Alert from the IRS Office of Professional Responsibility. The email topic, When a Practitioner Passes Away, is mostly focused directly at anyone subject to Circular 230 that practices before the IRS, typically attorneys, certified public accountants, enrolled agents and others who prepare tax returns for pay. I think it likely that every state also has their own additional laws and regulations regarding protection of your data.
Over my career I have found myself being a subsequent tax preparer numerous times where a CPA colleague has died. Lately, I have also been involved with "orphan" clients where a firm has merged their practice with a different (typically larger) firm but the new firm has decided to no longer offer tax services to a particular class of clients or specific clients. Frequently, those orphan clients are either not expected to be profitable in the eyes of the new firm, the new firm does not have the staff to appropriately serve the client, the client has a history of actions, such as providing initial documents just before a tax deadline, not paying invoices timely, and so forth which can stress the process of providing accurate and timely tax services, or all of the above.
The nightmare situation for clients does occur when a client has just dropped off original information to the preparer, the preparer dies and there is no one to return the information and that job of returning client data falls to a non preparer volunteer executor. You may want to request any needed extension yourself if you are near a tax due date.
I agree with the article's first point that early and often communication with your existing preparer is key to a smooth transition to a new preparer.
Your original data is yours, and as such that original data should be returned under the rules tax preparers operate under, but the time frame may not be to your liking when the tax preparer dies in possession of your original data.
The files your preparer creates, either paper, electronic or combination are typically owned by the preparer or the firm that the preparer works for. When the preparer dies the responsibility to protect your personal data continues even though the preparer has died. At some point if appropriate planning and actions have not been done to transfer the files upon the preparer's death and followed through on, that useful client information in the preparer's file will likely be destroyed when the statute of limitations period expires under the preparer's obligations to maintain information for returns they have prepared. Widows and executors of deceased preparers who have client files do not want continued liability to store and protect client data.
Do yourself a favor and either give your preparer (complete) copies of the original data or upload data directly to the preparer's portal whichever the preparer prefers instead of providing original documents. While your at it take the time to answer all questions on a tax organizer, but only you want the most accurate return at the lowest cost.
Many tax preparer's have software that can print a "reviewers copy" that the preparer uses as part of a final review after all data has been input that includes analytical information, diagnostic information and some detail of data input that does not appear in the copy sent to the government or typically to you. You may not be a tax expert, but you may spot something the preparer did not that just does not appear correct. I think most preparers are thrilled to have clients who review and ask appropriate questions.
Another best practice is for the client to review the draft return, prior to the required formal transmittal authorization, of the prepared tax return before transmittal. You may be able to do a better job in your client review of the preparer's work if you are doing so from a reviewer's copy. Ask your preparer if you can have a reviewer's copy, often sent to you as an encrypted pdf attachment by email or sometimes found on the preparer's secure portal , of the draft return for your review if they have one.
Ultimately, the government(s) considers the taxpayer(s) responsible for what is on the return even if a mistake was made by a preparer. Please spend the time to actually review your draft return prior to transmittal. I believe it is typically always better to extend than have to amend.
I hope you do not have to ever go through the additional stress of your preparer dying with your return in process.
Over my career I have found myself being a subsequent tax preparer numerous times where a CPA colleague has died. Lately, I have also been involved with "orphan" clients where a firm has merged their practice with a different (typically larger) firm but the new firm has decided to no longer offer tax services to a particular class of clients or specific clients. Frequently, those orphan clients are either not expected to be profitable in the eyes of the new firm, the new firm does not have the staff to appropriately serve the client, the client has a history of actions, such as providing initial documents just before a tax deadline, not paying invoices timely, and so forth which can stress the process of providing accurate and timely tax services, or all of the above.
The nightmare situation for clients does occur when a client has just dropped off original information to the preparer, the preparer dies and there is no one to return the information and that job of returning client data falls to a non preparer volunteer executor. You may want to request any needed extension yourself if you are near a tax due date.
I agree with the article's first point that early and often communication with your existing preparer is key to a smooth transition to a new preparer.
Your original data is yours, and as such that original data should be returned under the rules tax preparers operate under, but the time frame may not be to your liking when the tax preparer dies in possession of your original data.
The files your preparer creates, either paper, electronic or combination are typically owned by the preparer or the firm that the preparer works for. When the preparer dies the responsibility to protect your personal data continues even though the preparer has died. At some point if appropriate planning and actions have not been done to transfer the files upon the preparer's death and followed through on, that useful client information in the preparer's file will likely be destroyed when the statute of limitations period expires under the preparer's obligations to maintain information for returns they have prepared. Widows and executors of deceased preparers who have client files do not want continued liability to store and protect client data.
Do yourself a favor and either give your preparer (complete) copies of the original data or upload data directly to the preparer's portal whichever the preparer prefers instead of providing original documents. While your at it take the time to answer all questions on a tax organizer, but only you want the most accurate return at the lowest cost.
Many tax preparer's have software that can print a "reviewers copy" that the preparer uses as part of a final review after all data has been input that includes analytical information, diagnostic information and some detail of data input that does not appear in the copy sent to the government or typically to you. You may not be a tax expert, but you may spot something the preparer did not that just does not appear correct. I think most preparers are thrilled to have clients who review and ask appropriate questions.
Another best practice is for the client to review the draft return, prior to the required formal transmittal authorization, of the prepared tax return before transmittal. You may be able to do a better job in your client review of the preparer's work if you are doing so from a reviewer's copy. Ask your preparer if you can have a reviewer's copy, often sent to you as an encrypted pdf attachment by email or sometimes found on the preparer's secure portal , of the draft return for your review if they have one.
Ultimately, the government(s) considers the taxpayer(s) responsible for what is on the return even if a mistake was made by a preparer. Please spend the time to actually review your draft return prior to transmittal. I believe it is typically always better to extend than have to amend.
I hope you do not have to ever go through the additional stress of your preparer dying with your return in process.
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