THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Monday, February 5, 1996 TAG: 9602030231
SECTION: BUSINESS WEEKLY PAGE: 10 EDITION: FINAL
TYPE: Cover Story
SOURCE: BY TOM SHEAN, BUSINESS WEEKLY
LENGTH: Long : 141 lines
April 15 is not yet in sight, but the pace of activity at local tax-preparation offices is accelerating.
While four other customers file into an H&R Block office on Poplar Hall Drive in Norfolk, Michelle L. Stephenson takes a seat at Prudence Palmer's desk near the back wall.
Stephenson sips coffee from a styrofoam cup as Palmer runs through a string of preliminary questions: Your address? Your children's names? Their Social Security numbers?
The parent of an eight-year-old son and a seven-year-old daughter, Stephenson will use the earned income credit. However, filling in her 1040A short form requires no complicated calculations. It takes Palmer about 30 minutes to complete the state and federal tax returns.
Stephenson says she uses a tax-preparer because of the speed and confidence it provides.
``It's simpler to come to someone who knows what they are doing,'' the Norfolk resident says.
About half of the individuals who file federal returns each year turn to a tax preparer.
Some seek help from certified public accountants for handling complicated deductions or several sources of income. Others resort to accountants and other tax preparers because of a distaste for tax matters.
``A lot of people dread tax season and dread talking about taxes,'' says Ken Whitley, proprietor of Whitley's Tax Service in Portsmouth. ``There are people who don't even want to mess with a 1040EZ, as easy as that form is.''
Given a bit of time, a motivated individual can complete a 1040 tax return. What determines the need for a preparer is not so much the amount of an individual's income but the complexity of their financial situation.
The Tax Reform Act of 1986 sharply reduced the availability of deductions, prompting more individuals to forgo itemizing their returns and take the standard deduction.
Still, occasions arise when someone should consider using professional help. These include the sale of real estate, a marriage or divorce, and income from self-employment.
Whatever the reason, it pays to shop around because the sophistication of tax preparers varies widely. So does the cost.
At one end of the spectrum are those individuals who have developed a knack for completing filling out returns for a few friends and neighbors.
Next are the seasonal preparers working for tax-preparation chains like H&R Block and Jackson-Hewitt Tax Service. These preparers receive several weeks of training before tax season begins.
More often than not, individuals with simple tax situations have turned to commercial tax preparers to get a refund more quickly or obtain a loan on the refund that they expect to receive.
About 90 percent of the individuals using the H&R Block office on Poplar Hall Drive this tax season have had their returns filed electronically, says Sandra L. Coltrain, district manager for the H&R Block franchise in the region.
Of these, 70 to 75 percent have used electronic filing to get a refund-anticipation loan, she says.
But Coltrain and Carolyn Buzek, general manager of three Jackson-Hewitt offices in Norfolk, say their offices provide more sophisticated tax advice when it's needed.
If a prospective customer inquires about having a complicated return prepared, Jackson-Hewitt will line up a veteran preparer rather than using one of its seasonal employees, Buzek says.
Elsewhere along the spectrum of tax-return preparers are independent accountants who handle taxes, bookkeeping and payroll tasks for small businesses throughout the year. Some of these are enrolled agents - accountants who enjoy a special status with the Internal Revenue Service.
Enrolled agents have demonstrated their expertise in taxation and accounting matters either by being employed by the IRS as a tax auditor for at least five years or by passing a rigorous two-day examination conducted by the IRS.
Because of their credentials, enrolled agents can represent clients in disputes with the IRS, something seasonal tax preparers cannot do.
The most sophisticated tax advise usually is available from certified public accountants. These are college graduates who have passed a nationwide examination in accounting, met certain work requirements and have been licensed by state accounting bodies.
With their experience at business accounting, CPAs can offer advise on the organization of an individual's tax records and planning.
Accountants and CPAs are quick to differentiate themselves from the seasonal preparers by emphasizing the continuity of their service. Any client with a question about their tax return several months after filing it might have difficulty getting a speedy answer from a preparation service that relies on part-time help, says Harry James of James Financial Services Inc. in Virginia Beach.
``They can call me in August, and I'll talk to them,'' says James, who is an enrolled agent.
David Zimmer, a Virginia Beach CPA who specializes in tax work, makes copies of his clients' tax returns in case the IRS raises questions about a return. ``Record-keeping is clearly the key,'' he says. ``He who has the records usually prevails.''
CPAs, like enrolled agents, have the power to represent their clients before the IRS. ``A lot of times I'm able to meet with the IRS and resolve the difficulty'' without involving the client, Zimmer says.
But that level of service comes at a price, one that taxpayers with simple returns may not care to pay. Zimmer's minimum fee for preparing a tax return is $250.
In contrast to the hourly fees that CPAs charge for completing a tax return, H&R Block, Jackson-Hewitt and many other tax preparers begin with a basic fee and tack on charges for each additional line they fill in and for each calculation they make.
The basic cost for preparing a short form - a 1040A or 1040EZ - runs from about $25 to $50. For a simple 1040 form, the cost of preparation will be $75 to $90. ILLUSTRATION: Color photo by Huy Nguyen\The Virginian-Pilot
H&R Block employees, left to right, Prudence Palmer, Pat Lawhorne,
Paula Gordon, and Linda McDonald face busy days ahead. About half of
the individuals who file federal returns each year turn to a tax
preparer. At many tax preparation offices, the basic cost for
preparing a short form, a 1040A or 1040E, runs from $25 to $50. For
a simple 1040 form, the cost is from $75 to $90.
Michelle Stephenson gets help with her taxes from H&R Block tax
preparer Prudence Palmer. Stephenson says she uses a tax-preparer
because of the speed and confidence it provides. " It's simpler to
come to someone who knows what they are doing," the Norfolk resident
says.
David Zimmer, a Virginia Beach CPA who specializes in taxes, makes
copies of his clients returns in case the IRS raises question about
a return.
"Record-keeping is clearly the key," he says. "He who has the
records, usually prevails.
Graphic
Some Source For Help
Tax Preparation Books
For complete text, see microfilm
KEYWORDS: INCOME TAXE RETURN by CNB