The Discerning Investor

Are you looking for a tax professional to help you do your taxes this year?

First things first. Avoid scam artists.

In its "Dirty Dozen" list of common scams, the IRS warns about "ghost preparers," who can disappear after the tax return is prepared, charge a large percentage fee of the refund or steal the entire tax refund, and get taxpayers to take advantage of tax credits and benefits for which they don't qualify (tinyurl.com/msemaess).

If you are scammed, file a police report and fill out IRS Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit (tinyurl.com/yxxxvzf6), detailing your complaint. That's the advice of The Taxpayer Advocate Service, an independent IRS organization that serves as the "voice" of taxpayers (tinyurl.com/y389h2xx).

Second, consider the guidance offered by the IRS on how to find someone to work with by reading "Need someone to prepare your tax return?" at tinyurl.com/bddzbj5b.

From there, you can explore the IRS search engine at "Directory of Federal Tax Return Preparers with Credentials and Select Qualifications" (tinyurl.com/5aes58zn). The National Association of Tax Professionals recommends the IRS database to "search for the perfect preparer" (tinyurl.com/vbff635u).

You'll be able to find tax preparers in your area who either currently hold professional credentials that are recognized by the IRS or who have an Annual Filing Season Program -- Record of Completion, which is issued by the IRS to those who "obtain a certain number of continuing education hours in preparation for a specific tax year," according to the IRS webpage "Understanding tax return preparer credentials and qualifications" (tinyurl.com/yeyjd5en).

As to credentials, anyone can be a paid tax return preparer provided the person has an IRS preparer tax identification number (PTIN). That includes certified public accountants, enrolled agents and attorneys -- but it also can be someone who does not have a credential in one of those areas. Paid preparers are required to include their PTINs on the tax returns they process.

Another element to consider is "representation rights." If the tax professional has unlimited representation rights, that means the person can represent a client on any matter, including an audit or a payment/collection issue. Those professionals include enrolled agents, CPAs and attorneys.

If a tax preparer has limited representation rights, the person cannot represent clients regarding appeals or collection issues. See "Understanding tax return preparer credentials and qualifications" for more details.

Third, consider these IRS tips:

-- Find a tax preparer who is available throughout the year, in case you have questions after the filing season.

-- Make sure you understand the preparer's credentials and fees.

-- The preparer should ask to see your records and receipts.

-- The preparer should offer IRS e-file (tinyurl.com/bde2ux4e), which can mean a quicker refund provided a taxpayer files electronically and chooses direct deposit. Be sure that the routing and bank account numbers on the tax return are accurate.

-- It is your responsibility to review the return before you sign it, and to ask questions if something does not appear to be correct. Be sure to get a copy of the complete tax return, signed by you and the preparer.

-- Qualified individuals can take advantage of Volunteer Income Tax Assistance and Tax Counseling for the Elderly, two IRS programs that offer free tax preparation. See tinyurl.com/wcfxxvd3.

Considering what is at stake -- the relationship between you and the IRS when it comes to taxes -- be sure to take the time to find a qualified tax preparer (if you need one). But don't take too long -- the federal filing deadline for taxes this year is April 15, and the IRS expects more than 140 million individual tax returns to be filed before then, with more than half of all returns projected to be filed with the help of a tax professional (tinyurl.com/49k8hh76).

Don't forget: No matter who you decide to work with, "[t]axpayers are ultimately responsible for all the information on their federal tax return, regardless of who prepares the return," quoting the IRS (tinyurl.com/3styb7h2).

On another note, help me decide whether to give presentations (live or online) on the topics we talk about in this column. Email me at readers@juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

It's time to do some estate planning research together. A great place to start is the American College of Trust and Estate Counsel (ACTEC), which is an "organization of trust and estate lawyers and law professors in the United States and around the world," according to the ACTEC website (tinyurl.com/mtptvbc2).

The ACTEC website is robust (tinyurl.com/y48v8ukd). There are more than 80 videos and transcripts, so take your time to find ones that might be relevant to the questions you have.

Some topics are basic ("Estate Planning Checklist for After Someone Dies"; "Living Trusts and the Impact on Taxes"). Others are novel. For example, "Digital Asset Management in Life and Death": This involves online accounts (including photos), travel points and cryptocurrency. Do you want a "digital death" for some accounts that you don't want your family to have access to once you are gone?

If you are an AI fan, you'll enjoy watching "Use of Artificial Intelligence (AI) in Creating an Estate Plan," which discusses the limitations of AI and why it might not be ideal to use AI instead of hiring an attorney.

There are also videos that cover unique situations. "Understanding Special Needs Trusts" deals with trusts that "contain provisions that are designed to protect the assets in that trust in a way that continues to preserve public benefits that a person with a disability who is the beneficiary of that trust may be entitled to."

And more: "Estate Planning for a College Student or Young Adult" focuses on when your college-bound child turns 18 and becomes an adult. Do you need power of attorney and an advanced medical directive so you can continue to talk to doctors in case your child has an accident while at school?

"Motivating Heirs with an Incentive Trust": An incentive trust is set up with benchmarks "that trigger the trustee to make greater or fewer trust distributions when a particular conduct or behavior of a beneficiary can be observed." Those "behaviors" could include something like getting good grades.

"Can I Do a Will for Myself?": While this video notes that you can do one, each state has different requirements about what a will has to say in order to be valid (for example, some states accept a handwritten will, while others do not).

Law firm websites are also good resources for research. As an example, Connecticut law firm Cummings & Lockwood LLC offers a white paper titled "Relocating to Florida," which addresses, among other topics, wills and estate planning (tinyurl.com/y6a8ykxj).

Quoting the white paper: "A person relocating to Florida should review the peculiarities of Florida law with a qualified estate planner in order to determine the appropriateness of his or her current estate plan. Although you may not need to rewrite your will, there may be good reasons for considering a revision."

Another example: Law firm website Wollman, Gehrke & Associates of Naples, Florida, features an article on wills and trusts by attorney Edward E. Wollman (tinyurl.com/wkfcfr78). He points out that "Probate can be lengthy and costly in Florida. A well-drafted trust allows your estate to bypass the probate process, ultimately saving time and facilitating a seamless transfer to your beneficiaries."

In short, there is a lot of information to gather and consider -- even how to hire a lawyer.

ACTEC offers a search engine that allows you to find ACTEC "Fellows" (an ACTEC Fellow must have "more than 10 years of experience in the active practice of probate and trust law or estate planning" -- tinyurl.com/55zckbjz). You can also contact your state bar association for more information about estate planners in your area.

Doing some of your own research can help prepare for a meeting with an estate planning attorney. The resources are plentiful and well worth your time.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

If you inherited an IRA within the last few years, you've been dealing with dramatically new beneficiary rules adopted under SECURE Acts 1.0 and 2.0.

Here is something to think about: What happens when you, the beneficiary, pass away? What rules apply to a "successor beneficiary," someone who inherits the IRA from you?

To set the stage, we need to go back to the pre-SECURE rules for deaths that occurred before 2020, which are still in play for some taxpayers.

Take a reader I'll call Tom, who in 2018 at age 56 inherited his mom's IRA when she passed away at the age of 89. Her year-of-death RMD (required minimum distribution) was $16,667 based on her Dec. 31, 2017, IRA value of $200,000 and her divisor of 12.0 (Uniform Lifetime Table III, tinyurl.com/bnfwnebj).

When Tom inherited his mother's IRA, before the SECURE Act's changes took effect, he benefitted from a "stretch." Tom's divisor for his first RMD (2019) at age 56 was 28.7. Assuming a balance of $190,667 for Dec. 31, 2018, his 2019 RMD of $6,643 was quite a bit lower than his mother's last RMD of $16,667, based on her divisor. (I'm using Brentmark Inc.'s financial software for these calculations.)

SECURE Act changes did not affect his RMDs. He continues to take them under the old rules during his lifetime.

Tom wants to know: "If I pass away and my wife inherits the IRA from me, does she continue the stretch since it was originally pre-2020 and she is a spouse, or does she do the new 10-year payout scheme?" I asked Mark Luscombe, principal analyst at Wolters Kluwer Tax and Accounting, to share his expertise.

Tom's wife ("May") is a successor beneficiary. She will be "required to do a 10-year payout" under SECURE Act rules, according to Luscombe. Since the original IRA owner (Tom's mother) was already taking RMDs when she died, Tom's successor beneficiary (May) would be required to make RMDs each year over the 10-year period (2036) measured by Tom's date of death (let's assume he dies in 2026), instead of being able to wait until 2036 to empty the IRA.

Here is another wrinkle: You might think that a spouse can treat her inherited IRA as her own, but that is not the case if the spouse is a successor beneficiary. "The special rule for spouses of an IRA owner does not apply to spouses of an inherited IRA owner," explained Luscombe.

Those "special rules," as detailed in IRS Publication 590-B (tinyurl.com/47h9utkb), include treating the deceased spouse's IRA as your own by designating yourself as the account owner or by rolling it over into your own IRA.

One final question about the new rules: When does the yearly RMD rule not apply to a successor beneficiary?

Take this example: "June" dies in 2022 at age 50, well before her RMD age (73). "Andy," her beneficiary, dies in 2023. "Cindy" is the successor beneficiary.

When an IRA owner's death occurs before RMD age, the 10-year rule starts a countdown based on the IRA owner's death, and the entire IRA balance must be withdrawn by the end of the 10-year period, explained Luscombe.

Since June died in 2022, Cindy would have to empty the inherited IRA by the end of 2032. For Cindy, there is no requirement that money be withdrawn each year, although that's always an option.

As you can see, RMD answers depend on the precise set of circumstances. You'll need expert tax advice that applies to your situation. Wolters Kluwer's expert insights are subscription-based. See tinyurl.com/mt2m84vp.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION