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Choosing a Tax Return Preparer or Doing Your Own Taxes
With the economy in turmoil many people are wondering whether or not to attempt doing their own tax return and saving the fee, or wondering, with all the new tax changes, if this year they should hire the services of a tax professional. In reaching this decision, Taxpayers need to consider the following:
· During 42 of the past 45 years there have been tax law changes.
· Part time tax preparers are usually are not educated in tax law.
· Even professional tax software contains glitches which must be patched daily during the tax filing system.
· In 2008 there were approximately 100 changes to the Tax Code.
· In deciding whether to do you own tax or have it prepared by a part time, non-professional, tax preparer in a shopping mall consider the following:
- If you prepare your own taxes and need help, what do you know about the person answering your questions?
- If you need to call back, will you speak with the same person?
- If that person is not familiar with your total tax situation, can they provide competent advice?
- Who do you turn to if your return is audited or if the IRS or state has questions or issues a notice?
· In a recent survey taken by H&R Block they determined that 90% of all Taxpayers do not understand the tax laws or the difference between a deduction or a refundable or non-refundable credit..
· Each year some large tax preparation businesses open only during tax season and pay millions of dollars in false advertising fines which they consider a small cost of doing business.
· Even professional tax software, costing several thousands of dollars, get the return right and unless the personal preparing the return is aware of the federal and state provisions (which often differ) these deductions and credits can often be missed.
· Fees charged by part time tax preparers are often based on the number of forms and with so many new changes this can be more expensive than using a veteran tax professional who can tell right away if these forms are needed. Although their hourly fee rate may sound high, quality counts, not quantity.
· Electronic filing speeds up the processing of your tax return and a faster refund if you have it deposited directly to your bank account, often making refund anticipation loans a waste of money.
· Electronic filing also picks up errors immediately so a tax pro will want to ensure that the return is correct before it is filed, and if there is a notice, they are around all year to help you.
· Things to look for in a true tax professional:
- Is their career dedicated to income tax law as well as compliance (competing forms)?
- Do they stay current on changes in tax law, Treasury Regulations and IRS rules and procedures?
- Does their background include working with a Tax Department of a Big 4 or national CPA or tax law firm? Not that not every CPA is proficient in taxation and until recently it was rare for a CPA to begin their careers doing anything except accounting, auditing and financial reporting, with taxation being left to the Tax Departments. I have several clients who are either CPAs or have children who are CPAs who were experts in auditing and financial reporting but new little about taxation, which is an area of dedicated specialization.
-A tax professional is an Educator for the client and does more than put numbers in boxes and takes the time to learn about their client by interviewing them -either in person or by email (if you do not live locally). Each year they will usually provide you with a tax questionnaire to determine what changes may affect this year's tax return or detect potential problems affecting either the tax return or your future tax situation. They use newsletters or their website to educate clients about their taxes suggesting tax planning strategies or addressing planned future changes being addressed by Congress. A tax professional establishes and maintains a personal relationship with their clients and their families avoiding costly errors.
-A true tax professional maintains a network relationship with other accountants and tax attorneys, as no tax professional is an expert in every aspect of tax law, and is not uncomfortable reaching out to other tax professionals for help when it is needed to ensure that the client's needs are best served.
Remember, you get what you pay for and in almost every instance, retaining the services of a dedicated, year round and full time tax professional adds substantial value that usually equates to a far greater tax savings than the fees paid. Remember that a tax professional builds his or her tax practice based on referrals from satisfied clients, not fancy advertising, and sets high practice standards.