The 10 reasons you should hire a Professional Tax Preparer
Tax Professional’s are trained in the proper techniques of individual tax return preparation. The Tax Professional understands what documentation is required to obtain your best tax results within the law. Most Tax Professionals will use checklists and organizers to ensure that no tax deduction or potential income is overlooked. The tax professional will review your documents with you and assist you in gathering the tax documents required. He or She will thoroughly review the
returns ensuring the returns are filed with no errors or omissions giving you the confidence you are filing an accurate return. The Professional Preparer will provide you with a complete and professionally assembled return for your records and will maintain a copy of the return and his
documentation for a period of 3 to 7 years.
2. A Tax Professional can save you money
The biggest reason people hesitate to hire a Tax Professional is the cost. A good Tax Professional is worth far more than the cost of return preparation. The Tax Professional can save you more money than you would pay in taxes simply because they know more about the tax law.
They stay up-to-date on all the tax law changes and know all the tax breaks that apply to your return or business, thus wouldn’t overlook deductions or credits you may be eligible for. The Tax Professional will save you penalties and interest by not making the typical mistakes of a novice. One needs to remember that penalties and interest can sometimes be more than the additional tax assessment. A Tax Professional typically provides guidance during the year which will maximize your tax refund or minimize the tax balance due by utilizing proper tax planning.
3. Avoid common tax filing mistakes
Common mistakes like filing single when you should be filing married, filing separate or including someone as a dependent who isn’t can lead to interest, penalties and additional taxes owed. A Tax Professional who is properly trained can eliminate common errors that occur due
to taxpayer’s misinterpretation of the basic rules of tax law.
4. Small Business taxes can be complicated
Small business taxes can be complicated and may have legal considerations that need to be followed. The Tax Professional is well versed in these complications and can advise the taxpayer how to handle these complications. Many Tax Professionals prepare small business 1099′s which are due to the vendor by January 31st. This is just one example of a factor that a small business owner might not be aware of. Having a Tax Professional review these items can provide
a “peace of mind” factor that’s valuable to all small business owners.
5. A Tax Professional can save you Time
When you have a Tax Professional do your taxes, you are going to be able to save a lot of time by not having to deal the uncertainty of possibly having forgotten something. The Tax Professional does this by providing an organizer and asking the right questions that will
eliminate the possibility of you spinning your wheels looking for unnecessary information that is not pertinent to your return. An example of this would be medical expenses incurred by an
individual. Much paper work and compiling maybe required to obtain the total medical expenses to include in schedule A. However, as a Tax Professional I can ask a client if there was an unusual
amount of medical expenses which would come close to 7.5% of the client’s Adjusted gross income. If the answer makes it clear that medical is not deductible thean we saved the time necessary to
gather this information.
6. Audit Assistance
Many Tax Professionals provide audit assistance in the event that you are ever audited. They can also help you respond to IRS and state notices and letters. The Tax Professional will have records
that he/she compiled, during the preparation process, which will help in the defense of your return in an audit situation. Being audited is nothing to be afraid of. However, not understanding the audit process can cause unnecessary stress. This can be avoided by using a Tax Professional.
7. Uncomplicate the sale of stocks or bonds
The sale or exchange of stocks, securities, bonds, or any other investments is classified as a capital asset transaction. The phrases capital assets and capital gains tax scare a lot of people, but they’re not that bad. Capital transactions are actually taxed at a lower rate than your ordinary income, but handling capital transactions does get tricky. The tax basis of these assets are determined by a long list of rules. Taxpayers must also declare capital assets on a separate form. Many people know that you can deduct up to $3,000 in capital losses from your income, but what many do not know is that some limitations to this deduction apply when it is taken as the result of trading securities. A Tax Professional can simplify the rules and ensure that your tax return is prepared correctly.
8. Do you understand the tax law well enough?
However mundane, everybody should understand the basics of the tax return process. Whether you prepare your return yourself or get help, you’ll need to collect all of your relevant tax forms:
W-2s, 1099s, and other forms stating your wages and income for the year. Your employers, vendors, and financial institutions should mail them to you by the end of January, but you’re responsible for tracking them down if they don’t arrive. But tax forms are just the beginning. You’ll also need information about any deductible expenses you paid throughout the year like home mortgage interest, charitable contributions, and student loan interest (among many other things). If you started a business during the year, you’ll need detailed records of income and expenses. Also, you’ll need to know which forms and schedules you need to file for each transaction.
If you’re a full-time employee, don’t have many additional sources of income, don’t own a home or have kids, chances are your tax return should be fairly straightforward. You are probably fine by preparing your tax return by hand or with the help of free or inexpensive tax preparation software. If you have one or more situations that complicates your taxes, however, and any of this makes you uncomfortable or confused, consider consulting a professional tax preparer or accountant.
9. If you provide financial support to someone are they a dependent?
If you support someone financially, nine times out of ten, that person counts as a dependent and you can claim them on your taxes. The exception? If you support a friend or a relative that isn’t your direct descendant, you might not be able to claim him or her. (This is basically the government’s way of preventing freeloading). For example, if a friend of yours has a job, but still needs extra financial assistance that you provide, there is a good chance you won’t be able to claim them on your taxes. If you’re uncertain of the many rules regarding claiming a dependent, check with a professional preparer or accountant.
10.What’s the difference among tax professionals?
There are many types of tax professionals and their training and qualifications can vary greatly. In the past Pros didn’t need any particular education or certification to prepare someone’s tax return. However, recently that has changed. The IRS has mandated registration, competency examines and continuing professional education as minimum requirements for Pros who are not currently regulated. Professionals who are currently regulated are enrolled agents, certified public accountants (CPAs) and attorneys.
A. For lack of a better description, the first category of Tax Preparer we will call the Newly Regulated Preparer. These individuals are now required to register with the IRS and obtain a exclusive number by which all returns prepared by the Newly regulated can be identified. Additionally, starting in June of 2011, these individuals must past a competency examination given by the IRS. They will also be required to obtain 15 hours annually of continuing professional education. It is currently unclear as to how many unqualified and unethical tax return preparer this new system will eliminate, but it’s a good start. It is difficult to estimate the quality of the work, the Newly regulated will produce or at what cost. One can only reiterate the old saying, buyer beware.
B. Enrolled agents must pass a certification exam or have qualifying experience as a former IRS employee and should be more than competent to handle most tax returns.
C. CPAs meet extensive educational and experience requirements, pass a comprehensive exam and stay current on tax issues. You may want to work with a CPA if you have an especially complicated return
or you have a business and file as a Sole Proprietor, Schedule C. If you choose to have your taxes done at a reputable accounting firm, chances are a CPA will at least review your return before it is filed.