Tax Preparation

Reasons to Hire a Tax Preparer or Tax Consultant

Posted in Tax Preparation

Reasons to Hire a Tax Preparer or Tax Consultant

A software creator has released its latest commercial for their software recommending self-tax preparation.  The theme is “Tell the story of you by you”.  The basic meaning of the commercial is you know what happened in the past year why not prepare your own taxes??  Why is this not a good idea?  This is not a good idea because there are constant changes in the tax law that make tax review and updates a 24/7 job.  If you have the time and resources to stay on top of the job…you are able to effectively prepare your taxes.  However if you do not have the time, as most of us do not, you may miss some very important points.  Also, beware of “Free Tax Preparation.”  Everyone is not eligible for this program and not all of the preparers have the knowledge that you need to effectively prepare your tax return.  Other tax preparers and I have worked with former self-preparation clients and the members of the Free Tax Preparation programs.  I can say…….the clients were much more relaxed with tax season because they know they had a professional.  The reformers have said many times……this is well worth the money.

Self-Tax Preparation

The tax preparation software is wonderful but you have to have knowledge of the tax laws for federal and state.  If you do not read the fine print of the tax laws; you could force the software to give you a deduction for which you are not truly eligible.  This has caused millions of dollars owed because a tax payer has claimed a deduction that does not belong to him or her.   The tax questions in the software are similar to the same questions a tax preparer would ask.  However, a tax preparer knows that certain criteria would apply to distinguish if you are entitled to this deduction.  Example:  There may be a question asking, “Do you own your own home?”  You can own a home and not live in that home all the time.  Maybe you rent it out for a portion of the year or the entire year.  Where do you claim your interest deduction on the mortgage?  Schedule A? Is it Rental Property?  Having rental property means you may have additional income to report or you could end up under reporting deductions in error.  Another misleading issue is a college student that can be claimed as dependent on their parents/guardian’s taxes, however the college student earns over $20,000 in income and pays his/her own bills.   The parents paid for the student to purchase books.  Who can claim the tax deduction for the book purchase?  Most people would say the parents but this is not necessarily true.  This means what some would consider a simple return has just become more complicated because you may claim a deduction you are not entitled to claim or you could miss a deduction you are entitled to claim.  I recommend consulting a tax professional.  There are many variables in tax preparation.  Don’t under estimate the education and value of a great tax return preparer or tax consultant.

Free Tax Preparation Programs

Tax preparers and tax consultants also had the pleasure of working with former customers of the Free Tax Preparation Programs.  The Free Tax Preparation Programs are the locations or websites that offer to prepare and file your tax return for free.  However, it is only free if you make under a certain amount of money.  The former clients of the Free Preparation Agencies found that the service was not optimal.  The clients experienced missed deductions and owed more taxes than required because the agency only knew how to prepare “Simple Returns.”   This issue requires an amended return which is time consuming and troublesome for you as a client.  Most of the time a tax consultation or tax preparation fee is a great investment when you think of the amount of money you save.  Remember the tax law can be confusing and without investing many hours into study you can cheat yourself out of savings.

These Agencies or the software providers are not always around when you receive documentation back from the IRS during the year.  Who do you contact to answer a tax notice or tax problem?  Make sure you have someone that you can contact throughout the year for various notices or tax problems.  Remember the IRS is human too and sometimes you may receive a tax notice for a tax problem you have already handled and you do not owe money.  Don’t submit a payment out of fear….contact your tax consultant or tax preparer to assist you with these issues.