Who Will Prepare Your Income Tax Return This Year?
Did you know there are no requirements
Ten Questions to Ask Your Income Tax Preparer
to be an income tax preparer? No licensing or education is required to go into business preparing tax returns for the public. Because taxes take a big part of your income, it's important to select a competent, knowledgeable person who can help save you money.
- You Can Prepare Your Own Income Tax Return
- Income Tax Preparation Software
- Income Tax Preparation Services
- Ten Questions to Ask a Income Tax Preparer
- Three Ways to Find an Income Tax Preparer
- Can Your Teenagers Prepare Their Own Income Tax Returns?
1. You Can Prepare Your Own Income Tax Return
Many people can prepare their own income tax returns
. Basic tax laws don't change much from year to year, so last year's tax return will guide you when you prepare this year's return. Tax forms and tax publications are available online at www.irs.gov.
Did you know that a number of tax software companies
offer free electronic income tax preparation and filing online? You must qualify for the free service by meeting their criteria regarding age, income and other points. If your tax return is complicated or you earn big bucks, it is likely these companies will charge you to prepare it. You can find a list of these free tax preparers at the IRS web site www.irs.gov. Often the preparation is free for your federal tax return, but you have to pay a small fee for the state and local tax returns.
2. Income Tax Preparation Software
If you don't qualify for a free tax preparation service
, you can purchase tax preparation software in a box to run on your personal computer or a you can use an online site. It's hard to say which alternative is less expensive, because box software is often discounted. If you have a high-speed connection to the Internet, using tax preparation software online is convenient. The choice is yours.
Most tax preparation software
, like well-known TurboTax or TaxCut, show you a series of question and answer screens, while you provide the answers. The programs walk you through the process of preparing an income tax return, while reviewing all the possible deductions and credits you could qualify for. With your OK, the software will file your return electronically, or print out complete forms for you to sign and mail. You can rely on the software to take care of all the calculations, provided that you don't make any typing errors.
3. Income Tax Preparation Services
Perhaps you've moved beyond
do-it-yourself tax preparation software. It's possible that your tax return is too complicated to prepare online, or that you have lots of questions, or that you just don't want to risk doing it yourself. In this case, you can turn to a tax advisor or a tax preparation service. There are also qualified volunteers who often provide free tax preparation to low-income and middle-income taxpayers on a walk-in basis. Your public library may have more information for you about this service. The IRS offers a toll-free help line, where you may find the answer to a specific question, and some offices also provide tax help to you on a walk-in basis.
But, like most of us, you'll want to choose
a reliable tax preparation service.
4. Ten Questions to Ask a Income Tax Preparer
To choose a reliable, knowledgeable tax preparer
, you should ask questions like these.
- How knowledgeable are your income tax preparers? Do they attend seminars and subscribe to professional journals? Are they certified in the field?
- What type of tax returns do you handle? If you have a small business, you'll want a preparer who is familiar with small business tax issues. They'll have tax saving suggestions that are worth more money to you.
- Do you offer bookkeeping service? For your small business, this firm can help you prepare the financial statements you need to attach to your tax returns, the financial statements your liability insurance company wants to see, the statements you need for construction bonds, for bidding on contracts, and for bank loans.
- How do you work with your clients? Will this person be able to help you with a shoebox of receipts, if that's how you deal with recordkeeping? The better you organize your records, the less expensive it is to hire a tax preparer. Some preparers simply take the numbers you provide and plug them into computer software.
- Many well-advertised tax preparation services make money by offering tax-anticipation loans. In other words, they lend you the amount of your tax refund before the IRS can send it to you. The loan is repaid out of your tax refund. The interest rate on this type of loan is high, and, now that the IRS has improved its refund turnaround, these loans are unnecessary. The tax preparers who prepare your return at some of these services can be part-time,seasonal data entry clerks, rather than tax professionals.
- Did you have special taxable events this year? Quiz the advisors to determine their knowledge in your areas of concern. A tax professional can help with tax issues related to estate planning, inheritances, retirement accounts, investment decisions, divorce, marriage, student taxes, sale of a home, casualties and thefts, military service, birth of a child and charitable donations. If you have a small business, the tax advisor is invaluable expert. They will offer tax-reduction information that is worth many times the fee they charge.
- Does your tax advisor work full-time on taxes? Some tax preparers concentrate on selling you insurance, investments and tax anticipation loans that pay them a sales commissions.
Ask tax preparers how their advice has saved money for their clients. The typical preparer has a wealth of anecdotes on this, their favorite topic.
- Ask a tax preparer what fee you will be charged. For straightforward returns, the preparer can quote a dollar amount. For more complex situations, the preparer will charge a client by the hour. Does the preparer also charge if you call the office with a question?
- Ask the tax preparer how many of their income tax returns were audited last year. How aggressive or conservative is the preparer on tax issues? What is the likelihood that your return will be audited? Will the service represent you at an IRS audit? What does the preparer charge to accompany you to a tax audit?
5. Three Ways to Find an Income Tax Preparer
You can find tax preparers
from the personal recommendation of your friends and family and coworkers. Ask a tax preparer for references from other clients.
A CPA is a certified professional accountant
, who is educated in the field, passed the CPA exam and completes extra coursework every year. The American Institute of Certified Public Accountants can provide you with the names of CPAs in your town.
An EA is a licensed Enrolled Agent
qualified to represent you before the IRS. EAs complete continuing education each year and renew their license every three years. The National Association of Enrolled Agents can provide you with the names of EAs in your area.
6. Can Your Children Prepare Their Own Income Tax Return?
You do your children a good service
when you encourage them to prepare their own tax returns. For working teenagers, their tax return is straightforward, and they can rely on you to help them with specific questions. Year by year, your children will learn more about the tax topics that apply to them. Understanding income taxes builds confidence and good citizenship.
I hope life brings you much success.
I wish you a very happy day.
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