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Who should do your taxes?

Posted by on Feb 14th, 2010 and filed under Business. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

by Charles Andrew, Certified Public Account

Some people can get by with doing their own taxes, others need professional help.  Here’s how to tell which group you belong to and some tips on choosing the right person to do the job.
Returns fall into some basic categories: short form returns, itemized returns, or more complex returns for business owners, investors, property owners and so forth.
For the simple returns, you can use commercial software either online or from the stores.  These packages will allow you to e-file your return, a good idea in many circumstances, especially if you are expecting a refund.
A few questions to ask yourself to decide whether to do your own return:
1.  Are you prepared to spend the time to do your own taxes?
Preparing your own return is often time consuming. You need to learn about the schedules from the IRS instructions, and then to fill them in properly. This can take many evenings and does not include the many hours locating and organizing the records needed to prepare the return and then have the materials in proper order.  Tax programs can save time completing the forms, but cannot tell you if the schedules are accurately completed.
2.  Are you prepared to tackle the complexity of federal and state tax codes?
First, it’s not what you know that’s important here, it’s what you don’t know … or to the point, what you think you know and in fact really don’t know.
The tax codes changed slowly many years ago; now they change frequently.  Due to the complexity and constantly changing tax codes over 60% of Americans have a professional prepare their returns.
How to Choose a Preparer
There are five categories of preparers: commercial preparers like H&R Block, certified public accountants, enrolled agents, attorneys and actuaries.
Referrals are fine, but you need to ask a few questions on your own. The key is to find a person who specializes in taxation, who invests in continuing education in studying changes in the law. A good preparer will ask you many questions and you should come with a list of your own. This is necessary to ferret out every deduction the law allows you and to save you every penny to which you are entitled. A good preparer will also educate you on what you may deduct and at the same time document that deduction to minimize your exposure to tax audits and penalties. A good preparer will also zero in on future tax saving opportunities for you.
Fees vary widely, from about $75 for a short form to several thousand dollars for very complex returns. The more experienced licensed professionals will cost more; by their training and constant education they provide you the best opportunities to save on your taxes. A tax attorney, for instance, is necessary when complex issues or possible challenges by taxing authorities is involved, but will be more expensive than a commercial preparer or enrolled agent.
If you do your own taxes, and it is not in the simple group, consider hiring a professional at least every three to five years. Many persons who think they have had it right over the years find out they missed out on a lot of deductions.  That’s why you need a professional, at least occasionally.

Categories: Business

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