Forget Groundhog Day, Valentine’s Day, and Presidents’ Day. The next major date on most minds is April 15, the IRS Tax Filing Deadline. With that looming date comes an important decision-should you file your own tax return or have it professionally prepared?
I like to save money so my inclination would be to file my own return. However, after talking to a few tax preparers and researching, that option is best suited for a small population. As one Atlanta, Georgia area tax preparer stated, “It depends on your individual situation. (I)f you have nothing more than a W-2 and student loan interest, you’d probably be safe filing your own return.” Most of these tax payers would likely return a standard 1040 form.
If you choose to go the route of completing your own forms, understand there will be limited IRS support this year to assist you. The IRS’s budget has been cut by $346 million this year. What does that mean for you, personal tax preparer? There may be an inability to have questions answered. Of approximately 100 million calls the IRS expects to receive, only about half will get through. Excited to get through? Expect a wait time of thirty minutes or more. If you still want to complete your forms, and you have lots of extra time to read, invest in a comprehensive guide to all the tax deductions and credits available.
Does a professional tax preparation service sound more appealing now? Take a moment to consider a few important factors before putting your financial records in someone else’s hands. There are accounting firms and national chains that offer to take the strain and burden off your shoulders. Both are equally acceptable choices, right? Not in all cases. According to another Atlanta area firm, Certified Public Accountants who prepare taxes are required to accumulate continuing education credits and be up-to-date on current tax laws. Most national chains hire employees with little to no financial background and only require the preparers to complete a three month course of study. Make sure to ask about level of training and what work is guaranteed in the event of an audit. Qualifications and credentials will determine if your preparer is able to represent you in matters with the IRS.
If you are planning to file a form other than a 1040, such as a 1099 for those who need to report income form self-employment earnings, interest and dividends, government payments, and more, then ask about experience in that area. One seasoned CPA explains, “Some preparers are good for basic returns and not as good at higher income or complex returns.” Some deductions or credits may be overlooked if a preparer is accustomed to working with returns in a certain income bracket.
One critical factor may be cost of preparation. How much do you want to spend to avoid the hassle? The old adage “You get what you pay for,” may hold true with tax assistance. Many accounting firms in Atlanta offer set fees for filing federal tax forms on your behalf and charge additionally for services such as state filing or if bookkeeping is necessary. Rates vary, beginning at $99 for filing 1040 forms, to $375 and more for business income tax services. These are set rates. You will want to ask what is covered in your return. If you invest, how many equity and commodity trades are included in base prep price? If you own rental properties, what fees are associated with reporting unit income?
Other individuals, CPAs, or firms may charge a percentage of your refund amount. You may be persuaded to hire a consultant with a set fee. Hiring tax professionals who base payment on percentage of your refund could result in improper reporting practices to increase your refund (and the likelihood that you are audited).
The word “audit” triggers another question. What do you do if you are audited? In the event that the IRS selects your return for audit, you may want to ask your hired professional what is covered in their services. Some tax representatives will stand behind their work but charge to defend the filing if their work contains no errors. If they are found to be incorrect, fees are waived. Some services offer business audit support with a minimum retainer starting at $1500.
Amount of refunds is not the only way to evaluate a preparer’s services or value. Consider the time spent reviewing your finances as it helps you set up for the future. A certified preparer may share with clients what to do and what not to do regarding retirement savings, education costs, investments and charitable contributions to name a few areas. This may save time and money for future returns.
Ultimately, you are legally responsible for the information contained in your tax return filing. Whether you do it yourself or hire a professional, make sure the person is qualified, trustworthy, and that the information submitted is accurate.