Choosing a Tax Preparer
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Face it: filling out your tax return is no fun. First there are the hours of sorting through your records, statements, and receipts to see what you need for your return. Then there is the time it takes to actually sit down and complete the tricky forms, made more complicated by the 1997 tax laws. Once you’re done, you may very well think to yourself, Could I be paying less somehow? A top tax preparer can save you not only some time and aggravation, but probably some taxes, too. That’s why paid preparers complete two-thirds of the nation’s 1040 long forms. In the next topic you’ll learn how to best use a tax adviser and tax software.
Which type of preparer to hire and how much you’ll pay depend on the complexity of your tax return and your financial life. You have three basic options: storefront preparers, certified public accountants (CPAs), and enrolled agents. You needn’t hire a tax lawyer just to fill out your return or to get sensible tax-planning advice. A tax lawyer is worth a call, however, once you arrive at the intersection of taxes and the legal system –for instance, if you are about to get a divorce or buy or sell a business.
Try not to look for a tax pro in the heart of tax season, during March or April. By that time most of the better preparers are already hooked. You’ll also have a tough time getting one to sit with you for a free consultation. The best time to seek out a tax adviser who will provide tax-planning advice is in June or July; many take well-deserved vacations in May. If you want someone only to fill out your returns, start your search in January, once you have the necessary data for last year’s finances.The skinny on your tax adviser choices:
Storefront preparers. These are the people at places such as H&R Block, Jackson Hewitt Tax Service, and Triple Check Income Tax Service. Some are part-timers, some work full-time year round preparing tax returns. Nearly all are conservative about the write-offs they’ll let you claim. Storefront preparers are the least expensive way to go. Figure on spending between $50 and $100 for a basic tax form, maybe $150 or so for one that’s a bit more complicated. A knowledgeable storefront preparer can certainly fill out a 1040 with ease (you ought to be able to fill out the simple 1040EZ or 1040A by yourself), along with Schedule A and Schedule B for itemized deductions, interests, and dividends. However, once you get into more complicated areas, such as home offices, small businesses, rental real estate, and the sale of stocks, bonds, or mutual funds, you might consider stepping up to either a CPA or an enrolled agent.
A storefront preparer has two drawbacks: First, you won’t get any tax planning advice. This type of preparer might tell you about ways you could have reduced your taxes after he or she completes your return. You won’t have a session discussing how to cut next year’s taxes, however. In fact, you probably won’t even talk with the preparer throughout the year until tax season rolls around again. The second drawback comes if the IRS starts asking questions about your return. Commercial preparers aren’t allowed to represent you in dealing with IRS. So if the tax man starts snooping, you’ll either have to defend yourself or hire an accountant or an enrolled agent to act on your behalf.
On next post we will continue with another tax adviser you can trust: the almighty CPA (Certified Public Accountants and enrolled agents (EAs).
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