Choosing to outsource your personal income tax preparation can be a smart option. Depending on your tax knowledge and the complexity of return, it simply makes sense to seek help from an experienced professional who should utilize all your legal options to maximize your return.
Not all tax preparers are created equal. With over 60% of Americans paying someone to prepare their taxes, there remains a wide margin between the best and worst services available for taxpayers.
Is Your Tax Preparer A Hip Hop Artist?
The Hampton Roads, Virginia case of Mo’ Money has so far left thousands of taxpayers without refunds. It is alleged that Mo’ Money Taxes presented false and misleading information to clients including failing to disperse refunds, and distributing checks that failed to clear. The franchise owners left the local area leaving shuttered offices with no resolution to the missing tax refunds. Local news station Wavy 10 reports that the owners are actually members of the Memphis, TN based hip hop group SWAT Game.
Avoid These Mistakes:
Rapid Refunds / Anticipation Loans: It’s tempting to want your tax return as soon as you file. The downside here is that you will pay hefty fees for the rapid refund privilege. The IRS processes and distributes most refunds in around two weeks anyway. Keep more of your own money.
Refund Sent To Tax Preparer: The Mo’ Money Taxes example above could be avoided if refunds were sent directly from the IRS to the taxpayer. This keeps you in control of your money. Once you have filed your return and paid your preparer their fee, that should be the end of the business relationship. There is no good reason for them to have access to your tax refund.
Insufficient Knowledge: Interview your tax preparer to ensure they have the right knowledge to prepare your personal tax return. Before you commit, discuss the specifics of your return and make a judgement as to their suitability for your needs. It costs nothing to ask.
Wrong Credentials: People in associated industries are not automatically qualified to prepare your taxes. Your insurance agent, financial planner, or bank manager are not necessarily qualified. At the very minimum your tax preparer should be an Enrolled Agent. These individuals have studied the tax code, passed a qualifying exam, and update their skills annually.
Choosing A Brand New Tax Preparer: Stability speaks volumes in tax preparation. A tax business that has been around for years is likely to have a track record with the IRS and Better Business Bureau. You want to choose a tax preparation service that will be there to assist in the event of a problem or audit.
Take the time to ask the right questions to ensure your tax preparer is trustworthy, knowledgeable, and qualified to represent you. Almost anyone can hang out a shingle with their name on it and claim to be a tax professional. It’s up to each of us to scrutinize their claims to avoid disasters like those experienced by the taxpayers of Hampton Roads.
How do you choose your tax preparer?
I usually talk to my friends and get recommendations. I found my CPA that way 25 years ago.
Word of mouth is very effective. That’s quite a relationship you have with your CPA. Fantastic.
I view choosing a tax preparer as choosing your doctor. They will have access to a lot of personal and intimate details. Definitely check their credentials and make sure you feel comfortable with them (or rather no “bad gut” feelings).
Being a tax consultant myself, the IRS has changed a lot of the tax laws 2 years ago. So EVERYONE that files a tax return has to take a test and validate their PTIN (preparer tax ID number). Even EA’s and CPA’s have to have it.
Also, keep in my having an experienced tax person is great. But newer tax pros are 100% up-to-date with new tax law changes and information. It’s vital to ask if your tax professional has kept their continuing education current.
Great point Carrie, recently trained tax preparers are likely to be aware of the latest tax information. That definitely balances experience.
I own several businesses so I normally use my CPA to prepare my tax return as he knows the details of my businesses better than anyone else.
It would be nice to have access to a CPA at a reasonable price. Thanks Shilpan.
Man, I never thought of asking my tax consultant if he was ever an hip-hop artist!
Good tips Hunter! Once I was recommended a consultant since he was able to get some good refunds for my co-workers. After one meeting, I decided not to go with him. What he was doing to get a bigger check was slightly crossing the honesty line.
Not worth it.
I won’t cross the line either when chasing the best possible tax return. Not only is is legally and morally wrong in my opinion, if everyone failed to pay their fair share we’d quickly need a Greek style bailout.
That’s very scary. Although, with a business name of Mo’ Money, I’m not so sure I would have used that tax preparer.
This year I’m thinking I might have H & R Block prepare my taxes – they have a decent reputation and I think I need help this year.
Mo’ Money is a big warning sign for me too. I like my tax preparer to be boring. We use H&R Block but do it ourselves. There’s lots of help options and we can call them for help anytime. Although we’re getting close to outsourcing our tax prep…it’s getting complicated.
I think I would have avoided a tax preparer name Mo Money. I do my own taxes and plan to continue doing them although they are getting a lot more complicated now that my wife and I are self-employed.
I think you’re in a similar position to my wife and I. Preparing our taxes is stressful too, I’m not looking forward to it.
I definitely depend on the recommendations of friends and coworkers to find someone to trust with my taxes.
Word of mouth is priceless. It’s hard to argure with the positive experiences of others.
A really good tax preparer should help you plan your business in such a way to reduce taxes. Also the tax prepared should offer ways to organize your materials so that the preparer can charge you less.
I would gladly pay a little extra to be better organized for next year.
While Mo’ Money is an awesome, professional name for something as trivial as tax returns, I would have probably trusted “I’ve Got Your Return Right Here!, Inc.” more.
Names really do convey so much about businesses and products. Markters would be out of the job if this weren’t the case. Problems arise when you walk into a supposedly reputable tax prepaer and you are assisted by someone you don’t trust. What do you do?
I’m a turbo tax girl, I just go on their site and get it done. Next year though, I’m considering having them done professionally. Great tips.
Thanks Jen. I prefer to do it at home too. Hopefully they will overhaul the tax code (in my lifetime) and simplify it so that more people can feel confident about preparing their own taxes.
I’m lucky – my father is a CPA and CFP, so he does my taxes. Sometimes I do worry, even with his credentials, that he doesn’t pay as much attention to my returns since I’m a “freebie.”
I’m sure your Father would take great care of you Elizabeth. It’s great to know people with super useful skills.
I used to do my own taxes with software but am paying up for an accountant now that my tax situation is more complicated. It’s not cheap, kind of crazy expensive actually, but it’s worth it for my peace of mind while I can afford it. I wish I understood all the laws and forms to do it myself, but I’m happy to leave that to the pros for now! -Sydney