What Am I Missing by Not Using a Professional Tax Preparer?

As a business owner or individual taxpayer, it is up to you to review and ensure your return has been filed accurately. Mistakes can cost you in the form of lost deductions and credits or even interest and penalties from the CRA.

Pricing models vary, so knowing what you’re getting into is important before selecting a tax professional. Be wary of an exorbitant fee.

1. You’ll have peace of mind

Professional tax preparers have a lot of experience handling various tax situations. Their knowledge of your situation will help ensure that all filings are accurate, reducing the likelihood of mistakes that can cost you a significant sum in back taxes, fees, and penalties.

Despite this, it’s important to know that even professionals can make mistakes. This is why it’s recommended that you always double-check your returns before submitting them to the IRS, no matter who prepared them. Mistakes such as simple math blunders or transposing numbers can be costly, especially since they can follow you for years to come.

If you’re looking for a professional to prepare your return, ensure they offer a guarantee in case of audits. Most big tax preparation firms, CPAs, and enrolled agents will provide this service. This insurance is meant to cover any back taxes, fees, and penalties that may be incurred in the event of an audit.

Getting references and checking their qualifications before hiring someone is also a good idea. If a preparer claims to be certified, ask for their tax identification number so that you can verify it with the IRS. If they are unwilling to provide this information, walk away — it’s a clear sign that they are not legitimate and have little to no experience.

Another common scam is to sell you products, like a retirement account or life insurance, to generate additional revenue. Often, these companies will get commissions based on how much you invest. It’s best to steer clear of these types of offers and instead look for a reputable tax preparer willing to provide unbiased advice.

Lastly, make sure to bring all of your pertinent documents to the initial interview. It’s helpful for the preparer to have all of this information in one place so that they can process it efficiently and effectively. It’s also a good idea to bring your Social Security card so the preparer can double-check your name’s spelling and the correct Social Security number.

2. You’ll save time

As anyone who has ever filed taxes knows, they are a complicated process. Using a tax preparer will simplify the process and save you time. This is particularly true if you have a complex tax situation or you need to itemize deductions. A good preparer will keep up with new tax laws and deductions throughout the year, so they can quickly answer any questions you may have about your return. They will also be available to help you with any issues that arise throughout the year (choose a tax preparer that is open all year).

Another big reason to use a tax professional is that they will save you time by filing your taxes correctly. Many people who file their own returns make mistakes, which can result in fines or penalties. A tax preparer will ensure that all of your information is accurate and complete and will submit it to the IRS on your behalf.

It’s also important to remember that even professional tax preparers sometimes make mistakes. However, when they do, it’s usually because of an oversight or an error in calculating or transposing numbers. This type of mistake is generally easy to correct but can have severe consequences. A good preparer will always double-check their work and will be able to catch any errors before they are submitted for filing.

When choosing a tax preparer, shopping around and comparing pricing is important. However, you should also keep in mind that just because someone charges less than others doesn’t necessarily mean they will provide better services. When comparing prices, be sure to look at the total cost of service and not just the number of hours spent on the return. You should also be sure to get quotes for the same level of service from each person you are considering so that you can make an apples-to-apples comparison. This will help you find the best deal and feel confident you’re getting value for your money. Lastly, don’t forget to ask for a preparer tax identification number before you hire anyone. This is a number that the IRS requires all individuals who prepare tax returns for compensation to have. If a preparer doesn’t have this number, you should be suspicious and probably walk away.

3. You’ll save money

Professional tax preparers do their jobs well and deeply understand the IRS tax code. They can save you money by filing correctly and helping you avoid costly mistakes that could result in late fees, interest charges, or even a rejected return. Having a professional on your side can also help you claim credits and deductions you might not know about or be eligible for.

However, it’s important to remember that professionals can make mistakes, too. And while they may be more likely to have the resources to fix their errors, you might have to pay for their mistakes down the line, not to mention the frustration and stress of dealing with a dispute with the IRS.

You’ll want to find someone you can trust, and that starts with an interview. During the interview, watch out for any red flags, such as someone who talks about cheating on your taxes, says you don’t have to report certain income, or promises you a certain percentage of your refund. In addition, ask about their fees, what happens if you’re audited or examined by the IRS, and whether they’ll be available to answer your questions throughout the year.

In addition to determining their credentials, look for preparers who specialize in your needs and experience. For example, if you’re a small business owner, you’ll want to find someone who understands the ins and outs of tax rules pertaining to your company. And if you have unique circumstances, such as complex investments or multiple jobs, look for a preparer who can handle your specific situation.

Finally, be sure to bring a clear presentation of your documents and receipts to the initial meeting. Eisenberg warns to avoid bringing in a mess that will take longer to sift through. Instead, make a spreadsheet of your deductions and bring in all the necessary documents you need, including receipts, a list of donations and their documentation, the cost basis for any investments you sold, Social Security numbers for dependents, and all tax-related forms you’ve received in the mail.

With the vast number of choices for qualified tax professionals, it’s important to take your time and choose wisely. While most people don’t file their own taxes, a good, prepared tax professional can be worth the extra effort and peace of mind.

4. You’ll be more organized

Filing taxes can be a major pain—hours spent organizing documents, tallying receipts, and scouring bank statements for potentially lucrative write-offs. It’s no wonder many people dread it and rely on professionals to complete the process. However, even a professional tax preparer can miss things when preparing your return, especially if you aren’t careful with how you organize your documents and financial records.

A good tax preparer should make you aware of what you can and cannot claim on your return, including what tax credits you may be eligible for. You should be ready to provide clear answers when they ask questions. This will ensure that your filing is accurate and aligns with your goals.

As with any professional, you can expect a paid tax preparer to charge for their services. That’s why it’s important to do your research and compare prices before hiring someone. However, it’s also important to keep in mind that paying the lowest price may not always be in your best interest.

If you’re comparing prices, be sure to factor in the amount of time you and the preparer will spend together. This can help you determine the most cost-effective person in the long run.

In addition to price, be wary of any preparer who wants you to sign a blank return. This is a red flag that they are not legitimate preparers. Instead, look for someone who offers a preparer tax identification number.

Other common mistakes tax preparers make include missing deductions or credits and incorrectly classifying workers. Both of these mistakes can lead to expensive penalties from the IRS.

There is nothing worse than receiving a notice from the IRS or your state that something was wrong with your return. In addition to the initial frustration, you’ll have to pay additional taxes and fees, plus deal with the stress of finding out where and how the error was made. By using a qualified tax preparer, you can avoid these issues and get the peace of mind that comes with knowing that your return was filed correctly.