Are you scrambling to find someone to do your personal taxes this year? If so, you aren’t the only one. Most people don’t explore who they should work with for their personal taxes until April comes around again.
You might be surprised at how much your bottom line can be affected by the type of tax professional with whom you choose to work.
The sad part is that people can often be confused about whom to go to for assistance in preparing their income tax returns. Some people will tell you that you need to go to a local tax preparer who has been doing tax returns for 30 years. Others will tell you that you need a CPA with three different licenses. Should you hire someone at all, or should you just stick to an online solution?
Recognize Your Tax Situation First
Before you start searching for someone to file your personal taxes, ensure you recognize your tax situation first. Someone filing a simple W-2 and a standard deduction is vastly different from someone with a rental property, investment returns, or someone with another business.
The complexity of the tax return is crucial. If you have multiple income sources or some type of property, it might be helpful to get someone else to assist in filing your taxes. The same goes for anyone who has had a major life event or multiple major life events throughout the past year that could allow for them to file taxes that could be deducted from. Tax professionals can assist you in this regard.
Tax laws are always changing, and it would be very hard to keep up with the continually changing nature of taxes without years of experience under their belt. This is a full-time job, and unless you do this for a living, it can be nearly impossible to keep track of this year after year.
Understanding Qualifications
Not all individuals preparing taxes have the same level of licensure or qualifications. And this is something that people who are unfamiliar with the world of taxes tend to trip over.
A certified public accountant has the highest level of licensure and qualification. They can represent individuals in all matters with the IRS. Accountants undergo rigorous testing to acquire this licensure and then must meet ongoing education requirements.
For the most part, simple tax preparations will generally require a tax accountant, providing more of a personalized relationship than a CPA could potentially offer to individuals. Accountants generally know the current practices as well as the tax-saving strategies taxpayers might want to use.
Enrolled agents are another viable option. These individuals are federally licensed and specialize only in taxes. Therefore, they have a superior understanding of tax codes and can also represent individuals with the IRS.
Lastly, there are tax preparers who do not hold any license. A lot of them do an incredible job and have 30 years of experience; however, they are not able to represent you before the IRS, which is a big deal that should be taken into serious consideration.
Questions To Ask Potential Preparers
You should definitely interview any tax professional you are considering hiring to file your tax returns. After all, they will have access to very sensitive information about your finances and it’s pertinent that you are comfortable with them.
They should be able to answer any questions you have about their experience with your type of tax return. Someone who is freelancing should be paired with someone who is familiar with freelancers like accountants or CPAs. They should understand quarterly taxes, estimates, etc.
If you have investment income, make sure whoever prepares your taxes understands how investment income works, such as the importance of capital gains and cost basis.
Inquire about post-tax prep availability if you have questions after your tax returns have been submitted. You don’t want to find out that the individual preparing your taxes has gone and left you without any guidance for the rest of the year if you have questions.
Being upfront with fees before hiring someone to prepare your taxes is essential. Most individuals charge based on the complexity of a client’s tax return. However, be sure to ask how they charge and be well aware of what this will cost you ahead of time.
Avoid anyone who tries to upsell or who guarantees a big tax return even though they have never met you. Tax fees should be established prior to completing your tax returns.
Factors To Consider
There are some red flags that may be a good indication that you should move your personal taxes elsewhere. An individual should never refuse to sign your tax return if they are your preparer. This is illegal. All preparers should sign with their preparer’s identifying number.
You definitely want to avoid any individual who charges fees based on a percentage of your tax return because this can lead them down a shady and downright dangerous business path that might include making up deductions or credits that could get you in serious trouble and even audited.
Also avoid anyone who promises huge tax refunds before they even know you and your situation. There is no magic formula when it comes to personal income tax returns, and deductibles and credits might be promised by someone that only applies to their unique clients.
Make a Decision
When choosing someone, if someone comes highly recommended but doesn’t feel quite right, trust your gut. You can even get references from previous clients if it makes you feel better, but it’s crucial that you feel comfortable with the person preparing your personal tax returns.
The individual’s location might make a difference in who you pick, especially if someone is able to submit their personal paperwork virtually.
Whoever you choose should not only prepare your taxes year after year but should also be an invaluable resource in multiple situations throughout the year. They should be able to help you adjust withholding each year and also prepare you for significant purchases or life events that might alter how much you owe or the amount that you can receive as a refund.
The burden of personal taxes does not have to become overbearing every year. If you find someone qualified who has experience with situations like yours, they’ll make filing your taxes delightful.
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