Tips On Successful Tax Preparation

When to Hire Someone to Do Your Taxes

Advancements in tax software make it easier to file your taxes without the help of a professional, as does this year’s increased standard deduction and simplified 1040. But there are still plenty of circumstances when you’d want to hire someone.

These situations might include:

  • You’re a freelancer or you have multiple income streams
  • You started/own your own business, or sold a business
  • You do business in a foreign country
  • You got married or divorced
  • You inherited money
  • You’re retired
  • You take care of an elderly relative
  • You want year-round tax advice
  • You have significant investment income/losses
  • You buy health insurance through a health exchange
  • You’re rich (if you’re single earning more than $250,000 or married and earning more than $300,000 jointly, per Marketwatch)

 

What does tax prep cost?

If you don’t have any itemized deductions to claim, the average cost of having a professional prepare Form 1040 plus your state tax return is $176, as per the National Society of Accountants. For a 1040 with a Schedule A for itemized deductions and a state tax return, it’s $273. And for an itemized 1040 with a Schedule C, which is a profit and loss statement from business activities, plus a state tax return, it’s $457.

Of course, these are just averages. If your tax situation is really complex, you could pay a lot more.

When to file on your own

As a general rule, if you’re planning to claim the standard deduction, there’s really no reason to hire someone to prepare your tax return. All you need to do in that case is list your income from your W-2 and 1099 forms and see where that takes you. In other words, if you can read and copy over numbers, you’re all set. You can either pay a modest fee for software (like TurboTax) and submit your own electronic return, or print out a paper return and send it in by mail. You’re generally better off going the electronic route, though, as it will help you avoid errors, capitalize on the deductions and credits you’re entitled to, and get you your refund faster, assuming you’re entitled to one.

Furthermore, if you earn less than $69,000, you’re entitled to file your taxes for free. You can do so through the IRS’s website.

Now if you’re planning to itemize your deductions but they’re all pretty straightforward, then you can still get away with filing taxes yourself. For example, if you’re simply copying your mortgage interest total, deducting property taxes, and listing your charitable donations from the past year, that’s not incredibly complicated work. In fact, the bulk of the hassle involved is gathering that information in the first place, so unless you’re truly intimidated by the notion of messing up your taxes, you can probably spare yourself the fees associated with hiring a professional.

 

Prepare Your Taxes First, Then Pay Someone To Do Them

One option to consider is preparing your own return and then hiring a professional tax preparer to also do your return or review your self-prepared return.

You’ll get all of the benefits of preparing them yourself (even though the tax software may cost you some money) and you can then compare it to the return completed by the tax professional.

You may find your DIY return matches the one you pay to have done. If it doesn’t, you can talk with your tax preparer about discrepancies and see if hiring someone to do your taxes is worth the money.

Don’t forget to talk with your tax preparer about any planning you can do to help reduce your tax liability in the future too.

 

Should I Pay for Professional Tax Preparer?

You may still have time to make decisions about doing your own taxes or paying a professional tax preparer to do them – or doing both. But putting your taxes off once you have all of your documents organized usually doesn’t make sense.

Tax time is stressful for some people and waiting to do them can cause even more anxiety.

For most Americans, federal tax returns are due on April 15th – better known as Tax Day.

But, remember filing early will help you get your refund faster and cut down on identity fraud. And if you find out you owe money after your taxes are completed, you can wait until Tax Day to file and pay the taxes due.

Knowing what you owe will allow you to take control of your finances, develop a plan to pay your taxes, and hopefully avoid taking on debt to pay the tax bill.

 

Final Reminder

Finally, remember, even if you pay someone to prepare your taxes, you personally are responsible for the accuracy of the information provided. The tax preparer can help you, but you need to make sure it’s right.

One of the biggest errors I see every year are typos – especially from people that use the major mass-market tax preparation companies that you see on TV. These data entry professionals (because they rarely offer advice or help), can mess up. They can misspell your name, mistype your Social Security number, and more. All of those will result in delays on your tax refund.

Make sure that you do a thorough review of your tax return before you file – no matter if you do it yourself or if you pay someone to help you.

Tips To Find The Best Accountant

Choosing the Best Accountant For Your Business

Once you’ve decided it’s time to hire an accountant, the next step is to choose which accountant to hire.

It’s important to take the time to do this carefully, and there are a few things you’ll want to consider first. You’ll need to think about issues such as the accountant’s location, the division of workload and the type of accounting software you’ll use. Consider how much you’ll have to pay the accountant, and whether they can help to reduce your business taxes.

It’s in your company’s best interests to have an experienced, capable person handling one of the most important areas of your business – your finances. The right person will save you time and money year after year. So here are some things you should consider when you’re choosing an accountant.

 

Inside accountant

When the business grows in revenue and the transactions become more complicated, it is time to consider hiring a full- or part-time inside accountant. Since the outside accountant’s fee grows with the size of the business, the owner may see some cost savings by bringing some of the work in-house.

Duties and responsibilities of an in-house accountant usually include:

  • General ledger/chart of account maintenance
  • Responsibility for daily transactions
  • Financial statement preparation and analysis
  • Cost accounting and variance analysis
  • Treasury and cash management including bank reconciliations
  • Payroll and fixed asset accounting

 

Know What You Need

But before you choose an accountant, you need first to understand the kind of work or responsibilities you want the accountant to handle for your business. If you need monthly financial statements and bookkeeping tasks, a non-certified accountant or bookkeeper can be hired. But to get tax planning advice, tax returns prepared, or audited financial statements, you need a CPA or certified public accountant.

Ask About Accounting Software 

Before you choose an accountant, you’ll want to ask what software they recommend for their small business customers. You may find some accountants who are using the same old desktop accounting software. They do not want to switch to the latest online accounting solutions. You want to invest in an accounting software system that you can grow into in 3-5 years. You also want an accountant who can teach you how to use your software and set up your initial chart of accounts. You should also inquire about whether they could help you get a discount on your accounting software.

 

 

Referrals – ask other business people about their accountants.

Find out who other business people use and how satisfied they are with the services their accountant provides. If you don’t or can’t get any worthy referrals using this method, use the internet or yellow pages and choose several accounting firms.

When you call, tell the receptionist what you do and ask for the name(s) of accountants familiar with your type of business. Use this information to create a shortlist of prospective accountants.

It’s important that you choose an accountant that is familiar with the special requirements of your business and/or your tax situation so you can use these to vet potential accountants. For example:

If your business is internet related, you’ll want to find out if the accountant is familiar with ecommerce.

If your business involves periods of work in other countries, you need an accountant that’s knowledgeable about international tax issues. For instance, if you are Canadian and wish to do business in the U.S. you need someone who is familiar with the IRS and has experience completing U.S. tax forms (or has easy access to someone else who does, such as another specialist who works in the same firm).

If you’re thinking about exporting, ask how the accountant might help you develop an export strategy.

 

How will you be billed?

Before moving forward with your accountant of choice, make sure you understand how the accountant bills for services. Billing structure can vary pretty widely. Some accountants charge by the hour, others have flat rates per service, and others use some combination of the two.

Don’t forget to ask about charges that could occur, that haven’t been discussed yet. That might seem like an odd question, but you could be surprised by the answers you get. Better to be surprised now, before you’ve made any commitments, than to be surprised by your extra-large bill.