Should You Prepare Your Own Taxes?
Should you fix your own car or plumbing?
It seems you can’t go anywhere without seeing or hearing advertisements for the easiest, most cost effective and secure way to file your Federal Income Tax return. But how do you make the decision what way is best for you?
Should you use a local CPA or tax preparer? Buy that software you are assured will do everything for you including being there when or if an audit rears its ugly head sometime in the future? Or pop into one of those kiosks that can be found at the mall, on your neighborhood main street, or even in your local big box store?
Lets Ask Donna MacMillian, who’s been providing accounting, bookkeeping, and QuickBooks services to small businesses for nearly three decades:
The answer is yes and no to all the above options. If you a filing a very simple 1040, 1040A or 1040EZ form then yes pick up that software. It’s inexpensive, easy to use and will lead you through the entire process.
There are many do it yourself tax software programs available all at different prices and offering different features. But they all offer a wizard like interface that walk you through the process, answering general issue questions and performing a quick overview looking for obvious errors and missing information.
However, if you own a business, have sold a business or investment assets, are involved in a trust or any other of the many more complicated tax issues, than buying the software may not be the right solution for you. While the most popular do-it-yourself tax software programs will try to help you with these issues, you might not have the information you need to get the most benefit from the deductions you are allowed. Or even report your income properly.
This is where a CPA or professional tax preparer can shine.
So what about those tax preparers who work under the label of a brand name? Like all chain operations, some are excellent, some are good and some are, well not so good. Often the persons preparing your taxes have taken a quick course in the basics of tax preparation and are depending on software and the information you come in with to prepare your return. Don’t expect to get suggestions beyond the obvious and realize you are working with someone that is doing what you could do with an off the shelf tax preparation software in your own home. Of course, you might be lucky enough to run into someone who has been preparing returns for many years.
But every year these companies start advertising in the fall for new tax trainees, so just how many are out there with more than a few months training?
And now we come to CPAs and professional tax preparers. These are the people who have studied the tax laws, kept up on all the newest issues and will take the time to deal with your individual issues and needs. A good tax preparer will anticipate the questions and suggest solutions to get you to the point of paying the least amount of taxes you are legally liable for while making sure you have not under reported income or over reported deductions. Do you need a CPA to prepare your taxes? Not always. You do need a CPA to prepare certified financial statements, perform audits and other functions that certify that the financial records you are presenting to an outside entity are correct and complete. There are many excellent non CPA accountants and tax preparers that have the knowledge and experience to prepare your tax return.
And remember, no matter what method you use, in the end, it is you the taxpayer and signer of the return who is responsible for the correctness of the return. If there is an error of any type, it comes back to you. A good tax preparer should stand behind their work, however. They should be willing and able to represent you before the Internal Revenue Service if the need arises. (Where do you think that brand name, trained for a few weeks, and onto another job will be if the IRS comes calling?). A tax preparer may not do this without charging a fee, especially if the audit was called because the information you provided to the tax preparer was incorrect or incomplete, but I would expect them to take responsibility for any error they made due to a mistake in their understanding of the law. Some tax preparers will go as far as reimbursing their clients for any penalties they may incur because of a mistake the preparer had made. Of course this would not include any additional taxes or interest on the unpaid taxes owed by the client.
So to sum it up – if you are just reporting wages, interest, etc and your deductions are simple in nature, than get your self right off to your favorite store and pick up Turbo Tax or to the mall kiosk to sit with a brand name affiliated preparer. If your return involves more complicated issues then do contact your local tax preparer. And remember you get what you pay for, and this is certainly one place where quality and experience can save you a lot of money and grief.