When to Hire a Professional Preparer

January 3, 2011 by Jan Roberg · 1 Comment
Filed under: Tax Preparation, Uncategorized 

Friendly, neighborhood, professional tax preparer

Okay, you’re reading this on a professional tax preparation website and  I’m an enrolled agent.  Are you really expecting to see any answer other than, “Always?”  So you’ve been warned.  But seriously, many people are perfectly capable of preparing their own income taxes and they do it quite well.  For those people, the question is, when do you get a second opinion?  Here’s my list:

Whenever you have a major lifestyle change, like getting married, having a baby, buying a house, starting a new career, retiring.  You get the picture.  Many of the big life style changes have tax implications that go with them, it’s a good time for a professional.

Whenever you start a new business—many of the biggest tax problems occur during the first year of business.  Even if you’ve started a new business before, the rules are constantly changing.   You would be amazed at how many people prepare the wrong tax form for their business. 

Whenever you’re dealing with two or more states on your tax return—most home software programs don’t handle multiple states well.  Some of them can handle two states.  Even with my professional tax software, if there are three or more returns, I’m often re-computing  the figures by hand.   If you hire a company that sells an accuracy guarantee, always purchase that agreement for a multistate return.   Most tax preparation firms focus on the federal return and the state information automatically flows through from the federal.  There isn’t a lot of training for state returns, the assumption is that the software will handle it.  The problem is, the software is only as good as the person using it.  Multistates require someone with experience.  (Ah, like me, just saying.)

If you’ve had stock options-I put this in because one year I represented several people who all worked for the same company.  They received stock options and didn’t report them correctly on their tax return.  They all received scary IRS letters saying they owed thousands of dollars in taxes.  Once I was done with their amendments, they all received refunds, but they shouldn’t have even had to have gotten letters in the first place.

Finally, I recommend having your taxes reviewed every three years, even if you don’t experience any of the above.   Let’s say you’ve been doing your taxes on your own and a law changed and you missed a big tax deduction.  You only have three years to file an amendment to get your money back or you’ve forfeited the refund.

When Should I Do My Own Taxes?

October 1, 2010 by Jan Roberg · 1 Comment
Filed under: Tax Preparation 

I often hear the question, “When should a person do his/her own tax return?” Now nobody ever asks me that directly, as a professional preparer you’d think I’d say, “Always!” And yeah, that’s pretty much my general answer. But let’s face it, right now money is tight for everyone and if you can keep more of your money in your pocket by doing something yourself, maybe you should.

Here’s a clue: How long does it take for someone to do your taxes for you? I was reading in the paper today about a guy who whipped out tax returns for clients at an average rate of 15 minutes per return. If your preparer can finish your return in 15 minutes, that’s not tax preparation–that’s data entry. If you’ve just got a simple data entry type return, then you can probably do it yourself for free online.

Here’s an example: Peggy is a single person living in Missouri making $35,000 a year (roughly the median income for a single person her age.) Working a regular wage earning job, she’ll have $2,170 taken out for social security and $508 taken out for medicare taxes. Her federal income tax for the year will be $3,434 and her state income tax will be $1,225. So, for the year, she’s paying $7,337 in income related taxes alone. That’s almost 21% of her income.

If you’re going to spend 20% or more of your annual income on something, don’t you think it deserves more than 15 minutes of attention? If I were doing Peggy’s taxes, we’d be talking about her plans–does she want to buy a house? get married? go back to school? save for retirement? etc. We’d also talk about her job, what kind of benefits are available, is she taking advantage of those programs, etc. We’d also be talking about any ways that might be available for Peggy to reduce paying 21% of her income towards taxes.

It’s quite possible that there’s nothing there for Peggy. There are no possible deductions for her, she doesn’t care about retirement, she just wants her taxes to be filed and be done with it. Mr. 15 Minutes is good enough for her. In that case, why pay him when she can do it herself? Peggy would be a prime candidate for doing her own taxes.

Twenty percent of your income deserves more than 15 minutes of thought. If you’re going to a 15 Minute Man, that’s all you’ll get and you really would be better off doing it yourself.

Open letter to Charlie Dooley

September 1, 2010 by Jan Roberg · Leave a Comment
Filed under: People, Tax Deductions 

Charlie DooleyDear Mr. Dooley,
I read in the St. Louis Post that you recently released your personal income tax return for public inspection. I do taxes for a living so of course I had to check. The first thing I noticed is that you prepare your own taxes. The second thing I noticed is that you missed a big deduction. Mr. Dooley, you forgot to claim the real estate taxes that you paid in 2009. You missed out on a $1,056 deduction (real estate taxes paid is public record.)
Mr. Dooley, the tax money you would have saved on this deduction alone would have covered the cost of having your return professionally prepared. Who knows what else you could have missed that I can’t just pull up on the internet.
Mr. Dooley, I’m looking forward to seeing you in my office this coming February. If you’re going to be making your tax returns public, they’d better be right.

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