Most people do not need professional tax preparation. The internet has taken the anguish and arithmetic out of filing tax returns. Using just the information from their W2 forms, approximately two-thirds of working Americans can complete and submit IRS form 1040EZ. One form, about a dozen numbers, a little addition and subtraction, and the process is finished. Most people also can speed-up delivery of their refunds by requesting direct deposit into their bank accounts. Only in extreme cases do people need expert advice and counsel.
Try it yourself before you seek help
TurboTax and TaxCut make tax preparation relatively simple for almost everybody, and you can deduct the software’s cost from next year’s return. Even if you believe you eventually will get professional help, let the software guide you through the process of completing the forms, schedules and calculations. If you have last year’s return and all this year’s tax statements right in front of you, you have everything you need. The machine will ask questions and tell you what to do; the help files will answer all but the most arcane questions. About 90 percent of people who use high-end TurboTax and TaxCut programs end up e-filing unassisted.
If even high-powered software cannot save you, call a qualified professional. Before you meet with your tax adviser, write out questions based on your do-it-yourself experience. Your questions and concerns will guide your expert to issues that require his special attention, and his answers to your questions will teach you what to do next year.
Get help with complicated situations
A few common situations require at least professional review of your work. If you have interest and investment income or capital gains, get help. If you own income property, operate a “sole proprietorship,” are self-employed or work from home, get help. If your circumstances dramatically have changed since the last time you filed a tax return, get help. Especially, seek a professional’s assistance if…
- you did not file last year. Although the IRS may not catch up with you for several years, delinquent returns and payments eventually will attract agents’ attention, and they have the power to freeze or seize most of your assets and property. Even if you cannot pay overdue taxes, file returns and begin the process of negotiating for relief. The IRS regards delinquency as criminal activity, but agents respond well to displays of good faith.
- you were audited last year. You have attracted agents’ attention. Now that they know you, agents will continue paying attention until they feel satisfied you have complied with every title, subtitle, section and code in the tax laws. Have a professional complete your return not only because it assures the document’s accuracy, but also because the professional can represent you in further discussions with tax officials.
- you have an “Offer-in-Compromise” in effect. An “Offer-in-Compromise” dramatically reduces a delinquent taxpayer’s IRS debt, and it protects his assets and property from seizure. If the IRS agreed to settle your debt for substantially less than you owed, you must comply with every detail in the tax codes for three years after your offer’s acceptance. If you fail to file on-time and properly, you invalidate the agreement and restore your original obligation. Conversely, the more you take initiative to satisfy your obligations, the less the IRS will scrutinize your case.
- wealth complicates your tax situation. “The rich are different,” F. Scott Fitzgerald said. They work the tax codes to their advantage, and they pay less than most wage-earners. The greater your income, the more diverse your income streams, and the more shelters and hedges you employ, the more you must depend on a high-powered tax attorney. International transactions, commodities trading, family trusts, equity investments, annuities, tax-deferred accounts, and real estate transactions especially complicate taxes. If your income recently has increased dramatically, meet with a tax attorney right away, protecting your earnings in order to build wealth.
Choose a skilled, experienced professional
The more complicated or desperate your situation, the more you need expert assistance. Make sure you secure the services of a well-trained, experienced professional, a person who does nothing but taxes all year long. Find a tax attorney through the local Bar Association, or check Angie’s List and other online networks for reputable accountants and enrolled agents. You will pay “professional” prices for expert help, but you may deduct the fees from next year’s return, and you probably will save more in taxes than you will spend for assistance.
Next year, use your web tools for do-it-yourself tax preparation, and save time, money, and stress.
Rodger Black is a tax consultant and occasionally blogs for taxfix.co.uk, a site where you can use their tax rebate calculator to get an answer to “how do I know if I’m due a tax rebate?”