Dave Ramsey, a well-known speaker and radio host on the topic of finances, compares taxes to maintaining a car in this video. The takeaway? You would not fix a modern car by yourself in your backyard, nor should you prepare and submit your taxes by yourself. One statistic he cites is that the average taxpayer saves $700 on their taxes each year by using a professional tax preparer.
When facing tax planning, estate management, and the possibility of IRS audits, a tax accountant becomes an essential part of your tax preparation.
Tax Professional vs. Tax Software
At face value, a tax preparation software might seem like your easiest, cheapest option. But, an impersonal software may actually lose you money in the long run. Working with an individual tax accountant will give you focused attention to make certain that your taxes are prepared correctly, and it will also ensure you have a relationship with someone who is prepared to represent you in the case of an audit or other tax issues.
This personalized attention is one reason that people choose a tax professional over DIY solutions, but there are several more, including the Ten Tips for Choosing a Tax Preparer released by the IRS in January 2018.
IRS Tips to Help You Choose a Tax Pro
The IRS puts out notices at the beginning of each tax season to help people decide who should do their taxes, and these tips are important to consider as you look at your taxes this year and plan ahead for your finances in the year to come.
1. Check Qualifications
A good tax preparer at minimum meets the standards necessary for being included in the IRS Directory of federal tax preparers. Ideally, a quality tax preparer will also carry qualifications as an accountant or bookkeeper. When you are considering building a relationship with someone who can file your taxes for your business, consider that you may also use them in bookkeeping to keep track of expenses and reduce costs throughout the year.
If you are interested in this type of financial relationship, check with your tax pro to make certain that their qualifications match your needs.
2. Check Their History
There will always be a friend of a relative’s great aunt who is starting their tax preparation service. You have spent years building your business, so you do not want to trust that to someone who is just starting out.
A good tax preparer will have years of experience, preferably with similar income levels and business types to yours.
3. Look for Transparent Pricing
Commission-based fees, no clear costs per return or hours worked…these are some of the symptoms that your tax preparer is not operating completely above board. If you are looking for an organization to build long-term relationships with, fees need to be even more clear.
4. Electronic Integration
From e-filing taxes to integrated accounting and banking services, a tax and bookkeeping professional should use electronic means to reduce filing times, reduce costs of paper preparation, and increase accuracy through automated processes.
Take time to ask your tax professional whether they are able to check accounting through electronic processes and whether they e-file with the IRS.
5. Build a Long-Term Relationship
One of the IRS’s recommendations is to ensure that your tax preparer will be around after April 17th. We work with our clients throughout the year and focus on long-term relationships. This ensures that we will be there to follow-up with you on your taxes any time throughout the year if you have questions or need consulting.
6. Ensure Accurate Record Keeping
How long do you have to keep receipts from your expenses? An experienced tax preparer will help you find, organize, and store records of your expenses and income. This will both help in the event of an audit, and provide you accurate financial tracking throughout the year. Accurate financial tracking helps you plan your spending, budget your income, and plan for growth in the coming years.
7. Just Sign the Return?
Never, ever, use an accountant, tax preparer, or other help who tells you to just sign the paperwork. The IRS says this and common sense says this.
The IRS thought it was important to tell you, but any good tax accountant will never ask you to sign blank paperwork.
8. Review With the Heart of a Teacher
The IRS just recommends that you make certain your tax preparer reviews the return with you. We recommend that you make certain that your tax accountant reviews it with the heart of a teacher. A teacher wants you to understand the best decisions to make, both towards your tax balance and your long-term financial health.
9. Get Our PTIN
The IRS reminds people that a legitimate tax preparer has a Preparer Tax Identification Number; this is the law. Ask for the number, as it is a way to weed out potential fraudsters.
10. Let The IRS Know
Finally, the IRS reminds people that they have a system for reporting abusive or fraudulent tax preparers.
Tax Accountant vs. Tax Preparer
A good tax accountant will not only meet all of these tips the IRS recommends, but they will also be able to work with you as a consultant on your finances as well. While there are many tax preparation services, an accountant can work with you to recommend financial planning for large tax questions (estate planning, sales of capital, multiple streams of income, etc).
Look for an accountant who understands tax laws, tax filing, but also has a great understanding of financial planning for businesses and for individuals.
So, in summary, as you are preparing for taxes this year, consider a tax accountant who can work with you throughout the year to provide quality tax preparation services so you don’t run shy of the IRS. Also, consider a tax preparer who understands general accounting principles to help you integrate tax planning into your financial plan. Finally, consider working with someone who has a proven track record working with people in your line of work and at your income level.