This is a great article we saw on MSN Money. If you are trying to decide if you should do your taxes or hire a tax professional, this is a good, informative read.
Don't let taxes stress you out! Give us a call 828.277.4177!
Updated: 12/28/2012 10:45 PM ET
Should you do your own taxes?
Some people can get away with doing it themselves. Other folks need professional help. Here's how to tell which group you belong to -- plus a few tips for choosing the right preparer.
It's not what you know that's important here. It's what you don't know . . . or, more to the point, what you think you know and really don't.
If you have a simple return, you might consider e-filing or using a simple tax program. But remember, you're not hiring a tax pro just to put numbers in boxes. Any monkey can do that.
To help you decide whether to do your own taxes, I offer three questions that can help you frame the issue.
Before we get any deeper into this, a disclosure: I have two law degrees, and I have been licensed by the New Jersey Board of Certified Public Accountants. I make a lot of money as a tax preparer. I have a vested interest.
3 questions to ask yourself
1. Are you prepared to give your taxes your time?
Filing online through the IRS website, or through a tax program such as TaxCut or TurboTax, can save you a lot of time filling out the forms. But you still must organize all the materials.
And that assumes you have a fairly simple return with a limited number of deductions. It also assumes you have a good idea of what the records you'll need to do your taxes.
2. Are you prepared to put up cash to hire a preparer?
Getting someone to do your taxes can cost $50 to $100 at the low end -- assuming a simple return -- or up to several thousand dollars for a complicated return. The average for an itemized return is more than $290, $410 if you have a Schedule E or C.
One consideration: Any fee you pay may be deductible on your next year's return if you itemize. Tax preparation fees qualify as miscellaneous deductions, the sum of which must be more than 2% of your adjusted gross income before you can claim a deduction.
Taxpayers spend more than 7.6 billion hours and more than $193 billion each year complying with the Tax Code - and that's just to figure out what we owe.
3. Are you prepared to deal with the complexity of the federal code?
Because the tax code is so complicated, more than 90% of Americans have professionals do their tax returns or rely on computer tax programs. Tax law has had major changes in 46 of the past 49 years. In April 2011, IRS Commissioner Douglas Shulman reported that there had been about 3,500 tax law changes since 2000.
A growing number of individuals are filing electronically. Tax preparers who filed 100 or more returns by computer in 2011 were required to file electronically. And the e-file threshold has dropped to only 11 returns in 2012.
Even though electronic filing has made mathematical errors less likely, many taxpayers still need or want assistance. So if you've got the money, and you lack the time, skills or interest to handle your own IRS paperwork, look for a tax preparer who will give you your money's worth.
Pay for advice, not typing skills
There are four basic categories of tax preparers: storefront agents such as those at H&R Block, certified public accountants, enrolled agents and lawyers. The IRS now mandates that all preparers be registered and subject to continuing education (except for attorneys and CPAs, who have their own continuing-ed requirements). It's not the title that's important. It's the way the preparer approaches your return.
If you go to a tax preparer who just takes your numbers and inputs them into your return, I believe you've wasted your money and time. The key is finding an individual who specializes in taxation and keeps up with tax trends and changes in tax law.
What you should pay for is advice and direction. More specifically, here's what to expect:
- A good tax preparer starts by asking a lot of questions. The only way you'll get your money's worth is if the preparer understands what you do and how you do it -- and then scours for every legitimate deduction.
- A good tax preparer is a teacher who educates you not only on what's allowable as a deduction but also on how to structure your activities to minimize your tax exposure.
- A good preparer focuses not only on your 2012 transactions, but also on how you can reduce your 2013 taxes.
- Clearly, a tax attorney is going to be more expensive than an enrolled agent or a storefront tax preparer. But if your income justifies it, the more sophisticated advice and direction should more than offset the additional cost.
If you do nothing else, get a checkup
Again, I'm biased. If you choose to do your own taxes, fair enough. But let me make a suggestion: Consult with a good tax professional at least once every three to five years -- just to find out whether you're missing anything.
If you're starting your first job, for example, you may not know that you could contribute to a Roth IRA. You can't successfully play the tax game if you don't know all the rules. That's why I think everyone should -- at least occasionally -- pay a professional. In 2012, the Internal Revenue Service estimated that the average taxpayer needed 22 hours to do his or her 2011 tax return -- 32 hours if a Schedule C for business or a Schedule E for rental properties was filed.
Prepare
for your visit
Your Office Visit
Please call our office to schedule your appointment. It is important for you to speak with a tax professional when you drop off your information to be sure we have everything needed to prepare your returns accurately. Below are some things to keep in mind.
- Allow a few minutes for us to look over your paperwork & make copies of your ID & SSN cards, etc.
- You may complete a Client Origanizer from Forms & Worksheets before your visit.
- We will prepare your return using the information provided.
- If we need any additional information, we will contact you in order to complete the return.
- Once we complete the return, we will call and discuss the results and set up a time for you to pick up your completed return.
Prepare
for your visit
Your Office Visit
Please call our office to schedule your appointment. It is important for you to speak with a tax professional when you drop off your information to be sure we have everything needed to prepare your returns accurately. Below are some things to keep in mind.
- Allow a few minutes for us to look over your paperwork & make copies of your ID & SSN cards, etc.
- You may complete a Client Origanizer from Forms & Worksheets before your visit.
- We will prepare your return using the information provided.
- If we need any additional information, we will contact you in order to complete the return.
- Once we complete the return, we will call and discuss the results and set up a time for you to pick up your completed return.
This is a great article we saw on MSN Money. If you are trying to decide if you should do your taxes or hire a tax professional, this is a good, informative read.
Don't let taxes stress you out! Give us a call 828.277.4177!
Updated: 12/28/2012 10:45 PM ET
Should you do your own taxes?
Some people can get away with doing it themselves. Other folks need professional help. Here's how to tell which group you belong to -- plus a few tips for choosing the right preparer.
It's not what you know that's important here. It's what you don't know . . . or, more to the point, what you think you know and really don't.
If you have a simple return, you might consider e-filing or using a simple tax program. But remember, you're not hiring a tax pro just to put numbers in boxes. Any monkey can do that.
To help you decide whether to do your own taxes, I offer three questions that can help you frame the issue.
Before we get any deeper into this, a disclosure: I have two law degrees, and I have been licensed by the New Jersey Board of Certified Public Accountants. I make a lot of money as a tax preparer. I have a vested interest.
3 questions to ask yourself
1. Are you prepared to give your taxes your time?
Filing online through the IRS website, or through a tax program such as TaxCut or TurboTax, can save you a lot of time filling out the forms. But you still must organize all the materials.
And that assumes you have a fairly simple return with a limited number of deductions. It also assumes you have a good idea of what the records you'll need to do your taxes.
2. Are you prepared to put up cash to hire a preparer?
Getting someone to do your taxes can cost $50 to $100 at the low end -- assuming a simple return -- or up to several thousand dollars for a complicated return. The average for an itemized return is more than $290, $410 if you have a Schedule E or C.
One consideration: Any fee you pay may be deductible on your next year's return if you itemize. Tax preparation fees qualify as miscellaneous deductions, the sum of which must be more than 2% of your adjusted gross income before you can claim a deduction.
Taxpayers spend more than 7.6 billion hours and more than $193 billion each year complying with the Tax Code - and that's just to figure out what we owe.
3. Are you prepared to deal with the complexity of the federal code?
Because the tax code is so complicated, more than 90% of Americans have professionals do their tax returns or rely on computer tax programs. Tax law has had major changes in 46 of the past 49 years. In April 2011, IRS Commissioner Douglas Shulman reported that there had been about 3,500 tax law changes since 2000.
A growing number of individuals are filing electronically. Tax preparers who filed 100 or more returns by computer in 2011 were required to file electronically. And the e-file threshold has dropped to only 11 returns in 2012.
Even though electronic filing has made mathematical errors less likely, many taxpayers still need or want assistance. So if you've got the money, and you lack the time, skills or interest to handle your own IRS paperwork, look for a tax preparer who will give you your money's worth.
Pay for advice, not typing skills
There are four basic categories of tax preparers: storefront agents such as those at H&R Block, certified public accountants, enrolled agents and lawyers. The IRS now mandates that all preparers be registered and subject to continuing education (except for attorneys and CPAs, who have their own continuing-ed requirements). It's not the title that's important. It's the way the preparer approaches your return.
If you go to a tax preparer who just takes your numbers and inputs them into your return, I believe you've wasted your money and time. The key is finding an individual who specializes in taxation and keeps up with tax trends and changes in tax law.
What you should pay for is advice and direction. More specifically, here's what to expect:
- A good tax preparer starts by asking a lot of questions. The only way you'll get your money's worth is if the preparer understands what you do and how you do it -- and then scours for every legitimate deduction.
- A good tax preparer is a teacher who educates you not only on what's allowable as a deduction but also on how to structure your activities to minimize your tax exposure.
- A good preparer focuses not only on your 2012 transactions, but also on how you can reduce your 2013 taxes.
- Clearly, a tax attorney is going to be more expensive than an enrolled agent or a storefront tax preparer. But if your income justifies it, the more sophisticated advice and direction should more than offset the additional cost.
If you do nothing else, get a checkup
Again, I'm biased. If you choose to do your own taxes, fair enough. But let me make a suggestion: Consult with a good tax professional at least once every three to five years -- just to find out whether you're missing anything.
If you're starting your first job, for example, you may not know that you could contribute to a Roth IRA. You can't successfully play the tax game if you don't know all the rules. That's why I think everyone should -- at least occasionally -- pay a professional. In 2012, the Internal Revenue Service estimated that the average taxpayer needed 22 hours to do his or her 2011 tax return -- 32 hours if a Schedule C for business or a Schedule E for rental properties was filed.