As Certified Public Accountants and professional tax preparers, we take our responsibilities as our clients' trusted advisors very seriously. We are constantly pursuing continuing education to stay current on the latest tax laws and strategies. We maintain this high level of professional competence and knowledge in order to provide our clients with unparalleled services. However, not every tax situation calls for this type of expertise and experience. The following Yahoo! Finance article delineates the different alternatives that taxpayers have when comtemplating their tax return preparation. We find that many taxpayers have differing tax preparation needs in different years. For some taxpayers, the issue of data privacy is paramount and CPAs are in a unique position to safeguard your personal information. We are always glad to help taxpayers find the best solution for their situation, and look forward to being the tax professional of choice when the situation warrants.
Finding Free and Low-Cost Tax Help
by Laura Rowley
Mailboxes are filling up with W-2 and 1099 forms, heralding the arrival of another tax season.
Last year's stimulus package unleashed a variety of new and expanded deductions and credits, for everything from car and home purchases to energy-efficient upgrades to college tuition. This may the year that Americans are worried about making mistakes on their taxes. To minimize that, here are some of the best places to find free or cost-effective assistance.
If You Earn $57,000 or Less
Households earning $57,000 or less -- that's 70 percent of the nation's taxpayers -- can use the Free File program online, a partnership of the Internal Revenue Service and 20 tax software companies. Go to www.irs.gov/freefile, choose a software provider and you'll find step-by-step form that asks simple questions and then fills in the answers on the tax form for you. You can file the return electronically, and if you qualify for a refund, receive it in as little as 10 days. If you owe money, you have until April 15 to send in payment. Paying with a credit card will incur fees.
Many states also allow you to do your state taxes and electronically file them through Free File. (Use the tool called "Help Me Find A Free File Company" to find a firm that may offer Free File for your state.) Finally, people who took advantage of the first-time homebuyer tax credit last year can use Free File, but have to print their returns, attach proof of their home purchase, and mail everything in.
If you earn less than $50,000 and want help from a real person, call the Volunteer Income Tax Assistance Program at 1-800-TAX-1040, which has chapters in many communities. The AARP offers free assistance to the elderly at 7,000 sites nationwide -- you can find one at aarp.org or 888-227-7669.
Purchasing Tax Software
Using tax software is fast and relatively easy, and it will boost the chances of an accurate return, as well as the odds of getting all the deductions and credits for which you qualify. The biggest names are TurboTax from Intuit and Tax Cut by H&R Block, but others include TaxBrain, Complete Tax and TaxActOnline.com. The price will depend on your needs, but most people will pay $50 to $100 for the cost of federal and state preparation, and federal and state e-filing. (Many people don't realize there is a separate charge for the filing.)
Dan Green, a married father of three and a public relations executive in suburban Chicago, has used TaxActOnline.com for the last five years. He says it takes him about an hour to fill out his 1040 form. He pays about $15 for electronic filing for his federal taxes and $12 to file state taxes.
"I was a little skeptical at first because I thought there would be charges for everything," Green says. "But it was so simple for me, and I have no accounting background. It takes you through the process step by step, so it's almost impossible to make a mistake. After you're done you do a review process, and it tells you if there are any red flags so you can go back and check."
Check the software company Web site to see if you qualify for a free version. Some provide freebies to taxpayers with very simple returns. Also look for discounted software through your bank, credit union or brokerage. Fidelity.com, for example, offers a 25 percent discount on TurboTax to clients. Sites such as couponcabin.com also include discounts for software.
Look for guarantees that the software provider will pay penalties and interest if their product doesn't produce an accurate return. Some providers also offer audit support from a professional.
This year Green got a $1,500 credit for installing new energy-efficient windows in his home. "I didn't have to worry about being sure I received the credit, because I knew TaxActOnline.com would have it included in this year's program," he says. Which brings up an obvious, but important point: Make sure the package you purchase is for 2009, not an older version piled up in a store's bargain bin.
A store-front firm is an option for someone with no computer-savvy who feels utterly helpless in the face of paper tax forms. The biggest players include H&R Block, with about 13,000 U.S. locations, and Jackson Hewitt, with 6,000 offices. In this case, the preparer is basically filling in the software program for you. The cost varies depending on the complexity of the return, but for most people will run from $100 to $500. (The companies offer cost estimators, and sometimes coupons for discounted service, on their Web sites.)
In a tough economy, many people need their refund checks right away. But just say no to offers for "refund anticipation loans" -- where you can get your refund immediately for a fee. The National Consumer Law Center estimates that 8.4 million refund loans were made in 2008, and taxpayers -- mostly moderate and low-income -- lost $800 million from their refunds to these short-term loans.
In December, the IRS said it is scrutinizing refund anticipation loans, and bank regulators are cracking down as well. Recently, the Office of Comptroller of the Currency blocked Pacific Capital Bank from making the loans during this tax season.
Finally, be aware of privacy issues. Tax preparers just need your signature to sell your confidential tax return information to marketers, so read all the forms carefully before signing.
Professional Preparers: Individual Practitioners
People with complicated tax returns often turn to a professional. The IRS recently proposed that all paid preparers be registered and undergo testing and continuing education unless they are lawyers, certified public accountants or licensed enrolled agents, who represent taxpayers before the IRS. But for this tax season, you're on your own.
Get recommendations from people you trust, and check the credentials and references of the professional you plan to engage. How long have they been in business? Do they get additional training each year? Do they specialize in a particular area? Check for complaints filed against the preparer with your state's board of accountancy (for CPAs), state bar (for attorneys) and the Better Business Bureau.
Be prepared to pay from $100 to $1,000 for the service, and get the cost estimate in advance. Since many professionals charge by the hour, have all of your paperwork and receipts organized before you begin. Avoid preparers who claim they can get you a juicier refund than their peers and propose to charge a percentage of your refund.
Finally, find out if the service is guaranteed. According to a Better Business Bureau analysis, the number one complaint against tax preparers in 2008 was mistakes that resulted in penalties and fines.
CPAs are governed by strict codes of conduct and ethics that other preparers may not follow. As always, please contact our office with any questions you may have.
Circular 230 notification - Any U.S. federal tax advice that is contained in this document was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.