Surprising Truths About Tax Preparers
The choice to choose the correct tax preparer for your company is better not left until April. A retired tax preparer and strategist for small business provides insights into the secret world of tax preparers. Do you want to learn more?
Not every tax preparer is created equal.
It stands to reason, Worst Tax Preparer is somewhere in the world. The bad news is you may already have scheduled your rendezvous with him. Tax-preparation is a dynamic operation. So nuanced that many of us just throw in the towel, packing up our receipts and leaving for the closest tax office. You fully expect our tax preparer to be highly competent and completely committed to getting you the best deal in town as you arrive at the office.
Back in my tax preparation days, I worked as a preparer and writer of tax returns for one of the big name tax preparation franchises. I also operated with seasoned professionals and neophytes at large. The first day I walked onto the line as a novice preparer I recall well. I felt astounded. The client would be surprised to learn that I was novice. I’d be making a huge blunder, scared and the client will pick it up. Terrified my errors would be chuckled at by more seasoned preparers.
I realized quickly that as rusty as I was, I still understood far more than my clients did. And because the company had great systems, others would review and re-check my work in order to catch my errors and oversights before I did any damage to the business.
As a writer of tax returns, I have seen and fixed more mistakes than you would feel comfortable reading of. That takes me to a very important point, there is no cut and dry tax preparation, read the manual, do the calculations, follow the instructions and poof! This kind of thing you’ve achieved. In this world the tax codes are complicated and open to interpretation.
Tax preparers have broad experience varying from none to grizzled veterans. We cover the spectrum from legal to totally unethical, too. The more complicated the return will become, the more you will need a seasoned preparer. And if the preparer advises you that you can take this wonderful deduction and it sounds suspicious to you, adhere to your instincts. It is the difference between paying a little now or paying a lot later on.
Tax preparers aren’t specialists on companies.
The world’s biggest industry leaders are the ones running successful businesses. Tax preparers are trained to know the income. They are trained to know the ways and deductions that are necessary. They’re trained to help you prepare your income. We don’t have the training to understand how business works.
Then, you might have a tax preparer who’s a successful business owner too. Several CPA professionals, accountants, bookkeepers, and tax preparers are starting their own company. We are in a much better position to help you with your income, as we understand the challenges of running a business day to day.
Understand that having the taxes handled by a big name company, even if it means that your report is correct, does not guarantee that your return is done in a way that is better for you. Only a preparer who knows company will make a return for your business that works.
Hiring a tax preparer doesn’t mean you’re excused from understanding taxes.
I’ve seen it so many times. I sit down with a client to talk about finances or taxes. As I talk, the head is nodding, the mouth is saying, “uh huh, uh huh”, but what they’re really focused on is the pen in their hand. They don’t want to understand, they just want to sign off on the paperwork and be done with it. “That’s what I hire you for”, they say.
Big mistake. I could be sentencing them to time in a federal prison. Trusting someone else to the point where you abdicate all responsibility and have no knowledge of what you’re signing or what is being done in your name is a recipe for a big fat slice of disaster. That’s how embezzlement happens-I trust Mary completely. Bob always takes care of that. And it’s also how business owners end up in trouble-What do you mean he took a deduction for my Chihuahua as a guard dog? Hey, why didn’t I get a deduction for my new computer?
You have to know enough about taxes to be able to read your return intelligently so you know what you’re signing. You also need to know enough about taxes so you know what your tax preparer needs to know to prepare your return accurately and to your best advantage.
And don’t get your education from your buddies. I heard a lot about these “special deductions” you can take. Usually the information is not based on facts or tax codes. It’s a conglomeration of bad information that can get you into tax trouble.
Your tax preparer shouldn’t be the one telling you how your business is doing.
It hits them hard. They couldn’t be more shocked if you’d hit them upside the head with a dead fish. “I owe how much!”, they gasp. “How can that be? I don’t have any money!” Then the desperation sets in. The tax preparer is accused of not doing a good enough job. “You must have missed something.” Or, they dig deep trying to think of anything, anything at all, that can lower their tax liability. “Did I mention that vacation, I mean, business trip I took to the Caribbean? That’s deductible right?”
If the only time you know how your business is doing is on April 15th, you’re doing yourself a huge disservice. If you’re not tracking your tax liability and making plans to satisfy that liability, you’re in for a very long, painful, tortuous lesson delivered at the hands of the Internal Revenue Service. You will pay. You will pay way more than if you’d planned ahead. And it will take you forever to get caught up.
Why getting your tax return prepared shouldn’t be an errand you run on your lunch break.
I was in a client’s office one day getting her books closed out for the year so she could have her tax return prepared. I overheard a woman in the next office telling someone, “I’m just going to run out and get my taxes done.” I was horrified. Having your taxes prepared is not something you just “run out” and get done like an oil change. Good tax preparers are like good hair stylists. They have followings. People pre-book them.
If you just “run out” and have your taxes done, who do you think you’ll get as a tax preparer? The best and the brightest? Hardly. You’ll get the first year preparers who haven’t built up a following. The ones who are fresh out of tax class and generally have no experience preparing tax returns or running a business. The ones who don’t have the expertise to know the ins and outs of interpreting tax codes to your best advantage while still keeping you within the law. Sure everyone deserves a chance to gain experience but do you really want to be the first patient a surgeon operates on?
IRS Tax Refunds: The Truth About When You’ll get Your Tax Refund
If there is one good thing about tax season, it is definitely the idea of getting a big tax refund. In 2018, the IRS issued more than 111.9 million refunds that totaled over $324.4 billion dollars. So taxpayers could see themselves getting some extra cash after they file. Unfortunately for taxpayers, the IRS is noticing a lot of myths circulating around social media about the process of receiving your refund and are wanting to make sure taxpayers are aware of the facts when it comes to an IRS tax refund.
First off, there is no secret way of finding out when you will receive your refund. The IRS issues about 9 out of 10 refunds in less than 21 days. The easiest way to check on your refund is through the IRS.gov website tool “where is my refund”. The information on the tool is updated each day, so you can check each morning to see where your refund is. You should only call the IRS tax help hotline when it has been more than 21 days since you e-filed your tax return, it has been more than six weeks since you have mailed in your tax return, or when you check “where is my refund” and it says to contact the IRS.
Along with misinformation about when you’ll get your refund, there are also myths out there about what will help you get a bigger tax refund or other ways you can find out about where your refund is at. Here are just a few.
- Ordering a tax transcript is the golden ticket on knowing when you will receive your refund. Ordering a tax transcript will not give you a date of when you will receive your tax refund. Though, taxpayers will order a tax transcript to validate past income and tax filing status for a mortgage, student loans, and small businesses.
- “Where’s my refund” must be wrong because there’s no deposit date yet. The IRS tool “where is my refund” is only updated once a day and is usually updated at night. The IRS issues most of the refunds within 21 days. If you have not received your refund within the 21 days, there could be several reasons why it is taking longer, like if the return wasn’t complete or needs to be further reviewed. The IRS will contact you directly if they are needing further information to process your return.
- “Where is my refund” must be wrong because my expected refund amount is less than expected. If you check the IRS tool “where is my refund” and the refund amount has changed, there could be several reasons why the amount was lowered. You might have had a math error, delinquent federal taxes, state taxes, child support, and student loans. The IRS will also hold a portion of your refund while it reviews items claimed on the return. If your amount is lowered the IRS will send you a letter of explanation of why the adjustments were made.
- Receiving a tax refund this year means there is no need to adjust withholdings for 2019. Everyone needs to do annual tax planning to help avoid unexpected tax outcome for next year. Taxpayers should start planning now for next year, this could mean adjusting your withholdings with your employer or increasing your estimated tax payments. Taxpayers should especially do this if they go an unexpected result from filing their tax return this year.
Tax Preparer Myths You Should Not Believe
There are a lot of myths out there about tax professionals. We’re boring, it takes a long time to become we love math… These are lies! We’re recruiting students interested in learning tax preparation and joining our team for our online class in October. We realize there are a lot of myths out there about tax preparation so we’ve compiled this list to tell the truth about tax preparers, and what it takes to become one.
Myth #1: You need to be a CPA or have an accounting degree to be a Tax Professional.
Many people shy away from taxes because they think it will be too difficult and you must be a Certified Public Accountant (CPA) or have an accounting degree, or the equivalent. The truth is you really don’t have to be an accountant to be a tax professional. Yes, you do need to have an aptitude for dealing with figures, but high level knowledge of math and finance are not necessary because tax preparation is not accounting, it’s law.
What you do need is at least one tax preparation course to give you a solid foundation in individual tax. In addition, a new voluntary IRS Annual Filing Season Program (AFSP) recommends that you also take a 6-hour Annual Federal Tax Refresher Course (AFTR) with a 100 question competency test to confirm your tax knowledge, along with some continuing education, which is always a good thing!
Myth #2: Tax Preparation is for ‘numbers’ people.
It’s amazing how many people think that tax preparation is all about the numbers. It’s not all about numbers, it’s actually a people business, which is why we names our business Peoples Income Tax. While it is extremely important that you have the knowledge to prepare taxes accurately, the experience that your clients have during the tax preparation process and after is just as important. When you are dealing with a client’s financial information it becomes very personal. Your client trusts you to take good care of him/her and hopes you have their best interests in mind. Your client is looking for guidance and has come to you because they see you as an expert in the tax industry. You could prepare a client’s tax return perfectly but if you don’t provide personal service, they may not be back. Relationships are paramount!
So, if you enjoy working with people, you could do very well in the tax business. It’s all about building relationships and trust.
Myth #3: You need to be a college graduate to become a tax professional
We already told you that you don’t need to be a CPA to prepare taxes, but did you also know you don’t need to have a college degree either? The level of education required is just a high school diploma or the equivalent life experience. While you don’t need a college education, you will need education in tax law and preparation. Good news: it doesn’t take four years to get that, it only takes several weeks.
Myth #4: Learning tax preparation could take years.
Our Comprehensive Course can be completed in as little as 10 weeks. As we mentioned before, you can begin preparing taxes for the general public as soon as you learn the basics. From there you can increase your knowledge while working as a tax preparer.
Get your share of more than $1 trillion in tax deductions
The most recent numbers show that more than 45 million of us itemized deductions on our 1040s—claiming $1.2 trillion dollars’ worth of tax deductions. That’s right: $1,200,000,000,000! That same year, taxpayers who claimed the standard deduction accounted for $747 billion. Some of those who took the easy way out probably shortchanged themselves. (If you turned age 65 in 2018, remember that you deserve a bigger standard deduction than younger folks.)
Here are our 10 most overlooked tax deductions. Claim them if you deserve them, and keep more money in your pocket.
- State sales taxes
This write-off makes sense primarily for those who live in states that do not impose an income tax. We’re lookin’ at you, Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Here’s why this is a factor. You must choose between deducting state and local income taxes or state and local sales taxes. For most citizens of income-taxing-states, the state and local income tax deduction is usually the better deal.
For those of you in an income-tax free state, there are two ways to claim the sales tax deduction on your tax return. One, you can use the IRS tables provided for your state to determine what you can deduct. In addition, if you purchased a vehicle, boat, airplane, home or did major home renovations, you may be able to add the state sales tax you paid on these items to the amount shown in the IRS tables up to the limit for your state. Or two, you can you can keep track of all of the sales tax you paid throughout the year and use that.
The best way to see what you can deduct is to use the IRS’s Sales Tax Calculator for this. Keep in mind, the total of your itemized deductions for all of your state and local taxes is limited to $10,000 per year.
- Reinvested dividends
This isn’t really a tax deduction, but it is a subtraction that can save you a lot of money. And it’s one that many taxpayers miss. If, like most investors, you have mutual fund dividends automatically invested in extra shares, remember that each reinvestment increases your “tax basis” in the stock or mutual fund. That, in turn, reduces the amount of taxable capital gain (or increases the tax-saving loss) when you sell your shares.
Forgetting to include the reinvested dividends in your cost basis—which you subtract from the proceeds of sale to determine your gain—means overpaying your taxes. TurboTax Premier and Home & Business tax preparation solutions include a very cool tool—Cost Basis Lookup—that will figure your basis for you and make sure you get credit for every dime of reinvested dividends.
- Out-of-pocket charitable contributions
It’s hard to overlook the big charitable gifts you made during the year by check or payroll deduction. But the little things add up, too, and you can write off out-of-pocket costs you incur while doing good deeds. Ingredients for casseroles you regularly prepare for a qualified nonprofit organization’s soup kitchen, for example, or the cost of stamps you buy for your school’s fundraiser count as a charitable contribution. If you drove your car for charity in 2019, remember to deduct 14 cents per mile.
- Student loan interest paid by you or someone else
In the past, if parents or someone else paid back a student loan incurred by a student, no one got a tax break. To get a deduction, the law said that you had to be both liable for the debt and actually pay it yourself. But now there’s an exception. You may know that you might be eligible to take a deduction but even if someone else pays back the loan, the IRS treats it as though they gave you the money, and you then paid the debt. So, a student who’s not claimed as a dependent can qualify to deduct up to $2,500 of student loan interest paid by you or by someone else.