About ten years ago I had to get help with my taxes. At the time, I had to account for all of the following: employee stock options, employee stock purchase plans, stock gains and losses, itemized deductions, real estate gains and losses, business gains and losses, and my regular salary and bonuses. I was overwhelmed so I asked around and got a recommendation for some help. I gathered all of my documents, visited the tax professional (he was a CPA) and here’s what happened.
I brought in all of my transactions and made a spreadsheet with all of the items I thought he’d need. When I got to his office he couldn’t get rid of me fast enough. I was fine with that, except I felt sure he would need more information about me to complete the taxes. Anyway, he took all of my information and a few days later he sent me the completed tax documents to sign and mail in. Everything looked fine so I mailed them in and that was that. The next year, however, I called “my accountant” and he had taken a job with a CPA firm and no longer did individual taxes. So, at that point I had to decide if I was going to find a new accountant or take matters into my own hands.
I decided to do my taxes myself. After all, they make great software to help, even with unique situations like military tax preparation. And all the information you need can easily be researched on the IRS website. So, I bought the latest version of tax software and started working on my taxes. While using tax software is rather easy to do, transitioning from last year’s accountant’s documents to the software was not. That’s because the accountant had made depreciation schedules and had loss carryforwards and unrealized benefits that needed to be carried over to the next year and several years of tax returns. I had a difficult time trying to work backwards into his numbers, but I finally got my complicated taxes done. The printout from the tax software was over 266 pages when all was done and finished.
I’m telling you my background not to brag about how great I am at doing taxes, but to share with you what I learned about getting help with taxes in the hopes that it helps you make the right tax decisions also. Here are some of the most useful tax tips, or should I say, lessons learned.
Help Yourself With These Tax Tips
First of all, tax professionals don’t always care about your taxes. Most tax professionals get paid on the number of returns they can complete. That means they are motivated to do your return as quick as possible. While you may be walking into their office with all of the information about you and your business, they may just see you as another form to fill out. While this is not always the case, don’t expect to be great friends with your accountant.
The second thing I’ve learned, is that tax professionals are not all that accurate. While accountants obviously know how to fill out tax forms, they often neglect to get the details they need to be accurate. I have seen errors in every tax return that a “professional” has completed. They are not usually big errors, but they are still errors. Part of the problem is that, in order to do taxes correctly, you have to have all of the information. It is nearly impossible to give ALL of your information to a tax preparer. And when they run into problems or questions, and they are not big issues, they often neglect to call or email you with a request for more information. They often make assumptions or estimates on their own. After all, if they called each person each time they had a question, they wouldn’t get many returns done, right?
The next tax tip is that once you start with a tax preparer, it’s hard to stop. If your taxes are simple, then its pretty easy to change tax preparers, because all the next preparer really needs is last year’s tax forms and this year’s information. However, if you have complicated taxes that include things like depreciation schedules and amortization tables, then it is much more difficult to change preparers. However, if you your taxes yourself, using tax software, all of your information is stored in your tax file. And all of the relevant information is automatically transferred to next year’s return.
The final tax tip, and by far the most important one, is that if you hire someone to do your taxes, you just don’t get an understanding of how taxes work. Of course you can argue that you don’t care how taxes work or that they are just too complicated for you, but that would be a cop out. To really know how taxes work, you’ve got to do them yourself. Nothing can save you more money and time than knowing how things work. For example, if you know how capital gains are calculated, you can learn to manage your investments to minimize them. If you know how itemized deductions work, you can start a folder and keep all of the deductions organized throughout the year so that when it comes time to do your taxes you’ll be prepared and will not overlook any deductions. Furthermore, by doing taxes yourself you can run scenarios of taking different deductions and making different contributions to your tax deferred accounts. The software will walk you through ways to maximize your return that most tax prepares just don’t take the time to teach you. Even if you struggle with doing your taxes, try to do them yourself and if you need help, pay for it. The tax software companies often offer support that you can purchase whereby you send your electronic returns to them and they help answer your questions. The fee is small and it will help further your understanding of how taxes work.
In conclusion, we feel strongly that you can actually improve your personal finances and save a lot of money if you do your taxes yourself. You won’t just save the money that you pay a tax preparer, but you’ll find hundreds of ways to save money on your taxes every year that you may not have otherwise thought of. If you really can’t deal with them, don’t feel bad, but do choose your preparer wisely. It is often best to ask around for referrals rather than just show up at a tax office.
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These tax tips help people of all kinds that struggle with the choice if filing their own income taxes or using a professional tax preparer. This information will be beneficial for many years to come as it is a fundamental issue that many taxpayers face before they file their taxes. Thank you for taking the time to help people know they’re not alone and give them options on what they can do to take charge of their own income taxes! Keep up the great blogging.
Great article helping people and sharing about tax problem. Keep it up good man, we all need tax shield.
Cheers
Mitch Carson recently posted..The Gold Awaits You with Tax Lien Certificates
I think the best piece of advice is to try to do your taxes on your own until your taxes become too complicated. Many people are able to just do their own taxes because it’s fairly simple, especially with the right tax software. But once you start going into accounting for online businesses, multiple sources of income, changes in address, etc. it may be necessary for a professional.
Nice post. These tips will be useful for me. I do not have much idea about these taxes and all. Thanks for sharing this informative post.