It may sound like we are over-exaggerating the fact that tax compliance is something you absolutely have to get right but we are not! And not because just for the sake of maximizing your deduction. The right tax preparer can help you by preventing you from making screw-ups that can lead to penalties, or ensuring you have someone to accept liability.
Hiring a tax preparer is a safe way to go. Just like me and a lot of people out there, if you are confused and have a lot of questions, it’s probably in your best interest to go ahead and get a pro on your side.
But, who is this professional; we are talking about? Take a look.
What is a Tax Preparer?
A person who is familiar with the tax laws, procedures, and tax filing practices is called a tax preparer. For their offered service, they charge a variable fee that depends upon the complexity of your tax situation.
A tax preparer follows the proper guidelines issued by the Internal Revenue Service, generally known as the IRS. These guidelines are subjected to change from year-to-year for certain situations. These guidelines are not easy to understand, they are confusing for many. If you are confused by these guidelines hiring a tax preparer would be a huge help for you.
But how can you be certain that you need a tax preparer? I’ll list a few scenarios that will help you to understand your situation. Take a look.
- Running short on time.
- Swamped by the thought of preparing your own taxes.
- Confused about the tax implications of your financial activities.
- Having a complicated tax situation.
- Owner of a small business, consultants, and freelancers, or all who have to pay self-employment taxes.
- If you’re buying or selling a home.
- If you are preparing a sale of stocks, business holding, or other large assets.
- providing financial support for someone.
As a person who is quite familiar with the tax process, I always encourage people and businesses who might be considering preparing their own taxes as an attempt to save money or to understand your tax situation to take the advantage of a tax preparer as I am aware of how complicated the tax situation can be from time-to-time. Changing IRS guidelines can make this process even more complicated, then there are tax rules and whatnot. Please take a look at these benefits of hiring a professional tax preparer before you make a leap to prepare your own taxes:
Benefits of Hiring a Professional Tax Professional
- A tax preparer helps you save money. Being a professional tax preparer keeps a tight process and they find even one deduction or tax credit that you have missed, you’ll save a lot of money. This can even exceed the cost at which you hired the professional.
- A tax preparer helps you save time. IRS reports that it takes nearly 20 hours to complete an average tax return. Considering the time, you’ll need a whole day to just prepare your taxes!
- Answers questions and resolves issues. Having queries is common while doing taxes, even for the smallest query you might end up wasting hours and hours just on the line while trying to get the answers from the IRS. A tax professional can answer the questions and resolve the issue within no time.
- Keep you ahead of the changes. A professional tax preparer keeps himself aware of all the changes so that you don’t end up wasting any more of your valuable time to learn about them.
- Helps you reduce stress. Tax preparation is complicated involving a lot of things making the process complicated that can induce stress to any normal human being. By hiring a professional tax preparer you can achieve peace of mind as your taxes are being prepared by a professional who knows the process in and out.
- Your previous returns can be also reviewed. A tax professional can look at your previous returns to see if any deductions were missed and if so, amend them for you.
- Provides money-saving tax planning. A professional can advise you on some strategies that will help you make smart tax-saving decisions for your business.
So far you have learned about who the tax preparer is, why you should consider hiring one, and what are the benefits of hiring a tax preparer. I am pretty sure that till now you must have started to consider hiring one for you as well. But there is a catch, hiring a tax preparer is not an easy job. There are few important things you might wanna consider before you hire one for yourself. I have listed down few things you need to know before you hire a tax preparer:
Thing To Know Before Hiring A Tax Preparer
- Cost of Hiring a Professional Tax Preparer
Hiring a professional tax preparer isn’t going to be free, you end up paying something to the tax preparer. Considering that you are a startup or a business that works on a tight budget, hiring a tax preparer can put a sizable dent in the budget. While you can cut corners in a few places, hiring the cheapest preparer may not be a bargain as s/he may lack expertise or might not be completely capable to assist you with value-added services like proactive tax planning advice. Choosing a cheaper option may also cost losing the benefits of a few tools as He/she might not have access to a professional tax preparation software that increases the efficiency of the overall process.
Getting a clear idea of the service offered by the professional is the best way to start the hiring process. Get a good look at the fee structure, any professional will explain to you the fee structure they offer, whether you end up paying by the hour or on a flat-fee basis, the service that is included in the package, and what is the extra cost for additional services.
- Understand the Qualification of The Tax Preparer
Not all tax preparers are the same, each varies according to their levels of credentials, expertise, and qualifications. There are different types of tax professionals, 3 main being Chartered Public Accountants (CPAs), Enrolled Agents (EA), and Tax Attorneys. CPAs licensed by state accounting boards, tax attorneys are licensed by their state bar or bars, and Enrolled Agents are licensed by the IRS.
Before choosing any one of them making sure to check their credentials is important. You also want to ask what experience is also beneficial. And don’t forget to vet them by asking what kind of a track record they have with audits, getting references, and checking them out, and making sure they are in good standing with the certifying body before signing on with them.
- Knowing the Representation Rights
The different types of tax preparers have different representation rights. These rights can be limited or unlimited. This is important because you should always prepare for every situation like facing an audit or getting hit with an unexpected tax penalty. In this case, knowing the representation right will definitely come in handy as:
- Preparers with limited rights have to file the tax personally, otherwise, they can’t represent you to the IRS. They can’t represent you on appeals or collections issues as they can only represent you in dealing with certain categories of IRS employees.
- CPAs, EA, and tax attorneys can represent you on tax matters concerning audits, payments, collections, and appeals as they have unlimited representation rights.
- Don’t Just Focus on Short Term
You’ll end up missing the bigger picture while thinking about the relationship in transactional terms only. With strategic tax planning, a professional tax preparer can really play a vital role in your business’s long-term success.
- Preparing Yourself
Don’t just hire a tax preparer and forget, get your house in order to achieve maximum advantages from the tax preparer you hire. Keep your receipts and business records organized before you meet with a prospective preparer. Even if you miss out on something, at least you’ll know where the gaps are. This will help you to ask and answer questions about exactly what type of help you need, saving you time and money in the long run.
So there it is. I have done my part explaining everything that might come in handy while hiring a tax preparer or even if you are considering one. Hope that this
Whether you’re filing personal or business tax returns, hiring a tax preparer can save you a lot of time and stress. With a professional tax preparer, you can rest assured of an optimized and accurate tax return that won’t result in an IRS audit or penalties.