Avenues for preparing your taxes

As tax time rolls around, and in light of the substantive changes to the tax code under the 2017 Tax Cuts and Jobs Act (TCJA), more people are considering a tax preparer or tax preparation software to help with their taxes. This guide is designed to help you make an informed decision about the software, person or firm you choose.

Hiring a tax preparer: What to look for

Tax preparers may be certified public accountants, attorneys, enrolled agents and possibly others who do not have professional credentials. Because you are sharing your most personal data, you want to have a high degree of trust in the person you hire. You will divulge many details of your life, your finances, your marriage, your family, your income and your social security numbers.

While most preparers are qualified, it’s important to do your due diligence. Here are ten tips from the Internal Revenue Service (IRS) to help you make an informed decision about choosing your tax preparer.¹

1. Check the preparer’s qualifications. Use the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications. This tool helps taxpayers find a tax return preparer with specific qualifications.
2. Check the preparer’s history. Ask the Better Business Bureau about the preparer. Check for disciplinary actions and the license status for credentialed preparers. For CPAs, check with the State Board of Accountancy. For attorneys, check with the State Bar Association. For Enrolled Agents, go to the verify enrolled agent status page on IRS.gov or check the directory.
3. Ask about service fees. Avoid preparers who base fees on a percentage of the refund or who boast bigger refunds than their competition. When asking about a preparer’s services and fees, don’t give them tax documents, Social Security numbers or other information.
4. Ask to E-file. Taxpayers should make sure their preparer offers IRS e-file. The quickest way for taxpayers to get their refund is to electronically file their federal tax return and use direct deposit.
5. Make sure the preparer is available. Taxpayers may want to contact their preparer after this year’s April 17 due date. Make sure you’ll be able to contact your preparer before, during and after the filing process.
6. Provide records and receipts. Good preparers will ask to see a taxpayer’s records and receipts. They’ll ask questions to figure things like the total income, tax deductions and credits.
7. Never sign a blank return. Don’t use a tax preparer who asks a taxpayer to sign a blank tax form.
8. Review before signing. Before signing a tax return, review it. Ask questions if something is not clear. Taxpayers should feel comfortable with the accuracy of their return before they sign it. They should also make sure that their refund goes directly to them – not to the preparer’s bank account. Review the routing and bank account number on the completed return. The preparer should give you a copy of the completed tax return.
9. Ensure the preparer signs and includes their PTIN. All paid tax preparers must have a Preparer Tax Identification Number. By law, paid preparers must sign returns and include their PTIN.
10. Report dishonest tax preparers to the IRS. Report abusive tax preparers and suspected tax fraud to the IRS. Use Form 14157, Complaint: Tax Return Preparer. If a taxpayer suspects a tax preparer filed or changed their return without the taxpayer’s consent, they should file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit.
    

A different route: Tax preparation software

Tax preparation software was first launched in the 1980’s and it’s improved significantly over the past several years. There are many players in the market offering many different features. Before choosing a software package to assist you with your taxes, you should consider the following:

How simple are your taxes? Do you have relatively few deductions? Limited sources of income and investments? If this reflects you, then DIY software may be fine.

What’s your knowledge of taxes? Are you deduction-savvy? Are you aware of charitable contributions and the substantiation rules associated with them? Tax software should provide you with prompts to help you fill out the return, but the more knowledge you bring, the more accurate it will be.

Would you like some personal support? In the past that meant that you should probably hire a pro, but now some software packages are offering live support. For example, some offer reviews of your forms prior to filing, live advice and on-demand chat service for additional peace of mind.

The IRS provides links to free software options if your adjusted gross income is $66,000 or less. Whereas buying a software package can cost between $10–$200 depending on the complexity and features (such as live support) that you require. There is likely an additional charge to do your state taxes.

Whichever path you choose, be sure to read our tax preparation checklist to help you organize your forms and documents prior to filing.

Want to learn more? Check out other articles from AYCO on financial planning and more.