Advantages of Hiring Professionals With Tax Preparer Certification

July 26, 2011 by  Filed under: Taxes 

As the cost for software to prepare personal tax returns continues to drop, there are questions about the future for paid tax preparers. However, about 60 percent of tax returns are still prepared by professionals. Most taxpayers are buying peace of mind that others don’t have.

There is a real concern about whether do-it-yourself taxpayers will experience long-term savings. Tax software can apply the correct rules to various situations but it cannot replace the experience of someone in the tax preparation business. Preparing hundreds of tax returns every year that encompass many distinctive circumstances builds judgment for tax professionals that is not embedded in software.

In addition, professional tax return preparation means that every entry on each tax form is a defensible action with the IRS. That alone justifies the cost of a few hundred dollars. People spend more than that each year for car insurance and never file a claim. Tax returns are just as critical because the consequences of mistakes are severe.

Of course, there are always some taxpayers with do-it-yourself situations involving income only from a W-2 and no eligibility for any tax credits. But a paid tax preparer professional provides significant value to anyone with a business, investment property, multiple types of itemized deductions, a new home, or children that may qualify for other tax credits.

Tax software will ask what deductible expenses a taxpayer has to offset income on a 1099. But the program does not say what possible expenses are tax deductible and the types of records required – unless the taxpayer wants to spend a lot of extra time studying IRS publications. In such cases, a professional with IRS tax preparer registration already possesses the requisite knowledge.

Most importantly, careless mistakes are avoided because of a person’s skills, not software tools. This is increasingly critical as the IRS cracks down on overstated tax deductions. Using the wrong form is an easy way errors are noticed. For example, deducting home office expenses with other business costs – instead of using the separate form applicable to a home office deduction – is a common error. Failure to place expenses together or separate them when required is just as important as knowing which expenses are deductible. A registered tax return preparer training course is the only sure path to avoiding costly mistakes.

In fact, the IRS is often interested in the deduction for a home office. There are special rules relating to this deduction. A licensed tax professional has the training to assure these rules are followed. When justification is lacking for a home office deduction, a self-prepared taxpayer will lose any tax preparation fee savings by incurring penalties for back taxes.

There is another reason that do-it-yourself tax software is not an automatic preparer of tax returns. That is, the program has no capacity for knowing cost basis. Without this, accurate determination of depreciation is impossible as is calculation of capital gain or loss.

These are just a few of the reasons that registered tax return preparer jobs provide a secure professional future. Educating the public about the advantages of hiring a pro instead of only relying upon tax software will keep taxpayers out of trouble.

IRS Circular 230 Disclosure

Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.

Fast Forward Academy is a leading publisher of education for paid tax preparers and tax professionals. Access to free questions for the tax preparation business is available on their website.

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