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Tax tips that save money

Is the best option to prepare your taxes online?

Or maybe go to one of the nationwide chains? According to a Senate Committee, you should be very careful about who’s preparing your taxes. Take a moment to review these tips to maximize your deductions.

The Dangers of Do-it-Yourself Tax Preparation

Get peace of mind

With the growing presence of online tax preparation software, do you really need your own tax professional? According to the IRS, most people still use paid preparers. Do these people know something that the do-it-yourself taxpayers don’t? According to a study, it appears they do.

Most taxpayers seek the advice of a tax professional to ensure both tax savings and an accurate return. While it might be true that self-preparers start out with more confidence, that confidence typically flies out the window upon receipt of that menacing letter from the IRS and the ensuing tax, penalties and interest. The best reason to use a paid preparer is peace of mind.

The Government Accounting Office (GAO) in their April 2003 testimony before the Senate Finance Committee (GAO-03-610T) reported the following statistics regarding taxpayers that used a paid preparer:

  • 77% were confident their paid preparer achieved maximum tax savings
  • 87% planned to continue to use their paid preparer in the future

This same report states, “Given the complexity of the tax code, it is easy to understand why so many taxpayers depend on the assistance of a paid preparer.”

What about the national chains?

What kind of tax professional is best for you? An Enrolled Agent or a Certified Public Accountant, professionals recognized as tax specialists, are recommended. The IRS refers to these professionals as practitioners.

The national chains often hire seasonal workers with no more formal training beyond the course offered by the company that hired them. Any paid preparer who is not a CPA or Enrolled Agent is referred to as an un-enrolled preparer by the IRS.

Do you really want a part-timer who does taxes in his spare time and knows about as much about tax as your brother-in-law? At BRN, we are proud to employ experienced tax professionals with Bachelor’s degrees. Our professionals are either Certified Public Accountants or Enrolled Agents.

In their April 4, 2006 testimony before the Senate Finance Committee, the GAO reported that chain preparers made serious errors. In GAO visits to commercial outlets, un-enrolled preparers often prepared returns that were incorrect, with tax consequences that were sometimes significant. Some of the more serious problems in these cases were:

  • 50% failed to report business income
  • 50% claimed an ineligible child for the Earned Income Credit
  • 33% failed to take the most advantageous stance on higher education expenses
  • Over 75% failed to itemize deductions at all or failed to claim all available deductions

This same report reveals that, in most states, anyone can be a paid preparer regardless of education, training or licensure and that un-enrolled preparers are not held to the stringent regulations and continuing education requirements that apply to CPAs and Enrolled Agents.

What about price?

Per page 25 of the GAO report, the average fee charged for a simple 1040 by most national chains during Spring 2006 was over $200 with some being over $250. In most of the GAO cases, the tax chain preparers either refused to give an estimate or charged more than the estimate.

At BRN, we believe honesty is the best policy. We will quote your return based on last year’s forms, letting you know right up front how much any additional required forms will be per our fee schedule. Plus, you will receive a detailed invoice upon the completion of your return. No guessing. We stand by our word, period.

Read for yourself

Download and read the GAO Reports yourself and then make an informed decision on who should be preparing your next tax return.