As the clock keeps ticking and the April 15 filing deadlinefor filing the 2012 income tax returns, (or the April 16 filing deadline for your Massachusetts return,) keeps getting closer, one decision many taxpayers grapple with is whether or not to hire someone to help them prepare their returns. As with many such decisions, the best answer really is “it depends.”
What it depends on is a number of factors including:
- Is it something that you really want to do?
- How complex is your return?
- Has something unusual occurred this past year that needs special attention?
- Are you anxious about getting your paperwork accumulated and filing the return timely and accurately?
Beyond all of those issues, as a general proposition, I believe that most people who have more than wages and bank interest to report on their tax return would benefit from utilizing the services of a tax professional. Perhaps the main reason for this belief is that ‘better’ tax assistance generally comes from those who are not, what I call, “tax historians.” In this context, “tax historians” are tax preparers who receive your information for what transpired in the prior year and put it down on the tax return forms with the primary goal being the size of your refund or how little the balance due is.
I believe that those tax professionals who offer the best value for their involvement are those who get involved in assisting people with their tax filing responsibilities by viewing the tax refund or balance due as not much more than a tollbooth en route to maximizing the total amount of money left in one’s pocket after the completion of the tax return. Furthermore, it is those same tax professionals who use the previous year’s tax return and associated information as a source of inspiration for which strategies, (contributions - whether to charities or retirement plans,) timing of income receipt, and/or expense payments will work best not only in the then current tax year but in the tax years that follow.
How can you do your due diligence in selecting a tax professional to work with? More often than not, the best referral system is inquiring of friends, colleagues, coworkers, and/or relatives whom you trust for their recommendations and experiences. Once you get a name or names, the next step would be for you to interview each person either over the phone or face-to-face in order to get a sense for whether or not there might be the makings of a good, and ideally, long-standing relationship.
Among the questions you might ask during that interview are the following:
- What type of tax preparer are you?
Meaning: are you a tax preparer, enrolled agent, CPA, or tax attorney?
- Do you have a Preparer Tax
Identification Number (PTIN)?
While the mere fact that someone has one of these is not necessarily a confirmation of their ability, it does indicate that they are registered with the IRS which leads to a conclusion that they are doing more than just several returns and have at least met the IRS minimum threshold to sign returns.
- Do you operate your tax
Clearly, the reason for asking this question is that tax notices do not only arise between January 1 and April 15, and should you receive any correspondence with regard to a prior filing, you want to be able to follow up on it in a timely fashion.
- What is your typical turnaround time
for the completion of the return?
The issue, from my perspective as a tax attorney, is not simply whether the return will be finalized and filed by April 15, but also includes whether the tax professional is realistic about filing deadlines so that the filings will be taken care of thoughtfully, thoroughly, and timely. This is true whether the returns are filed by the April 15 date or within any allowable extension period, which might be necessitated by either your ability to produce the applicable information or the level of how busy your potential preparer might be based on a somewhat arbitrary filing deadline for everyone, and the delay, (especially this year,) in not only the tax forms becoming available but also the receipt of reporting information from the various sources.
- If I were to get audited, do I need to
meet with the IRS?
In this instance if he or she answers other than “no, you do not need to meet with them alone”, that would mean that you might well do better looking somewhere else for someone to help you with your filing responsibilities.
- What will it cost me to engage your
As with almost anything else that you purchase, this is certainly one of those areas where, in most situations, you will get what you pay for. Certainly the cost associated with preparing any return is going to depend on the tidiness of your information presentation, the comprehensiveness of your records and how it is presented. Other factors that will have an impact would include the complexities associated with your return, the accuracy of your information, whether you are self-employed, whether you have rental properties, the nature of some of your investments, etc. Therefore, it is sometimes challenging for the preparer to provide a specific fee quote, but at least you will have a sense for how the costs might run and how it may or may not fit into your budget.
In the final analysis, you are well advised to look for someone who is not just looking backwards at the year just completed, but who is looking forward to help you plan for the future and is available at any time of the year to be able to address issues that might arise from previous filings, in order to address how you might want to deal with something that arises in the course of the current year. In all cases, remember that the person you engage to assist you is working both with and for you.
And in conclusion, under the ‘for what is worth’ heading, I offer for your consideration my opinion that the income taxes we pay are our rent for the opportunity we have to live in our wonderful, if imperfect at times, democracy.
Bruce M. Fogel, Esq.
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