Just about every household with an income is required to file a tax return. But with everything, you have a choice. You can choose to be in compliance and file a tax return. Or you can choose not to file a tax return and be out of compliance. But this is not recommended!
If you choose to be in compliance, then you can choose to prepare and file your tax return yourself. Within that option is the choice to file paper returns or to use an on-line software.
A paper return is the old school, original tax filing method. Although tax booklets are not mailed to your house or available at the post office, again, there are options! You can download forms from the IRS website, visit a local IRS office, or request copies by phone — 800-TAX-FORM. But be forewarned, this is the slowest method of processing your return. That is because once your tax return is received by the processing facility, a data entry clerk must type in all of your data into a computerized version of the return. Obviously, with the known backlogs at IRS, this can be a very slow process and delay receiving your refund if you are due one.
If you choose to prepare your own tax return, there is a plethora of on-line software options. Many even boast “free” tax returns. But “caveat emptor”, “let the buyer beware!” There seems to always be a catch to “Free.” Often what is discovered is that “free” only applies if you have a very simple return, such as one W-2 or maybe two W-2s if you are filing joint. Sometimes “free” is for completing the federal tax return but there may be a fee to file your state return. Or there may be a fee to electronically file the return. Just be cautious of such hidden fees when all you hear is “free, free, free”.
Another not-so-free feature of DIY software is the “upsell”, causing those with more complex returns like those who are self-employed or have itemized deductions, to purchase add-ons and ultimately spend more money and save less time.
Of course, you’d think that I would say that the best option is to hire a tax professional. But actually, you may be surprised to know that I encourage everyone to try to understand the tax code and if possible, do their own tax return. Say what?? That’s right. Because that is how I found my love for taxes. I had my own small business and wanted to understand how to file my own business tax return. In so doing, I learned that I really enjoyed all things taxes and have made a career of it. The same may happen for you, too!
But yes, here is what you have been expecting.
The other option for being in tax compliance is to hire a tax professional. Certainly, this is not required. But with the constantly moving target for so many different tax rules, it can be very difficult to know what is in effect for 2022 taxes, what is different and causing such a huge difference from your 2020 and 2021 tax returns, and how it may be different again in 2023.
If you have more complex tax returns, there are more options to utilize the tax code to your own tax advantage. Knowing how to do that is where the value of a tax professional becomes most cost effective (and time effective, too).
The best way to find a tax preparer, according to Investopia, is to ask friends and advisors for their recommendations. If your friend has confidence in this person, it is worth learning more about them.
At the least, be sure the preparer has a PTIN (preparer tax identification number). Credentials can include designations such as CPA (certified public accountant), however, not all CPAs are versed in tax law or prepare tax returns. Other designations are Enrolled Agents (an IRS designated title for those who pass a 3-part rigorous test) and attorneys. Again, not all attorneys are versed in taxes.
Another consideration is knowing who you can trust with your confidential information. In the age of identity theft, a reputable firm with procedures in place to ensure confidentiality is crucial.
With one day of tax filing underway already, it is essential to not procrastinate in selecting your tax professional. One piece of advice is to provide all of your tax documents as soon as you have everything. Waiting until the last minute can cause you to incur unnecessary rush charges.
If you would like to consider Saunders Tax & Accounting for your tax preparation this year, contact us at 301-714-2071 or visit www.SaundersTax.com. We have been helping our clients enjoy a Less Taxing Life and More Prosperous Solutions since 1984. And we can help you, too!