Income Tax Preparation

What is your time worth to you?

Income tax

This is a good question to ask yourself when it comes to preparing tax returns. According to government statistics, the average 2003 itemized tax return with interest and dividends took 28 hours and 30 minutes to prepare. Surprised?

Each year, federal income taxes increase in size and difficulty. Each year tax software packages get better, but even using software programs require time. Plus, the outcome is directly related to information being entered correctly by the taxpayer. To save you from stress, the services of a paid professional may be something to consider this year.

Average costs to have an individual tax return prepared range roughly from $150 to $450, depending on complexity. Professional tax preparers stay abreast of tax law changes, are familiar with software glitches, and have insight about frequently overlooked deductions. This year, many tax returns will be directly affected by new legislation signed by the President in two recent tax bills. Tax preparers have studied and equipped themselves to work with the latest guidelines. Often, consulting a tax preparer not only pays for itself, but offers you a learning experience that will help you better structure your financial matters for future savings. Many tax professionals are very good financial advisors. All of these considerations enter into the “Do I or Don’t I?” equation. However, it mostly comes down to the investment of time versus money.

Assess Your Needs

Several elements factor into the type of professional that is best for you. Just as it is not a good idea to hire a home repair contractor or a nanny without doing some personal needs assessments and careful investigation, it is never a wise idea to hire a tax professional without doing the same thing. Just as importantly, never base your decision solely on cost. Compare what services are available and included, as well as how the professional meets your personal expectations. These factors will help you determine where you will receive the most value for your dollar.

Hire a Preparer

To hire a tax preparer, consider:

  • The complexity of your tax return. Do you have such things as the sale of property, investment income, or income from the operation of a business activity to report? You will want someone that ensures proper tax treatment, has experience, and can optimize reporting to best benefit you.
  • Is future financial advice important to you?
  • Do you want someone who will also help you out after tax season if the IRS questions something or audits your return? Is this an included service or an additional charge?
  • What is the fee structure and does it make sense to you? How does the preparer charge? Flat rate? Per form? If so, how many forms are anticipated? By the hour? How many hours do they estimate? Which way would you feel best paying?
  • Do you feel that you can trust the person you select? This is crucial.

Other criteria worth thinking about:

  • How long has the preparer been in the tax business?
  • What type of credentials or designations do they maintain? Do they continually upgrade their knowledge by meeting continuing education requirements?
  • Does the preparer belong to any professional organizations? Belonging to a professional organization indicates a commitment to excellence in his or her chosen profession. Professional organizations provide their members with the latest tools necessary to enhance business knowledge as well as providing a valuable resource for information.
  • What do other clients say about the tax preparer? Referrals from friends and acquaintances are great, but references are important to check out too; satisfied customers attest to reliability. A good preparer will cheerfully provide references.

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