Filing a tax return is understandably a daunting task for many Americans. Not only is the US tax code awfully complicated, Congress had also passed the largest tax reform legislation in recent history, which took effect in 2018. Those not keeping up with these changes are in for a hard time.
Thankfully, there are professionals whose main job is to keep up with all this complexity. Your tax preparer will not only save you time, but also money in the form of deductions or credits your untrained eye may have missed. They can also spare you from a ton of potential headaches from costly errors.
But not everyone calling himself a tax preparer is worthy of your time. If you’re in need of one, don’t go about making these mistakes.
Sorting by cheapest
The cheapest option in the tax preparation industry is not always the best option. You’ll have to look out as most tax preparers are unlicensed, and may cause you to lose more once the IRS identifies an error on your tax return. When something is too good to be true—you know how it goes.
Not doing a background check
We didn’t make the warning against unscrupulous tax preparers out of nothing. In fact, the IRS itself counsels about choosing one’s tax preparer wisely as the taxpayer will be held responsible for all the information on their income tax return. The revenue service also warns of a bunch of other things that you could suffer from not doing your due diligence, so it’s a good idea to do your homework before signing one up.
Picking one oblivious to your industry
Is your business heavy on research? If it is, you may be eligible for a Research and Experimentation tax credit. How about a deduction for keeping production jobs at home. Yes, that exists, too.
It’s important for tax preparers to be familiar with not only their industry, but also yours. Tax laws are complex and provisions are different from industry to industry. An untrained tax professional could miss a tax deduction that you are entitled to, costing you extra.
Thankfully, our tax firm is well-versed in a wide range of industries, including real estate, small business, healthcare, and more. So if you feel you’re tax preparer is missing something, call us and we’ll take a look.
Hiring for tax season only
One of the not-so-obvious mistakes you could do is not seeing the big picture. What this means is not including a qualified tax preparer in your overall business strategy. The benefits of working with a tax preparer in the long-term is manifold. For one, he or she can help you track tax savings and deductions throughout the year, and not just the tax season, which will give you savings in the long run.
Every decision that you take, such as buying a house or equipment, can impact your tax returns. Partnering with a trusted tax preparer will help you determine how you can use those decisions to your advantage.
Not hiring at all
Quite possibly the biggest mistake you could make is skipping the due diligence and taking on the IRS yourself. The cons of doing your tax return on your lonesome outweigh the pros, for instance, you are guaranteed to spend a large amount of time making sense of the US tax code, which could lead to costly errors.
This is not to say that it cannot be done, of course. There are a ton of resources online that can help you learn about tax credits and deductions and tax filing options. In addition, software options abound, including one provided by the IRS itself.
Just remember that if you’re having doubts, it’s probably a good idea to bring in the pros.