#DailyTaxTip – Questions to Ask Your Tax Preparer BEFORE Filing Your Taxes

After having a conversation with a coworker where I asked what questions they’d have for a tax professional, I realized that many people don’t interview the person that plays a significant role in their financial life for the year. With that, I began to think of things you should ask your tax preparation specialist BEFORE having your taxes done and the “Top 10” questions are below. Remember, this is just a starter list. Whatever comes to mind during your conversation should be asked but make sure you interview them.

After all, they work for you.

  1. How long have your completed tax returns for people?
  2. Do you have a current PTIN (Preparer Tax Identification Number)? (NOTE: Every tax preparer who is compensated for completing tax returns for other individuals should answer this with a yes. If they do not, ask what year was their last official PTIN issued.)
  3. Do you have a current EFIN (Electronic Filing Identification Number)? If not, why? (NOTE: While most tax preparers need both numbers, those who utilize electronic software or work through a company tend to work under an umbrella EFIN of the larger organization.)
  4. On average, how long does it take you to complete a simple tax form (1040EZ)? How much longer does it take you to compete a tax form complete with extra schedules (1040 with extra forms)?
  5. Which forms are you most comfortable filling out? (NOTE: The more complex your financial situation – you have multiple income streams and qualifications for credits – the more forms your preparer will have to complete. It is easy to get confused in this process so be sure to understand which forms apply to your situation and what your preparer is able to handle.)
  6. How many clients do you file for in a given tax season?
  7. How many of your clients have been audited? (NOTE: I encourage people to ask this question because it speaks to the quality of the work. You can also ask if a particular type of client is audited, i.e., a business owner, to get an idea if it’s a simple trend that can be explained.)
  8. Do you work outside of the regular tax season? Why or why not?
  9. What advice do you give to your clients concerning their financial status/habits? (NOTE: Most tax preparers are not financial planners/professionals BUT they should have something to offer you concerning your financial situation, especially for common situations like saving for a child’s education or for retirement.)
  10. How and when can I contact you if I have further questions?

You should never feel pressured into using a service, especially when your finances are concerned. The moment you do, collect your things and run for the hills (or just exit quietly through the door). I hope these questions help you become more comfortable discussing your tax situation and other financial issues.

**

Since 2010, Courtney has been using her training and expertise to provide affordable, accurate and ethical tax preparation services to those in her community. She firmly believes in the saying, “When you know better, you do better,” and it is always her intent to educate others on things that significantly impact their lives. 

Advertisements

#DailyTaxTip – Credits! Credits for Everyone! (February 22, 2014)

Good morning! The Daily Tax Tip is back and today I’m explaining credits.

To begin with, you need to understand what a credit is. Simply put, a tax credit is an amount that’s deducted from the total amount of tax a person owes back. A tax credit differs from deductions, which reduces the amount of money the government can tax, and are given out for various reasons. The most common tax credit is the income tax and it recognizes what you’ve already paid toward your tax burden. Other credits may be offered as a subsidy (think the Health Care Tax Credit that’s being offered now) or to get you to invest or spend money on certain things.

Below is a list of the three most common tax credits available:

Earned Income Credit

The Earned Income Tax Credit (EITC) is available to you if you worked but did not make a lot of money. Granted a “lot” is predetermined by the government and is based on your total income and filing status, but it is worth the research. This credit is a refundable credit (which means you see the money in your refund). There are different qualifiers for this credit and the caveat here is that you usually see the money if you have a child (there have been some cases where people qualify for the credit without children but that amount isn’t as much).

Child and Dependent Care Credit

This credit is available to those who have qualifying child OR dependent care expenses. The credit is given to you in the form of a percentage of the expenses you spent during the year (up to $3,000). Generally, you receive the credit for children less than 13 years of age or a mentally/physically incapacitated dependent. There are some caveats to this credit, so if you receive it, be sure that your tax professional explains it to you.

Retirement Savings Contribution Credit

If you make eligible contributions to a recognized individual retirement account (IRA), you may be eligible to take a credit based on the percentage you contributed during the year. With this credit, there is an income ceiling (you can’t take the credit if you make over a certain amount) and your income determines your credit rate (the lower your income, the higher your credit rate).

 Your tax professional should walk you through an interview before they even complete your paperwork to understand your spending behaviors for the past year and your goals for the upcoming year. If you are eligible for credits, they should also take the time to explain why you received the credit. These two conversations will allow them to offer you advice on credits you should be aware of, what you can do to take advantage of other credits in the future and provide you with some security if you’re questioned about it.

**

Since 2010, Courtney has been using her training and expertise to provide affordable, accurate and ethical tax preparation services to those in her community. She firmly believes in the saying, “When you know better, you do better,” and it is always her intent to educate others on things that significantly impact their lives. 

#DailyTaxTip – January 20, 2014

Good morning and welcome to my first post in the Daily Tax Tip series!

Those of you who read my posts regularly may or may not know that I subscribe to the School of Multiple Income Streams and in addition to my “day job” (and blogging), I am also a Certified Tax Preparer. Since 2010, I have been completing returns and making sure that I stay up-to-date on our nation’s tax code. Most days, it’s super fun. Other days, it’s just fun. Let me get right into today’s #DailyTaxTip so that I don’t bore you with more of an intro (this won’t even be included in future posts).

“Daily Tax Tip” for January 20, 2014:

What is the most important thing to get right on your annual tax return? If you said, everything, you are correct (that was a little tax humor). However, the one thing that sets the tone for your entire return is your FILING STATUS, so it is imperative that you use the one that works best for you. The United States Tax Code recognizes five categories for individuals to pay their income tax. They are below, with a brief explanation for each.

Unmarried Taxpayers (fall under three categories):

  • Single: Unmarried, divorced, a registered domestic partner, or legally separated according to state law on December 31.
  • Head of Household: Unmarried taxpayer who maintains more than half of the cost of a household for more than half of the year for oneself and a dependent.
  • Qualifying Widower with Dependent Child(ren): Taxpayers who maintain the principle residences of qualifying dependents AND whose spouses have died in either of the last two years (2012 & 2013) can be considered surviving spouses if they have not remarried.

Married Taxpayers (fall under the last two categories):

  • Married Filing Separately: Given some tax situations, a married couple may feel it is best to file separate returns and this status allows them to do so.
  • Married Filing Jointly: A couple that is married on December 31 may file a joint return BUT should the couple have a legal separation or divorce by December 31, they can not file a joint return for any part of the year.

Some other quick things about your FILING STATUS:

  1. It is determined by your marital status on December 31st.
  2. It determines your tax liability.
  3. It determines your standard deduction AND exemptions amount.

I hope that this Daily Tax Tip proves useful for many of you. Make sure you follow the hashtag #DailyTaxTip on Twitter and if you have any questions at all, do not hesitate to ask.

Happy Filing!

***

Since 2010, Courtney has been using her training and expertise to provide affordable, accurate and ethical tax preparation services to those in her community. She firmly believes in the saying, “When you know better, you do better,” and it is always her intent to educate others on things that significantly impact their lives.