I have a confession. I have prepared tax returns and not taken all available tax deductions. Now that I have your attention, I will get back to actually preparing tax returns a little later. Well, it is Tax Preparation Season 2024. Maybe you have just moved to the area. Perhaps you opened a business or began to work as a gig worker, freelancer, or independent contractor. You just received a big inheritance. You made a killing in the stock market. You finally purchased some investment property. It’s time to make that annual decision. Do I purchase software to prepare my tax return? Do I prepare my tax return myself or should I hire someone to handle this for me?
I did not feel it necessary to prepare my own Will and Trust, likewise, attorneys should not prepare their own Personal and Business Tax Returns. I cannot self-prescribe medications, therefore physicians should not prepare their own returns. I did not shingle my own roof… I am sure you get my point.
I am a firm believer that most taxpayers, especially professionals, business owners, and higher-income earners and investors should not prepare their tax returns. Professional Tax Preparers such as Certified Public Accountants (CPAs), Enrolled Agents (EAs) and even accountants who work for Tax Preparation Firms (H&R Block, Jackson Hewitt, etc.) prepare hundreds, even thousands, of tax returns in any one year.
These skilled Tax Preparers know the ins and outs of tax deductions, including those that should be taken and those that are not legitimate. They are familiar with deductions and expenses for your profession or industry. Professional Tax Preparers have tax software, which is not available to the public, that analyzes deductions that are out of line with IRS national industry averages.
Tax Professionals can compare your unique set of facts to other similar cases they work on throughout the year, not just during tax season.
As promised and annually debated, we do not have tax simplification in the United States. It just gets more complicated. This translates to a very complex U.S. Tax Code for even experienced professionals to navigate.
HOW DO YOU FIND A TAX PREPARER?
Get a referral from your attorney, financial planner, banker, or a colleague in the same industry as you. Ask a relative or neighbor whom they would recommend.
So, do you still want to go at it alone? There are excellent software programs and tax return preparation manuals that are available to assist you in preparing your own tax return such as TaxSlayer, TurboTax and TaxAct. There are free filing versions, but be wary of purchasing unnecessary add-ons. The IRS sponsors Free File online preparation for lower-earning taxpayers.
My suggestion is to use these as a guide to suggest legitimate tax deductions. However, you still need documentation to support your expenses in case you are ever audited. Do not let tax tips suggested by Google, a how-to guide, or a software program steer you into trouble by creating or inflating expenses. Most concerning for taxpayers—the IRS is sending out an increasing number of tax notices each year (considered mail audits) because income reported to them by financial institutions, credit card processors, online merchants and employers does not match the tax information reported on their tax returns. Don’t ignore the 1099 forms you received. IRS computers are catching unreported and underreported income that taxpayers fail to report on tax returns. The best software or professional cannot detect underreported income.
Still want to go at it alone? I estimate I have prepared more than 18,000 tax returns in my career! I can help you.
ROBERT A. MANELA, CPA
Consulting CPA, PLLC
5550 Glades Road, Suite 500
Boca Raton, Florida 33431
Tel: 561-867-1040 or 561-867-1120
Fax: 561-244-0503
robert.manela@cpa.com
www.consultingcpas.com
www.irspenaltybusters.com