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2013 CCH Whole Ball of Tax
CCH Reviews Preparing Tax Returns in a Season of Uncertainty: Do it Yourself or Consult a Tax Professional?
(RIVERWOODS, ILL., January 2013) – With fiscal cliff and tax negotiations going past the 2012 end-of-year deadline, keeping track of the impact of those last-minute decisions might be challenging for even a seasoned tax professional, let alone the average taxpayer. CCH, a Wolters Kluwer business and a leading global provider of tax, accounting and audit information, software and services (CCHGroup.com), offers timely information, tips and suggestions for all taxpayers – whether you’re choosing a professional to handle your taxes or filing your own return.
“This has been one of the toughest tax seasons to prepare for,” said CCH Senior Federal Tax Analyst Mildred Carter, JD. “Some people who are usually comfortable preparing their own returns may turn to a tax professional this time. If so, it’s very important to ask the right questions and make sure you choose the right person who is qualified to meet your tax preparation needs.”
Tax Filing Trends
Electronic filing (e-file) of tax returns continues to grow in popularity. According to the IRS, of the 137.2 million tax returns received through June of 2012, more than 113 million were e-filed – a 6.2-percent increase from 2011. Of those returns received, the IRS reports that slightly more than 71 million were filed by tax professionals, up 4.3 percent from the year before. Those same statistics also show that just over 42 million of those returns were self-prepared, a 9.7-percent increase from 2011.
Professional Preparation Requirements
Anyone who is a paid professional tax preparer must be registered with the IRS to work on income tax returns. Tax practitioners must have either a Preparer Tax Identification Number (PTIN) or be a Registered Tax Return Preparer (RTRP). Professionals must renew their PTINs each year or pass IRS competency tests to achieve RTRP status. More information on specific PTIN and RTRP requirements are available from the IRS.
Inquiring whether a tax preparer has an updated PTIN or RTRP status is one of many questions taxpayers should feel free to ask when checking a professional’s background and credentials. Picking the right person is the key. But remember that the bottom line is, you’re responsible for what’s on your return, even if it’s prepared by someone else. So, if you’re going to seek professional support, it’s important to pick someone you have confidence in.
Look for Experience, Continuing Education
It’s a good idea to look for a tax professional with consistent experience in tax preparation. A qualified tax preparer should stay on top of all tax code changes throughout the year and understand how taxpayers are affected.
Sources to help you find a professional include:
- Recommendations from friends: Ask friends with financial situations similar to your own if they can recommend someone they know and trust.
- Contact your state CPA, Legal or Enrolled Agent organizations: Many state organizations maintain databases of local accountants and other tax preparers and will provide free assistance in helping you select a tax professional in your area. Also, many of these organizations provide free assistance to low-income taxpayers who may not be able to afford tax preparation help. Finally, there are a number of Internet sites that provide listings and directories of accountants organized by locality.
Be sure to check out the preparer’s credentials and whether he or she is a member of a professional organization that encourages or requires members to pursue continuing education. Each year, CPAs and enrolled agents are required to take continuing professional education courses while employees of large tax preparation firms must complete training classes. Ask whether your tax preparer is up-to-date on continuing education, training and changes in the tax code.
And before you hire someone, check with your state CPA society to verify his or her license and to see if any complaints have been filed. If complaints have been filed, look elsewhere.
Have Your Questions Ready
Here are some questions you will want answered when evaluating professionals:
- What is your experience and do you have a specialty? Some tax professionals have specialties or gear their practice to particular types of professionals or individual taxpayers. Also, if you have financial interests in states other than where you live, make sure your tax professional is familiar with those state laws.
- How do you bill clients? Before you ask your tax professional to do anything, find out what the fees are and what exactly you’re being charged for. Does the preparer bill at an hourly rate or a straight fee? How will you be billed? Will you be billed for research time if needed? To avoid confusion, get the billing and payment terms in writing.
- How do you characterize your professional style? Do you prefer someone who will take an aggressive stance in checking every possible angle in minimizing your tax exposure or someone with a more straightforward approach in identifying your available tax deductions?
- If I am audited, will you represent me? Ask if your preparer will represent you if you are questioned or audited by the IRS. Ask how much experience your tax professional has with IRS audits. While some experience is good, too much can be a warning sign.
- What do you need from me? Before providing information to your tax professional, ask exactly what information is needed and in what form. Many provide print or electronic “organizers” to help you sort your financial records. Some ask that all tax information be saved electronically so it can be downloaded into tax return software. The more organized you are before you give your tax preparer your records, the better she is able to help you. Beware of a preparer who does not ask for details and documentation of your income and deductions.
Never Sign a Blank Return
Avoid preparers asking for your signature on a blank tax form in advance of completion. Taxpayers should always review their entire tax return and feel free to ask their tax preparer any questions before signing off. Also, your paid preparer must also sign the return, include their PTIN and give you a copy of your tax return.
Evaluating Do-it-yourself Online Options
Do-it-yourself, online tax preparation solutions are also a popular option for those who prefer to prepare and file on their own. Almost all programs offer the ability to e-file your return, which catches simple errors and speeds refund checks. Before choosing a tax prep program, ask the following questions:
- Is the software provided by a name I know and trust? Now is not the time to take chances! You’ll want to find a software package with the right options, features and price. Make sure you are going with a provider with a name you know and trust.
- Is the software easy-to-use and secure? Make sure the program is easy to navigate, helps you organize your information in a way that makes sense to you and provides the support resources you need to complete your return. One example is a plain-language glossary of terms and an information guide clearly explaining how to handle various tax situations you may encounter. You also want to make sure the online tax service you choose encrypts your data using recognized Internet security standards.
- Can I work at my own pace? Online tax preparation sites allow you to password protect your work, coming back as often as you need. Make sure it also automatically checks for errors or oversights and provides links to the pages where the problems occur to quickly spot and correct mistakes. If you choose to electronically file your return, check to see that you have the ability to print and review the final forms before e-filing with the IRS or state revenue department.
- What becomes of your return after you file? Some online programs enable filers to securely save their latest return along with returns from prior years in case they need to print a copy or a quick reference. Users should also check to see if their online tax solution allows for carrying over basic information from one year to the next – saving more time when beginning this year’s tax return.
- Does it clearly show the cost of preparing and filing both federal and state returns? If consulting with a tax software provider, be aware of the costs involved in filing your return. Some promote a federal tax return price or free federal filing, but may not clarify all costs for filing a state tax return. On a multi-tiered pricing structure, see whether the total fees compare with what a professional tax preparer may charge.
- What are the payment and refund options? Many sites allow you to deduct the cost of using their program from your expected tax refund. Most also allow direct deposit of your refund into your bank account, allowing you to access your refund even faster. Some solutions may offer a refund advance or refund anticipation loan feature, but that option may come with additional fees and interest charges. In fact, the IRS has been trying to discourage refund anticipation loans, by providing faster refunds and limiting refund indicator information, due to high fees and inflated refund claims in some cases.
- What are the help and support options? Ideally, the tax prep program you’re using should be straightforward so you do not need support. However, you will want this safety net, so look to see that the program offers the support features you want, such as e-mail or live online chat. Premium support features, such as live phone or online chat, may come at a nominal charge.
- Do you qualify for Free File? Free File is an IRS-sponsored program that allows individuals who meet certain income and other qualifications to use commercially-supplied online software and file electronically for free. The commercial vendors participating in the program each can set their own qualifications for participation. It’s important to access the program through the IRS web site, IRS.gov.
“If you’re counting on the Free File program, be aware of some costs that still may be involved,” Carter added. “Your federal return is free with the program, but vendors may charge extra for a state return or for additional services, such as a refund advance.”
About CCH, a Wolters Kluwer business
CCH, a Wolters Kluwer business (CCHGroup.com) is a leading global provider of tax, accounting and audit information, software and services. Celebrating its 100th anniversary in 2013, CCH has served tax, accounting and business professionals since 1913. Among its market-leading solutions are the ProSystem fx® Suite, CCH Integrator™, CCH® IntelliConnect®, Accounting Research Manager® and the U.S. Master Tax Guide®. CCH is based in Riverwoods, Ill. Follow us on Twitter @CCHMediaHelp. Wolters Kluwer (www.wolterskluwer.com) is a market-leading global information services company. Wolters Kluwer is headquartered in Alphen aan den Rijn, the Netherlands. Its shares are quoted on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices.