Tax Time-Why use a tax pro?
April 15 is rapidly approaching and many people are starting to think about getting their taxes prepared. There is some good news in that tax returns are not due until April 17, 2012 so there are two extra days to prolong the inevitable but at some point, your tax return must be filed.
While the decision to file is not much of a decision unless you want to feel the wrath of the IRS for an unfiled return, the decision on how to have your taxes prepared is one that you are fully in control of and sadly, often one that is overlooked and done way too quickly.
There are many ways to have your tax returns prepared. Options range from a do-it-yourself computer program to a large scale tax preparation service to a C.P.A. or other trained tax professional. While most people focus on the cheapest option or simply using the same service that they have used in the past, it can pay to spend a little time to find the right tax return preparer for you.
What should a tax preparation professional do for you? Most people are content with getting a refund, hopefully a large refund, and not paying attention to their taxes until the next year. This type of thinking can often cost you a lot of money.
Here is a list of items that your tax professional should be covering with you:
1 – Your withholdings. Are you over withholding taxes each paycheck? A large refund is always nice to receive but you are giving the government an interest-free loan when you get a large tax refund each year. Your tax preparer should help you adjust your withholdings so that you get use of hard earned wages each paycheck and still don’t owe taxes at the end of the year.
2 – Deductions. While everyone wants to maximize their deductions, very few people know what deductions are available to them based on their income. A qualified tax professional will help you understand what deductions are available to you and how you can maximize them.
3 – Filing Status – While most married filers filed their taxes under the married status, there are reasons to file separately. Did you knowthat your federal student loan payments may be reduced based on your Adjusted Gross Income? Therefore, you might want to file separately to reduce your student loan payments each month.
4 – Tax planning for the next tax year – When you are meeting with your tax professional, you should be talking about the next year’s return. Why? You have, at least, 8 months still left in the year and have plenty of time to plan so that you can reduce your taxes this year. Whether it be contributing more to a retirement plan, using the Flexible Spending Account at work, or buying a house, your tax professional should be assisting you the whole way.
This list is not exhaustive but gives you a good idea as to ways that the right tax professional can make you money. By looking at a tax professional as an investment rather than expense is the first step in getting the most out of your money.