Did you know that roughly 60% of taxpayers pay someone to prepare their tax returns?  That’s roughly 84 million people!

Here are some tips I believe people should consider when paying someone to prepare their taxes.

1.     Make Sure the Preparer is Eligible to File Your Returns

In today’s day and age, this is something we shouldn’t have to worry about, but unfortunately we do.

In fact the California Franchise Tax Board estimates that there may be between 4,000 – 5,000 unregistered tax preparers illegally preparing tax returns for a fee in the state of California.

To help combat this problem, beginning January 1, 2011, new IRS regulations require all paid tax return preparers – including attorneys and CPAs – to have a PTIN, or Preparer Tax Identification Number, in order to prepare federal income tax returns.

So my advice is to make sure your tax preparer is compliant with state/federal regulations. To verify my credentials with California, click here and type “Schurter” next to “Last Name.”

2.     Google ‘Em

Google the person’s name who is going to prepare your taxes.  Check out their website and learn about them and their qualifications.

Consider content over style.  Having a good/bad looking site doesn’t necessarily mean they’re good/bad at preparing taxes, but it may help give you a feel for what to expect.

Something to also consider is whether or not they make an attempt to educate their clients.

I try to do this on my site www.BryanSchurter.com.   Feel free to let me know what you think.

3.     Check out Their Fees

The national average for a basic federal tax return costs between $200 and $500 to prepare.

Obviously, this amount varies depending on the difficulty of the tax return.  Never assume cheaper is better, or conversely, that paying more means you’re getting a better return.

Don’t be afraid to call and ask the person about fees.  With some basic information about your specific situation, the person should be able to give you a good estimate.

Caution:  It is illegal for a preparer to base your fee on an anticipated refund!!     

4.      Are They Available Throughout the Year?

If their office is only open January – April, you may want to re-evaluate your choice.  Issues always come up throughout the year, and you want to be sure you can reach the specific person who prepared your return.

5.      Look for Referrals and Trust Your Gut

After asking your family/friends who they use and trust, go with your gut.

Everyone is different, and everyone has a unique situation that applies specifically to them.  If you’re getting bad vibes from someone, go with your gut, and make the best decision for you.

6.     Response Rate!

Keep in mind, a good and caring tax professional will return your phone calls and answer your questions.

We all get busy, but just because it’s tax season, doesn’t give the tax professional the right to not return your calls or answer your emails in a timely manner.

Don’t ever accept bad service!  You have a choice!

If you feel you could use some assistance with preparing your 2010 Tax Return, feel free to comment below, email me, or call me anytime.    

*Please keep in mind that all the information I post on this site is for general purposes only.  I understand that every person’s situation is unique and should be treated as such.  If you would like more information about how something listed in any of my posts specifically affects you, please feel free to comment below, email me, or call me anytime.

I’ll admit that my thoughts on this topic are probably a bit biased.  However, I hope this article provides some thoughtful information that everyone should consider when purchasing a tax software program versus using a professional.

Here’s a True Story  

A year and a half ago I had a client come in to see me – I’ll call her Amy.  Amy had tried to prepare her fiancé’s taxes on her own using a tax software program.  However, she couldn’t figure out why it showed her fiancé having to pay over $11,000 in taxes.  She knew this couldn’t be right based on his income.  Amy told me that she had gone through the program several times over a couple of hours and couldn’t figure out what was happening.

Amy called me and asked if I wouldn’t mind looking over the return for her.  When we finally met, we quickly figured out the problem.  I could easily see why Amy was getting frustrated.

She was answering the questions correctly in the tax software program, she was even inputting the correct numbers, the problem was, it was the wrong question!

There really was no way for Amy to know she was answering the wrong question.

The good news is, once we corrected everything, Amy’s fiancé went from owing over $11,000 to just a little over $2,700.

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Obviously this was an extreme case, and I was happy that I was able to help Amy and her fiancé, but it got me to thinking.  What if Amy’s program showed her fiancé owing $3,500?  Would she have checked to make sure that was accurate?  Would any of us?

How do we really know that the refund amount shown on the tax software program is really the highest amount to which we are entitled?

How do really know that the amount due shown on the tax software program is really the lowest amount to which we should be paying?

There really isn’t any way of knowing without talking to an experienced tax professional.

Many of the tax software programs will guarantee the lowest refund, but how on earth do you know you have the lowest refund if don’t talk to a professional?

Unfortunately our tax code has gotten far too complicated and confusing.  Congress passes laws changing the tax code all time and it really can become very difficult to keep up with all the changes.

I encourage everyone to educate themselves as best as they can in all areas of taxes and finance.

I also encourage people to seek out expert advice with a professional that you trust.

If you feel you could use some assistance with preparing your 2010 Tax Return, feel free to comment below, email me, or call me anytime.    

Last month I briefly talked about how the Bush Tax Cuts May Affect You if Congress did not vote to extend the tax cuts voted on by the previous administration.  I am happy to announce that on Friday, December 17, 2010, the cuts were extended for another two years.  If the cuts hadn’t been extended many of us would have seen higher taxes beginning next year.  As an example, single tax filers would have seen an increase in taxes between $400 – $1,600.  Many middle income families would have seen an increase between $2,200 – $5,500.

One of the major elements of the tax package is a one-year reduction in the payroll tax that funds Social Security.  FICA taxes will drop from 6.2% to 4.2% for most workers – This would save a married couple earning $75,000 per year $1,500 in 2011.  Keep in mind this is only for people who pay into Social Security – so unfortunately (depending upon how you look at it), teachers and other public employees who do not pay into Social Security will not see this reduction in their pension contributions.

Other key points in the tax extension:

• 15% – Maximum tax rates on long-term capital gains and qualified dividends.

• 0% – Tax rates on long-term capital gains and qualified dividends for those in the two lowest income-tax brackets — 10% and 15%.

• American Opportunity Tax Credit – the new college tuition tax credit was set to expire at the end of 2010.  It has been extended through 2012.

Some other popular tax breaks that had expired at the end of 2009 have been reinstated for 2010 and 2011.  They include:

• Choice between deducting state sales taxes or state income taxes

• Tax deduction of up to $4,000 for college tuition costs available to some taxpayers whose
  incomes are too high to qualify for the American Opportunity Credit

• $250 tax deduction that teachers can claim for out-of-pocket expenses for
  classroom supplies – even if they don’t itemize their deductions.

Please keep in mind that all the information I post on this site is for general purposes only.  I understand that every person’s situation is unique and should be treated as such.  If you would like more information about how something listed in any of my posts specifically affects you, please feel free to comment below, email me, or call me anytime.

The year I discovered the difference between a Tax Preparer and a Tax Advisor was back in 2002 when Brandy and I were both teaching.

Up until that point, I had always prepared my own taxes.  However, in 2001 Brandy and I had just bought our first home, and we wanted to make sure that we were doing things correctly, so we decided to go to someone to prepare our returns.  Being the teacher that I was, I worked on our return the night before in order to compare how well I did when we met with the preparer the next day.  I guess I was hoping he would give me a good grade!

The next day when we had our one and only appointment, I was shocked to discover that he came up with a smaller refund than I did on my own the night before.  He had me getting a smaller refund by a couple hundred dollars!  Add in the fact that I had to pay for his services, and I was just a little frustrated.   So, again like a good teacher, I had to gracefully and tactfully show him his mistakes and together we got the same refund I came up with the night before.  Unfortunately, I was still out the money I had to pay him.

To say that I was frustrated would be an understatement.  Brandy and I felt like we were being rushed throughout the appointment, the preparer missed many deductions that I was able to find on my own, and I was going to pay him to get a lesser refund than I got on my own.

To further add to my frustration, when I asked him about what we could do to lower our taxes for the future, he pretty much said we were doing all we could.  I knew this couldn’t be true!

This is when I began to realize that there is a major difference between a tax preparer and a Tax Advisor.  This was one of several events that started my journey of getting the information, knowledge, and training I needed to minimize my income taxes.  Little did I know at the time this experience would also one day help my future clients.

It has become somewhat of a mission of mine to find all the deductions and credits that I can for my clients.

If you have ever felt the same way as Brandy and I did back in 2002, please feel free to email me or comment below and share your story.  I guarantee you are not alone!

If you’d like to see if you are getting all the deductions to which you are entitled, and would like to lower your income tax liability, please feel free to contact me anytime.

You may have noticed that I often refer to myself as a Tax Advisor rather than a Tax Preparer.  Although I am a Registered Tax Preparer, I believe there is a major difference between those who refer to themselves as Tax Preparers vs. Tax Advisors.  I have also recently come to realize that I might be confusing people.  Just the other day when I posted about year end tax saving tips, I received an email with the question, “Is a tax advisor the same thing as a tax preparer?”   

I figure if one person asked that question, there are probably many more that I’ve confused as well.

Here are the differences!

Short answer – Both Tax Preparers and Tax Advisors are “tax preparers” and can prepare tax returns, but a Tax Advisor provides many more services for their clients.

Long answer – If the only advice you are getting about reducing your taxes, or increasing your refund, is to change your withholdings and to contribute more to your retirement account(s), than you are most likely dealing with a tax preparer.  If on the other hand, the person who prepares your taxes takes the time to meet with you, goes over your taxes, and educates you on ways to reduce your taxes now and in the future, then you are most likely dealing with a Tax Advisor.
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A Tax Preparer is best for people who want to have their taxes done as quickly as possible.  A Tax Advisor is best for people who want to have their taxes prepared as efficiently as possible – while paying the least amount in taxes.

If you’d like to read more about a frustrating experience I had with a Tax Preparer when I was a teacher, click here.  Not being educated almost cost me a couple hundred dollars that year!
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Here’s my breakdown on differences between Tax Preparers and Tax Advisors:

Tax Preparer

            Prepares Tax Returns, usually in one quick appointment
Usually only available between Jan – April
Usually very limited advice on how to reduce income tax liability

Tax Advisor

            Prepares Tax Returns, usually meets twice with clients to insure lowest tax liability.
Available all year
Provides personalized strategies to help reduce income taxes for years to come
Keeps in contact with his/her clients throughout the year
Provides personalized strategies to help maximize paycheck
Provides tax advice on issues like home ownership, retirement accounts, etc…
Provides financial advice
Considers tax implications now and in the future
Understands the whole “death and taxes” analogy more than any one person should
Is part of an Organization that promotes ethics 
(Here’s my Professional Profile)
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I encourage everyone to educate themselves and find the right tax advisor for them.  It’s almost always best to find someone who specializes either in your career field or business.  Above all else, make sure you trust the person!

Do you have any questions?  Would you like me to expand more on the differences?  Feel free to comment below or contact me anytime.

Please keep in mind that all the information I post on this site is for general purposes only.  I understand that every person’s situation is unique and should be treated as such.  If you would like more information about how something listed in any of my posts specifically affects you, please feel free to comment below, email me, or call me anytime.

Attention Teachers!  In a future post I’m going to also discuss the differences between 403(b)/TSA Salespeople and Financial Advisors.  If you’d like to make sure you receive that post and any other future posts from me, please subscribe to my email list.

I know, I know, you don’t want to hear about taxes in December.  But just like there are many ways to save money on our purchases right now, there are many ways that we can save on our taxes right now too.

Most, but not all, of the tips listed below are for those who own a home and/or itemize their deductions.  If you don’t know whether or not you are eligible for these deductions please leave a comment below or contact me anytime.

Before I begin, let me quickly say that these items are the ones that I have noticed get overlooked most often.  Each year I prepare over 200 tax returns, and just like a teacher who has to grade well over 200 papers throughout the year – I remember this all too well during my 5 years of teaching junior high – we all start to notice common mistakes that are overlooked repeatedly.

So here some things that you still have time to do before the end of the year to save money on your taxes.

Classroom/Office Party – If you are having a party in your class/office, make sure to save those receipts.

Unreimbursed School/Business Expenses – Purchases that you don’t get reimbursed for can be written off as long as you use them more than 50% for school/work.

School/Work Shirts/Sweatshirts – Many people buy shirts with their school logo or work logo on them.  Did you know you can write these purchases off?

Charity/Church Cash Donations – This also includes donations through check and credit cards.  Gift purchases used for “Toys for Tots” or some other charitable function can also be included, just make sure you save your receipts.

Charity Non-Cash Donations – If you’re like me and my family, you may have already started de-cluttering your home and getting rid of some unused items.  Donate these items to either Goodwill or some other non-profit that allows for such donations – don’t throw them away!  Take a picture of the items you’re donating, and use this sheet provided by Goodwill® to help calculate the cost.  This could save you a ton of money in taxes!  Believe me, it’s worth it.

College Tuition – If you, your spouse, or child/dependent are going to college next semester, you may want to pay the tuition this year.

Energy Saving Home Improvements – The tax credit for the cost of energy-saving home improvements is 30 percent for 2010, up to a combined maximum of $1,500 in both 2009 and 2010.  It applies to qualified insulation, windows, outside doors, biomass fuel stoves and high-efficiency furnaces, water heaters and central air conditioners.

Have a Baby – Just Kidding!  I just wanted to see if you’re still reading!  If you do start though, you may get a credit/deduction next year!

Obviously, there are more things that can be done before the end of the year, and this is just a short list.  If you do have any questions, or would like clarification on something I talked about above, or something I didn’t mention, please feel free to leave a comment below, or contact me anytime.