When tax time comes, we will begin to see a large number of television commercials from competing tax preparation companies. They will make claims such as promising “instant tax returns” or they will tell you that you don’t need a W-2 form to go in and prepare your taxes. Well the IRS doesn’t process tax returns any faster for these companies than anyone else. What they offer, if you qualify, are short-term, generally high-interest loans that must be repaid by sending your refund to them or the financial institution that provided the loan. They will also usually charge extra for this service. Interest and fees will be deducted from the total refund amount as well as tax preparation fees. As for not requiring a W-2, except in certain situations where a W-2 substitute may be used, if you work for pay or wages, you will need a W-2 to file your tax return. The tactic is to get you in the office to “start” your return so you feel compelled to come back to finish once the actual W-2 arrives.
In addition, because there is still very little regulation about who can prepare taxes to be paid, when tax reporting season arrives, unregulated makers start popping up in temporary storefront locations. They would start putting up signs on street corners promising big refunds aimed at attracting low-income people and when April 16 arrived, they closed shop and disappeared.
So what should you look for when choosing someone to prepare your taxes?
* Be sure to choose a tax professional with appropriate credentials. Registered Agents and CPAs are licensed professionals, guided by a code of ethics established by the Internal Revenue Service. We are required to keep up with constant changes in the tax code through continuing education and this is reported to the IRS.
* Your tax practitioner must have a Practitioner Tax Identification Number and must sign all tax returns.
* You should use someone who will be available throughout the year to answer any questions that may arise. There are life changes that occur during the year that could affect your tax situation and you may need someone available to offer the necessary advice, or you may get a letter from the IRS that may need help responding.