Many people view the income tax return as just another profit and loss statement. They input the income they received, apply some deductions and credits that are allowed by the tax code, and hope the bottom line shows that enough taxes were with held to give them a refund.
Because the prices charged by some of the large chains for basic returns have sky-rocketed into the stratosphere, many taxpayers have gravitated to purchasing tax software and preparing their own tax return. They have evolved to this point because of cost factors more than because of time saving factors.
Tax preparation software prompts you to answer yes and no questions to determine if you qualify for a certain deduction or credit. An understanding of the tax laws are still required to answer these questions correctly if you want an accurate return. Henceforth, the time saving factor decreases as you try to understand the meaning of a question through research.
The software program is not an intelligent program but simply adds and subtracts numbers based upon your input. The finished result can be incorrect if you answered a question wrong or transposed numbers, but you may not realize this unless you have a thorough understanding of the income tax return. There is no interaction taking place with your software, and you certainly cannot get answers to any questions you may have with the final result.
We realize that some returns are basic enough to withstand this shortcoming of a software program. A seasoned tax professional knows what the finished return should look like while inputting the data, and therefore can pick up these inconsistencies when reviewing the return. At Total Tax Solutions we view the preparation of the income tax return as a time for your annual financial checkup. It is true that the preparation of the income tax return is a reconciliation of the prior year's financial activities. Other than the possibility of contributing to an IRA before April 15 for the prior year to offset a balance due or increase the refund amount, the results of your financial actions is a done deal. Now is the time to plan for the current year's financial activities so that you are not in the same place next tax season. Knowledge and understanding is a very powerful weapon. The income tax return is fairly complex, and a minor change in one area of the return can affect several other areas of the return. An example of how one transaction can change various areas of the return: Mary, a single mother of 2 dependent children, files as Head of Household. Her total income is $27,000. Her employer offers a 401K plan at work and will match up to 5% of her wage contributions, but Mary feels like she is barely making ends meet. We suggest that she try to contribute $2000 to this 401K plan.By making this move, her refund will increase by $821, because 5 areas of the return were affected by this one transaction. With her employer's contribution, she will have $3500 set aside for her retirement while costing her only $23 a week. Now Mary has food for thought and can actually see what such a move can mean to her financial future. When we prepare your taxes, we not only explain where you are and what happened during the year, but also tell you how your actions may help you save additional taxes in the future. We can tell you when you will be losing deductions or credits, and how certain actions you take may cost you much more than you anticipated.
Since none of us can foresee the financial windfalls or disasters that will face us in the near future, another benefit to consider is we are local and available to you throughout the year. Many clients call us during the year with a question about making a financial move. We can immediately call up their prior year return, and explain how a particulartransaction will affect their next return. This service is an extension of the cost they paid at preparation.
We realize that our price for tax preparation, though less than the large chains, is still more than the purchase of tax software. We also recognize that there are many returns that may not be complex enough to warrant the price of professional tax preparation. However, we would like to make the suggestion that you consider to have a financial checkup at least every 3 to 4 years by having your taxes professionally prepared. Amortizing this additional cost once every 3 to 4 years may be feasible for the peace of mind it achieves. If any errors were made on prior returns, you will be able to go back and amend these returns since they are within the 3 year deadline. Since starting our business in January of 2007, 55% of our new clients have had errors found on their prior year returns. These clients were able to receive from $200 to $5500 in additional refunds from the errors or overlooked deductions that we found on those returns. You will also have the opportunity to ask the questions that your tax software can not answer, so that you can make educated decisions about your financial future.
When we started our business, we realized that we had to address the issue of growing a customer base while at the same time maintaining our prices. Like some of the major chains, we opted for charging by the forms required to complete a return rather than a "flat rate per return" fee. We considered this a fair way to price so that a taxpayer with a less complex return pays less. However we are able to charge much less for the form rates because we do not have corporate salaries or overheads to pay like the large chains.
Most of our new clients who used the large chains in prior years see a difference of 25% to 35% for a return of the same complexity. If you feel like you are paying too much for tax preparation, give us a call today for a free estimate.
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