Get inside information! Our friend Eric is guest blogging for us, sharing dirty secrets of the tax business in time for the new year and prepping 2016 taxes.
At this point in the year, you’ll have more than enough blogs to read regarding your 2016 tax return. Sure, you’ll hear how you need to be organized or how to choose a tax preparer. You’ll also hear how to get a bigger refund and how to not stress out. I’m sure they’ll all be of value to you.
But with me, you are getting inside information. You see, I’ve spent the better part of my adult life preparing tax returns. I’ve worked for high level CPAs and I still prepare some myself. Here are some dirty secrets of the tax business. You didn’t hear them from me!
Confession #1: Some tax preparers should be called “number inputters”
Anyone can drop numbers into a box and follow directions. The reason you pay your accountant is to be aggressive. He should have a deep client base and industry experience to draw from. Having these assets will help him know what the IRS is focusing on of late in order to steer you away from some high-risk deductions.
Now, I am not saying aggressive means doing anything illegal. I would never condone such a practice. What I do support is an accountant who knows where the grey areas of the tax code sit. In short, don’t pay someone to copy your numbers into a tax program and hand you a printout. If that’s what they are doing, it will be quite clear.
Confession #2: You're paying unnecessary interest and penalties
People who prepare tax returns as a side gig are not as knowledgeable in the field (This type of person is normally found at a national tax franchise location.) That is not a knock on them, I respect someone who is trying to hustle on the side. The knock is on you for letting them handle your finances. If your preparer isn’t talking to you all year or thinking about topics such as making quarterly tax payments, you may be paying some interest and penalties that are easily avoided. This is more common for self-employed individuals, as they don’t have an employer to withhold money for them.
Also, if you handed your accountant your tax information more than 2 weeks before the deadline, it SHOULD be filed on time. If not, they should inform you that you’ll be going on extension. If one of these does not happen, you're most likely paying unnecessary penalties and/or interest.
Confession #3: You are paying too much for your return
How much should a return cost? That’s a good question: the answer is arbitrary. Here is my guide to tax return prices.
National Franchises — They will overcharge you because of all the overhead. They are training people to prepare returns who have never done so, paying rent in prime location, etc. These types of services are frowned upon in CPA land. Though some of these entities prepare a simple return for free, it’s rare anyone out of college will fall into this category. Otherwise, a couple hundred dollars is standard.
CPA firm — This type of environment will cost you a pretty penny. If price is not a concern, you will get top-notch expertise at these offices. That being said, you’ll be paying at least $300 for a basic return, going upwards from there. Most of the time, their individual return preparation is a courtesy to the business returns they prepare.
Ideal preparer — The ideal place to prepare your return, in my humble opinion, is a one- or two-man shop where the lead guy or gal used to work for the tax side of a CPA firm. Normally, someone doing it out of their home will be more negotiable with price, since their only investment in the business is time. These types of folks will have more time to talk to you and focus on your specific situation.
Good luck and I hope these confessions helped!
Eric Estevez is a freelance writer, blogger, finance coach, and tax accountant. He has been training in the grappling art of Brazilian Jiu-Jitsu since 2010, currently holding the rank of Purple Belt. JiuJitsuFinance.com combines his passion and life's work where he teaches you how to do Financial Jiu-Jitsu! The blog focuses on money issues for Millennials, whether for personal or business.