Should I do my own taxes. . .
This is a guest post from Andy over at $aving to Invest. I am very honored to have Andy here as his blogs on blogging help me in my blogging. This article goes along with my last post Choosing a tax preparer. . . This article was inspired by my guest post Real Tax deductions that may surprise you at $aving to Invest where Andy had commented on the money savings a tax prepare can save you.
Thanks again Andy.
When it comes to doing your taxes, one question that most people have asked themselves at some point is, “Should I do my own taxes or hire an accountant?” When I first started filing tax returns they were very basic and I used to do them myself. However once I started working full time, investing and undertaking further education I started using an accountant to file my taxes. They make life much easier and a good accountant will by far save you more money than you would pay in preparation fees. However you need to weigh up your own situation to determine the best and most cost-effective way to prepare your taxes.
So how do I know if need an accountant? The more complicated your taxes are and the greater you earnings, the more likely it is you need a tax professional. The easiest way to determine this is to first try to do your taxes on your own. If you find it’s too difficult, or if you feel like you’re making mistakes, seek out an accountant or a tax preparation company. {Bruce here, I just want to add that when deciding on an accountant/tax preparer know who you are hiring, if you have a question check my post Who is:}
Though I did my own taxes for a long time, I gave up once they became complicated and too much work. My brother referred me to his friend, who was an excellent up and coming accountant and someone I was very comfortable to pay for doing my taxes. I was sure he would get the maximum return I was entitled to and provide assistance with any future audits if needed. With income from various countries (due to multiple investments) having a knowledgeable and competent tax professional greatly assisted with my family’s taxation impacts and he has provided sound tax related investing advice on a number of occasions. Not to mention all the money he saved me.
From my experience — and this may not be true for everyone — having an accountant prepare my taxes has paid for itself. Though I’m a relatively smart guy and follow directions well, there are things I miss when I do them myself. Further, the tax code is updated every year and most of us non-accountants don’t have the time or background to keep up with all the changes and possible deductions. Accountants normally have tax preparation software and tax checklists that enable them to file taxes quicker, with much fewer errors and to try and get back as much as legally possible for you. For example, did you know you can claim the fuel /driving costs to and from training classes/courses you go to using your own car? {Bruce here – what Andy is referring to I believe is on Form 2106 when deducting work related expenses if you attend a training class or CE course for your employer you are able to deduct any expenses that your employer doesn’t reimburse you for. To see if your specific situation applies to this rule, please check with your preparer.}For multiple days or year-long programs, that can add up to hundreds of dollars in deductions most of us wouldn’t know about if doing our taxes on our own.
A good accountant will do more than just file your taxes; they will actually save you taxes and provide sound tax related advice. The other thing is to always choose a qualified accountant you are comfortable with, trust and has good referrals.
For more on this topic please see yesterdays post and/or More on “finding a pro”. . .
Choosing a tax preparer. . .
Or
Not Choosing An Expert In The Type Of Tax Service YOU Want!
(titles can be hard to chose)
Most people know what they want when they are looking for someone to help them. However, in the case of filing a tax return, most folks just assume all accountants, CPA’s or tax preparers are about the same. But just like most other professional services, nothing could be further from the truth. Each tax professional has certain qualifications and expertise in certain areas. Again, people who help taxpayers file taxes for a living have their own strengths and weaknesses. But here is the rub: Too many people don’t match up what they want with the strengths of a paid tax professional. If you fall into this category, listen closely.
- First, let’s be clear. What do you want from a tax preparer?
From my experience, here are the most common “wants” of regular middle income taxpayers:
1. You want an accurately filed tax return.
2. You want the tax filing process broken down into layman’s terms.
3. You don’t want to hear about someone else’s tax filing scenario. No, you are just interested in your own tax situation — explained so you can understand,
v and once you’ve “got it”,
4. You want the tax preparer to give you a heads up about some possibilities in the future to save even more money or qualify for other deductions that would legally add more money to your pocket at tax time.
5. You want assurances everything your tax preparer is doing for you is valid and correct, so a guarantee(s) is essential to the process. And of course,
6. You want to “close the book” on this year’s tax filing in a reasonable amount of time.
-No dragging this process out for many days or weeks. You want to know what’s going on with your taxes in a day or two, gather more info (if needed) which might reduce your tax burden and/or increase the amount of refund money Uncle Sam owes you – and then file your taxes so you can be done with it!
Oh, and if you ARE getting a refund, you want a tax firm who can get you the most money back the fastest, with the most electronic filing options available. (in my opinion Rapid refunds are false and more trouble that they are worth-stay away from those)
Bottom line:
You want accuracy, you want clarity, you want to be aware of beneficial tax options, you want peace of mind, you want an efficient use of your time, you want your refund money back in your hands fast, and at the end of the day, you want to KNOW you got the most money back from Uncle Sam AND you know the IRS will stay off your back so you can sleep like a baby at night!
If the tax professional you are talking to (or the tax practitioner you currently use) can’t do what you want honestly, don’t give him/her your business. Go to someone who will be on your side, looking out for your interests and not treating you like a number.
Website update. . .
New pages are up. Although the rebuilding is slow. I am using Mambo and it is different from anything I have ever used. All through it, all is taking more time than I have. It’ll get there. I think I have cleared up a few weeks at the end of the month to spend a lot of time on it over all.
The new pages I have up are:
o Fair Market Value Guide for Used Items
o Job and miscellaneous expenses
o Other miscellaneous deductions
All the information was on one page on my other site (except the FMV Guide) and was a bit long to get through. Having broken this Form into different pages of its sections, I believe it will be easier to navigate. The information on these pages are for the filing of your 2007 returns (filed in 2008 – I’m assuming everyone has filed).
The Fair Market Value Guide for Used Items was updated for 2008. I imagine there might be a few updates towards the end of the year but for the most part it is right on the monies (within listed variables). If you’re making donations I highly recommend using the prices listed on both the Household FMV and the Clothing FMV pages. (After reading Fair Market Value Guide for Used Items.)
Schedule A: What is it describes what all the pages are. The whole series is based on the idea to give someone a general understanding of IRS Form Schedule A. I designed this section or series as somewhat of a walkthrough for the form. The information is far from all inclusive and by no means should be used that way.
Some IRS History. . .
The U.S. government’s privilege to levy taxes was incorporated into the Constitution in 1787. The responsibility for how to collect these taxes fell to the Treasury Department where it has stayed. 30years later the issue of taxes was abandoned due to our governments needs were being met by taxes on imports. So no more taxes for citizens.
45 years later the Revenue Act of July1, 1862 was signed by President Lincoln due to the outbreak of the Civil War and the governments need for funding it. This established our nation’s first real income tax. The Internal Revenue Service is officially born.
When the war ended, as before, the nation’s financial needs were being met by the taxes on imports, along with taxes on tobacco and alcohol. This resulting in some 90% of our internal revenue. In 1872 (10 years after its birth) the “income tax” was once again abolished.
Congress revived the income tax in 1894, but the Supreme Court ruled it unconstitutional the following year.
18 years after the Supreme Court ruling, Wyoming ratification of the 16th Amendment, provided the three-quarter majority of states necessary to amend the Constitution. The 16th Amendment gave Congress the authority to more or less re-enact an income tax. That same year, the first Form 1040 appeared after Congress levied a one percent tax on net personal incomes above $3,000 with a 6 percent surtax on incomes of more than $500,000.
Five years later, during World War I, the top rate of the income tax was raised to 77 percent to help finance the war effort. In the post-war years, that dropped down to 24 percent by 1929, and rose again during the Depression.
During World War II, Congress introduced payroll withholding and quarterly tax payments.
I am compiling a historical highlight section for my website that I don’t have completed (not that my site is up yet either) yet but when it is going I will be directing more to it and from it.
If you want to get a look at what the first 1040 form looked like with it’s instructions follow the link below to where the IRS has as a pdf file reproduction.
“first 1040 form and instructions”
Some things of interest to notice:
1. Taxes were only paid on income above $3,000, equivalent to $61,000 in today’s dollars, at the initial rate of only 1%.
2. The highest marginal tax rate in 1913 was 6%, which applied to income above $500,000, equivalent in today’s dollars to a little over $10 million.
3. The entire 1040 tax form in 1913, including all forms and instructions, and was only 4 pages. All instructions in 1913 were contained on a single page, compared to the 2007 1040 Instructions, which held 92 pages long, (without any forms).
Prepare your taxes on-line With L & R Tax Preparation
L & R Tax Preparation
Tax Preparation, Payroll, and Accounting,
Including online services.
E=MC2 or use QuickBooks
