Are you about to take your taxes to the local branch of a national tax preparer so that you can get your much anticipated tax refund? You might want to think twice before heading to the local office. It could get you in hot water with the IRS.
The national brands are more than happy to get you in and out of their offices as quick as possible so they can earn their fee and move on to the next customer. The problem is, these tax preparers may not have enough experience to be preparing your return.
If you only have a W-2 and no other tax situations, you’ll likely be fine. However, if you have a complicated tax situation you could be leaving a ton of money on the table, or, even worse, be under reporting to the IRS which could get you in hot water fast.
Most tax payers go to national tax preparer brands in order to get what they see on TV, the largest refund possible. If tax preparers are solely focused on getting the largest refund possible, you could potentially end up misreporting to the IRS. If you get audited and ended up underpaying, you could end up owing a ton of money in interest and penalties due to an unscrupulous tax preparer trying to get you the largest refund. You are ultimately still responsible for your tax return no matter who you pay to prepare it.
On top of that, some major tax preparation companies offer refund loans. Essentially, they charge you money to get your refund faster. If you calculate the cost of the loan on an annual basis, you might be shocked at the interest rate you’d be paying to get that money just a couple weeks earlier! The larger the loan, the more the company makes, so it makes sense for preparers to under-report to get a larger refund.
Not all national tax preparers are unscrupulous, but as with anything, you get what you pay for.
Alternatives To National Tax Prep Firms
The first option you have is to do your taxes yourself with a computer software program. By completing your taxes yourself, you can make sure you’re actually reporting everything that is necessary to the IRS. You can take this time to learn what deductions and credits are available in the future to lower your future tax burden as well.
Worried that you have no clue what you’re doing? These tax software programs try to make the filing process as painless as possible by asking questions in plain English rather than in crazy complex tax code speak. If you get confused and need to ask someone for help, many of these programs offer live support or a forum to help you with your tax questions at little or no additional cost.
The More Expensive High Quality Route
The second option you have, if you’re not comfortable with doing taxes yourself or hiring a national preparer, is to consult with a local Certified Public Accountant (CPA) firm. Hiring a CPA firm is likely the most expensive option you have, but these firms will make sure your return is correct based on the information you provide them.
CPA firms generally send you a tax planner that you fill out with tax information from the year to make sure they get the whole picture of your tax situation. Every CPA firm is different, but unless you’re working with a very small firm your return will probably be prepared as follows. Once you send in your information, one person will prepare your return and another, higher up person will review your return. Finally, a partner of the firm will do a quick review and sign the return.
There are smaller single person CPAs available that would only have one set of eyes on your return. Chances are, these CPAs will be cheaper than the larger local CPA firms.
As you can see, with a CPA firm you get multiple sets of eyes on your tax return to make sure you’re return is as correct as possible based on the information you provided. Of course, CPA firms can only prepare returns based on what they know. It is on you to make sure they have all of the information necessary.
Make Sure You Weigh The Costs vs. The Benefits
If you have a simple tax situation, such as just a couple of W-2s (jobs), some interest income and mortgage interest, you’ll likely be OK going to a national tax prep chain or doing your return yourself. However, add in rental properties, self employment income and other complex tax situations and you might want to take a trip to your local CPA firm.
How do you prepare your taxes each year? Do you do them yourself, take them to a national chain or to a local CPA firm? Let me know in the comments down below!