Real Tax Smarts: Tax Pro or No?

Today concludes our final blog on taxes for the season (we had a good run). We’ll conclude with a helpful article on tax preparation.

As a taxpayer, you really have three choices when it comes to preparing your taxes:

Behind door #1 you have … Online tax preparation services

Behind door #2 you have …Tax preparation companies

Behind door #3 you have …Accountants and CPAsAngela Morrison Tax CPA Massachusetts Accountant

To help shed some light on the best door for you, we asked… you guessed it…our trusted tax expert, Angela Morrison, CPA, MSA, MST, and Partner at Huntington Tax Partners in Bedford.

Real Smarts: “Hello again, Angela. Thanks for taking the time to talk to us about this subject. Now, we know as a professional with all those fancy letters after your name, you are a tax professional. So we can pretty much guess which door you’ll want us to open – door #3. Is that expensive for the average taxpayer?

Angela: “It can be, but it all depends on your circumstances and the level of service you need. I know plenty of people who would rather prepare their returns themselves than hire someone. From my perspective all they are doing is paying the IRS more than they should over their lifespan because CPAs can educate them on tax savings opportunities that the average taxpayer may not know about. So the question people should ask themselves is: Would I rather pay more in taxes for my entire life or save on taxes and pay a CPA to inform me on tax savings strategies and file my return for me? Plus, you can have peace of mind that your return is actually being prepared correctly.”

Real Smarts: “What’s wrong with using those online tax software programs? They make tax filing look so easy on those commercials.”

Angela: “If you don’t know what the return should look like as a finished product, how do you know if the software is doing it correctly? It’s easy to make a simple mistake by answering a question incorrectly. We had a client recently come to us because she prepared her return herself using an online program. She sent us the return she prepared, but did not file and asked us to prepare the return instead.  Her hiring us resulted in a saving of $1,908 in taxes -- she went from owing $1,314 to receiving a refund of $594.  I can tell you that it did not cost her $1,908 to file the tax return.”

Real Smarts: “What about tax prep companies? I think people like the idea of getting the money so quickly. How are they able to do that?”

Angela: “These tax prep companies make their money based on the volume of tax returns that they prepare. However, from what we’ve seen in practice, the quality is all too often lacking. The way they get people their money faster is they now offer refund advances. What they have done is partnered with banks to offer short-term loans to their customers. These loans are given based on the expected refund of the taxpayer. If approved, the funds get loaded onto a prepaid card that you are generally able to take with you the same day that your return is filed. Now, according to CPA ethics, we cannot divert client refunds to ourselves directly, no matter the reason. It’s a major conflict of interest. However, in electing to take on these short-term loans, you authorize the bank, not the tax prep company, to repay the loan out of your refund. So they don’t actually get you a refund faster, they just act as an intermediary between the taxpayer and the bank.”

Real Smarts. “So aside from potentially saving you money, what other benefits will we find if we open door #3 and go to a professional?”

Angela: “I think there is a lot of non-monetary benefits for hiring a professional instead of self-preparing or going to a H&R Block type of location.  You can build a relationship with a person that you can rely on for all of your tax needs. It is one less item on your checklist, less worrying about whether or not your return is prepared correctly, and you have someone invested in your life.  A lot of CPAs can help you with other aspects of your financial life – such as estate planning, insurance needs, financial planning, you name it.”

Real Smarts.Would a professional firm like yours want the average taxpayer? I mean you deal with big clients, right?”

Angela: “We deal with all sorts of taxpayers. The average taxpayer has a place in our firm just like everyone else. Although you may associate a tax firm like ours as just preparers, we offer many financial planning tools for any taxpayer. Whether you want to plan for retirement, save for your kid’s college, or if you want to simply adjust your withholding from your paycheck, we can help.”

Real Smarts: “Thank you Angela for help with the tax series. You’ve made what can be a very confusing subject easier to understand. What’s more remarkable is that we didn’t even fall asleep listening to you.”

Readers looking to open door #3 and get professional assistance with their taxes may call Angela at 781-778-7139 or email her at amorrison@huntingtontaxpartners.com.