Consult A Tax Professional For Complicated Tax Situations

Posted on August 18, 2010 by admin
Consult A Tax Professional For Complicated Tax Situations

For some people, their financial situation is such that a simple 1040EZ form is sufficient for their needs at federal tax time. Other people have expert knowledge of the tax laws and codes and are able to compete a complex form themselves. But for most of us, employing the services of a tax professional may be the only way to complete your tax forms in the proper manner and get the deductions and credits to which you are entitled. But finding the right tax professional is a job in itself, one that requires research and planning.

There are many types of tax professionals available that offer different levels and types of services. A certified public accountant (CPA) is a financial professional with significant training and very often a degree in accountancy. In addition to their educational training, CPAs must also pass a state-exam before being permitted to practice. Many CPAs also belong to professional organizations that also require them to pass a specific level of tests and exams or take specific courses.

A tax attorney is usually employed by those with extremely complicated financial and tax needs (corporations, the wealthy, etc.) and mainly work in an advisory role, consulting with tax preparers rather than filling out the tax returns themselves. Tax attorneys are law school graduates who have passed the bar exam, so the rates they charge are usually the highest among all tax professionals.

An enrolled agent is a tax preparer that has received extensive testing by the IRS and is equipped to handle the tax issues of those with a relatively complex tax return. EAs are permitted to accompany you to an IRS audit. Because their main focus is tax and tax laws, their fees are close to but not in excess of a typical CPA.

A certified financial planer typically works closely with a set of clients so they can be helpful in filing taxes or explaining complicated tax procedures, even though they do not have the same education and training as a CPA. A certified financial planner should possess a license and accreditation from the Certified Financial Planners Board of Standards.

Finally, a tax preparer has the least training of all of the tax preparers and is not required to be licensed. Tax preparers include those working at well-known tax preparation firms such as H&R Block, Jackson Hewitt and others. A tax preparer can assist individuals with simple returns and perhaps help them find deductions but, as stated previously, their knowledge in these areas may be limited. While their rates are the lowest of all the tax preparers, those needing extensive tax help should probably seek help elsewhere.

Whichever type of tax preparer you select to help you with your federal taxes, you should keep several things in mind:

Qualifications

Carefully review the tax prepares credentials, education (if applicable) and qualifications. Find out what their experience is in the areas in which you need tax help. Check to see if your tax preparer is a member of any CPA organizations, state boards or bar organizations. In addition, check their status with the Better Business Bureau. It is important to verify the qualifications of your tax preparer because even thought they are required to sign the completed federal tax form, it is the taxpayer who is responsible for the information contained within. Any errors on the part of the tax preparer, you will have to answer for. In addition, a qualified tax preparer will be able to find deductions and credits that can reduce the amount you owe, which should be incentive enough for you to find a qualified preparer.

Fees

Depending on the level of expertise of your tax preparer, you may either pay a flat fee or be charged on an hourly basis. In addition, some tax preparers may charge based on the amount of your refund, while other may claim to be able to get you a refund that far exceeds anything any other tax preparers have promised. Be wary.  These preparers may resort to filing practices that benefit them more than you. Discuss how payment will be charged up front to avoid any surprises.

Interview

Don’t be afraid to interview your tax preparer before giving them your business. Talk to at least five tax preparers before selecting one and try to meet all of the candidates in person. Have questions about your specific problems and concerns ready and make sure you get satisfactory answers. In addition, a qualified tax preparer will have questions of their own for you as well, to get a better understanding of your particular situation. Make sure the tax preparer will be available for your calls and having a tax preparer that is available in the case of an audit is also helpful.

A professional tax preparer can help you avoid the pitfalls of the federal tax preparation process. For taxpayers with complicated tax situations and little knowledge of the tax system, getting the help of a professional is a must.

Consult A Tax Professional For Complicated Tax Situations
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Tax Credits Can Have Double Benefits For Taxpayers

Posted on August 18, 2010 by admin
Tax Credits Can Have Double Benefits For Taxpayers

For smart taxpayers, a tax credit is a welcome solution to easing some of the burden of the federal tax. Whether it’s a credit for a business-related expense, childcare expenses, moving expenses or attending school, a tax credit can leave you with more money at the end of the fiscal year.

A tax credit is a purchase or item that reduces the amount of your actual tax that must be paid to the federal government. It is different (and often more valuable) than a tax deduction. A tax deduction merely reduces your taxable income and, therefore, is subject to the changes in the tax rate. A tax credit, meanwhile, is not dependent on the tax rate and is worth the same to each taxpayer no matter what their income.

In the U.S., most tax credits are included with items that have a larger impact on society. There are tax credits for converting your home to solar power, for buying a fuel-efficient car or for returning to school. Other tax credits help those with a low income make the most of their earnings. There is the Earned Income Tax Credit for low-income workers that lets them keep more of their earnings. There are also tax credits for those who use daycare and childcare facilities to aid them in returning to work.

Below are some of the most common federal tax credits.

Energy tax credit

Homeowners who make improvements to their property with materials and equipment that is energy efficient may qualify for an energy tax credit from the federal government. For instance, the federal government currently allows a tax credit for the purchase of an energy efficient water heater, furnace or air conditioner. In addition, upgrading your windows and doors with energy efficient materials also may qualify for the tax credit. The credit is usually about 30 percent of the price of the item, up to $1,500 (the limit set in 2009 and 2010). For instance, if you purchased an air conditioner for $5,000 in 2009, you would receive the maximum federal tax credit of $1,500 (30 percent of the price) on your 2009 tax return.

Restrictions stipulate that improvement must be made to existing homes (or mobile homes or condos) rather than newly constructed dwellings or rentals.

Childcare

Because childcare can be an important and necessary expense for many families, the federal tax credit for this expense can be important. The federal tax credit for childcare is usually equal to a percentage of the cost of childcare minus any reimbursements you may have received from any social service programs. The tax credit is based on your income. If you income is less than $15,000, your tax credit will begin at 35 percent of the expenses; if your adjusted gross income is $43,000 or more, your tax credit tops out at 20 percent of expenses. The maximum tax credit is $3,000 for one child and $6,000 for two or more. The childcare center you utilize must meet federal standards and have a total enrollment of six children or more.

Education

There are two federal tax credit programs that permit students to recoup the cost of attending school: The Lifetime Learning Credit and the Hope (or American Opportunity) Credit. The Lifetime Learning Credit gives you a federal tax credit of up to $2,000 or $4,000 for students in disaster areas to attend an eligible institution. The benefit of a Lifetime Learning Credit is that there is no limit to the number of years you can receive a tax credit and there is no requirement to pursue a degree. The Hope Credit (or American Opportunity Credit provides a maximum of $2,500 in federal tax credit and has recently been modified to make it eligible for students at four-year post-secondary institutions, rather than only two years as in the past. To receive the full credit, students must have an adjusted gross income of $80,000 or less or $160,000 or less for married couples that file jointly.

First-time homebuyer

One of the most popular of all the tax credits, the first-time homebuyer tax credit had recently been expanded to include $8,000 for homes constructed after December 31, 2008 and before May 1, 2010. And users of this tax credit have the added benefit of not being required to repay the credit (unless the owner sells the home within three years). The tax credit is limited to $75,000 for single owners and $150,000 for married couples. A reduced tax credit of $6,500 is offered to homeowners who have lived for in their homes for at least five straight years before moving into a new home. To receive the tax credit, the home must be bought after November 6, 2009.

They are many more federal tax credits available to qualified purchasers that can not only result in much-needed additions to their homes and lives, but be a big advantage to their bottom line come tax time.

Tax Credits Can Have Double Benefits For Taxpayers
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The Right Tax Advisor Can Help Your Small Business Grow

Posted on August 18, 2010 by admin
The Right Tax Advisor Can Help Your Small Business Grow

If you are the owner of a small business, you no doubt know how complicated the federal tax laws can be. They can seem to change almost daily and knowing which paperwork is important to the tax filing profess and which is not can be confusing. This is where a small business tax preparer can be of great assistance.

Navigating the complex seas of tax filing with regards to business requires a specialize knowledge of the laws, tax deductions and tax credits available to owners of a small business. A qualified tax preparer should be able to help you determine which tax forms are best suited to your particular business, keep up-to-date on the latest changes to the tax code and deductions, notify you of which taxes are due at what time and help you determine your gross income, among other services.

Some tips on selecting a tax preparer

So, how should you select a tax preparer? First, assess your needs as a small business owner. Your tax preparer needs may depend on the size of your business, the number of employees, the number of locations, etc. Gather as much information about your business as you can and consult with one of the many tax preparer organizations available such as the National Association of Tax Consultants or your local Certified Public Accountant agency. They may be able to recommend several qualified tax professionals based on your needs.

In addition, there are many resources online that can assist you in your search as well. The Certified Public Accountant organization has an online site that can assist small business owners in finding a qualified tax consultant in their area.

The process of finding an adequate tax advisor may require some effort and time but if you devote yourself to this task the results will be worth the effort. Here are a few points you should consider before making any permanent decision when it comes to your future tax advisor.

Things to take into consideration when selecting a tax preparer

One of the essential things you should first consider is whether or not your tax advisor has the right qualifications for handling your specific tax reporting requirements. Keep your eyes open since the tax preparer you hire actually may not be completely qualified to work on the tax reporting requirements for your business.

In general, many business owners turn to CPAs (certified public accountants) for the advice on their  federal tax, since they have the right training when it comes to any business accounting procedure. They have also passed many of the state exams, and that gives them the needed credentials to work in this field.

If possible, get recommendations, from fellow business owners, particularly those in your industry. Ask friends, too, if they have had a good experienced with a tax advisor. Good recommendations will help you narrow down your selection and speed the process.

Next, understand the various types of tax professionals. Depending on the size of your business, you may require the services of a tax attorney, a CPA, an enrolled agent or a certified financial planner. Each of these professionals has a different set of skills, so research their different educational qualification and areas of expertise.

Try to narrow your search for a tax professional to at least five candidates and be prepared to interview them on their experience, their area of expertise and their fees. Ask questions about your specific tax issues to gauge how they would handle them. If possible, ask for references or the opportunity to speak with other customers. And check with the various tax organizations and agencies to guarantee their credentials.

You will no doubt want the tax preparer to be available to you at any time during business hours. No matter what the level of experience or qualifications, a tax preparer that is unavailable when you need them most can result in unnecessary penalties for filing your federal tax return late or with errors.

Long-term relationship helps build trust

It may also be helpful to have a tax professional who is familiar with your industry and, later, your business itself. This means building a long-term relationship with the professional and building a relationship built on professionalism and trust. The longer you know your tax professional, the more than can help your business grow and prosper.

Do not go for the low cost option

Lastly, consider cost. It may be tempting to go with the cheapest of the tax professional options that you have, but doing so may end up costing you in the long run in terms of experience and expertise. For instance, a simple tax preparer may be able to fill out the paperwork necessary, and can do so for a relatively small fee, but they may also miss many of the deductions of your small business or not be aware of changes in the business tax laws.

The Right Tax Advisor Can Help Your Small Business Grow
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