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Who Is Doing Your Taxes?
"Nothing is more inevitable than death and taxes." So said Benjamin Franklin.
Franklin, who was born in Boston in 1706, the 10th child of a candle and soap maker, ran away to Philadelphia at the age of 17.
You, too, might like to run away, especially around April 15th. But thanks to the Internet, the IRS is very likely to find you and when it does, it won't be very happy.
To ease the burden of filing your 1040, you might want to use a pro. Of course, if you like crunching numbers, then by all means do your own return and take a mini-vacation with the money you save.
Selecting the right tax preparer takes a little doing. Many people hang out their shingle this time of year and then disappear. Unfortunately, in numerous states, tax preparers do not need a special license to practice. So you must do your homework before hiring one.
Begin by getting referrals from smart friends, savvy co-workers and clued-in employers. Your lawyer can also put names into the hat. Yet regardless of who says what about whom, never select a preparer who promises that he or she can get you a refund before they look over your financial material! And, secondly, check out a potential preparer's credentials long before April – you should start this check this week, in fact!
Your three main options follow. (If you have a very complicated situation, one requiring legal expertise, then you'll need a tax attorney.)
1) Certified public accountants. CPAs must have a college degree and pass a rigorous certification program. They are authorized to represent you before the IRS should you be audited.
2) Enrolled agents. EAs must have at least five years of working experience with the IRS or pass a tough IRS-administered two-day exam. They too can represent you before the IRS.
3) Unlicensed preparers. Unlicensed does not translate "unqualified." Many reputable but unlicensed preparers have been helping people for years. But before hiring one, find out how long the person has been in business, if he/she does returns similar to yours, what the fee will be and what, if any audit support he/she will provide. And, be sure to ask for and follow through on three references – in fact you should do this with anyone you're considering.
TIP: Only tax attorneys, CPAs and enrolled agents can represent taxpayers before the IRS regarding all matters – including audits, collection actions and appeals.
Special situations...
(1) Low- and middle-income tax payers (generally with incomes of $49,000 or less), including members of the military and their families, are entitled to free tax preparation help through the Volunteer Income Tax Assistance program, also known as VITA. There are also VITA offices specifically trained to address military tax issues. These are set up in military installations. Call the IRS at 800-829-1040 or go to www.irs.gov and enter "VITA" into the search box to read "Free Tax Return Preparation For You by Volunteers."
(2) If you are a senior citizen, the AARP has over 7,000 Tax-Aide Centers around the country. Call: 888-227-7669 to find the one nearest you.
MORE INFO:
The following three websites have good (but differing) information. It's worth your time to check out all three. The first two will also help you find members located near where you live or work.
- National Association of Tax Professionals: www.taxprofessionals.com
Has a free brochure, “Finding the Right Tax Preparer,” which you can download. You’ll also see links that search for a tax professional near where you live.
- National Association of Enrolled Agents: www.naea.org
Has much useful information in its “Resource” section, including state and federal links (including your federal representative), help with tax questions and links to each state’s department of revenue. You can also locate an EA in your area.
- The IRS: www.irs.gov/taxtopics/tc254.html
Here you can download “How To Choose a Tax Preparer” which includes information on what is required legally from a tax preparer.
MORE ABOUT BEN FRANKLIN
Ben undoubtedly could have prepared his own 1040, had there been one at the time. After all, he invented the lightning rod, the Pennsylvanian Fireplace (AKA, the Franklin Stove), a clock that showed seconds in addition to minutes and hours, an artificial arm (a long pole with a pair of pincers at the end for retrieving things on high shelves), a library chair that included a seat with climbing steps under it, security mirrors and bifocal glasses.
He also made many career moves during his lifetime. In addition to being an inventor, he spent time as a printer, publisher, author, diplomat, postmaster, statesman and librarian.
Source: The Amazing Life of Benjamin Franklin by James Cross Giblin (Scholastic Press).
STAY TUNED: More on doing your taxes next week!
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