Last Updated: March 5, 2012
The tax deadline is April 17. If you haven't begun gathering your annual tax records, it's time to do so. Every year, however, people's lives change – they buy and sell houses and move, they take new jobs, have kids, buy and sell stock. Those and dozens more reasons might give you cause to hire a tax preparer.
It's worth going over the primary reasons why some people should get help with their taxes and others can continue going it alone.
Doing it yourself. If you meet the following circumstances, you can probably do your taxes by yourself:
- You work for only one employer who gives you a W-2 tax form each year.
- You earned less than $1,500 in taxable interest.
- You rent your residence and don't own a home or vacation property.
- You don't have kids or other dependents.
- You don't have any complex investments such as a partnership, a trust or extensive stock holdings.
- You really like numbers, are willing to investigate annual changes to the tax code and doublecheck your work.
- You're comfortable doing computations by calculator, by hand or by using tax software on your computer or online.
For do-it-yourselfers with computers, the Internal Revenue Service's (IRS) FreeFile program is aimed at taxpayers with an Adjusted Gross Income (AGI) of $57,000 or less in 2011 to prepare and e-file their federal tax returns for free. E-file, the IRS's online tax filing service, is available to individuals with compatible home computer tax software.
Seeking help. It generally makes more sense to get help with your taxes if:
- You're buying or selling property.
- You own a business or rental property.
- You get regular income from a trust or partnership.
- You trade investments frequently or have a complex portfolio.
- You've undergone a major financial impact during the previous tax year, such as a divorce, death of a spouse, an inheritance or a move of more than 50 miles for a new job.
- You are supporting a child between the ages of 19 and 24 who is a full-time college student.
- You don't have time to do it yourself.
- You are subject to the Alternate Minimum Tax (AMT).
- Your income has increased by a considerable amount from the previous year.
You're still legally responsible for your return even though you have professional help, so it's important to choose a qualified professional to help you. The IRS gives the following suggestions for finding a qualified preparer:
- Check the person’s qualifications. Ask if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics. New regulations require all paid tax return preparers including attorneys, CPAs and enrolled agents to apply for a Preparer Tax Identification Number (PTIN) — even if they already have one — before preparing any federal tax returns in 2011.
- Check on the preparer’s history. Check to see if the preparer has a questionable history with the Better Business Bureau and check for any disciplinary actions and licensure status through the state boards of accountancy for certified public accountants; the state bar associations for attorneys; and the IRS Office of Professional Responsibility for enrolled agents.
- Find out about their service fees. Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers.
- Make sure the tax preparer is accessible. Make sure you will be able to contact the tax preparer after the return has been filed, even after the April due date, in case questions arise.
- Provide all records and receipts needed to prepare your return. Most reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items.
- Never sign a blank return. Avoid tax preparers that ask you to sign a blank tax form.
- Review the entire return before signing it. Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.
- Make sure the preparer signs the form and includes their PTIN. A paid preparer must sign the return and include their PTIN as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return. The preparer must also give you a copy of the return.