“We’ll get you a bigger refund.”
“Get your refund before you leave our office!*”
And the guarantees get more outlandish with each new firm of “tax professionals.” For anywhere between $99 to a couple hundred dollars, you too can drag all of your personal information to a complete stranger so they can type your information into their special tax software.
Before you use a tax professional to prepare your income taxes, there are steps you should take to protect yourself from mishaps. The biggest problems with using a tax professional are:
Paying High Fees for A Simple Return Preparation
If addition, subtraction, multiplication, and division are not tough for you, and you only have a job and very few deductions, you could do your own taxes. The chain tax preparation services charge flat fees for tax preparation, so you may end up paying high dollar for something that could take you less than an hour to complete. Taxes only begin to get complicated when there are varied income sources, such as investment and self-employment or business income, and multiple schedules of deductions.
Protection: Give your own tax preparation the old college try before you see a tax professional. Even if you only prepare you own taxes once it can be valuable. Feeling nervous about your results? Pay for professional tax preparation after you finish and if you receive similar results to your own attempt, you now have confidence to do-it-yourself next tax season.
Miscommunication Between Client and the Tax Preparer Results in Penalties for Taxpayer
Ignorance of the law is never an excuse to break it. Even tax professionals with great reputations and flawless credentials make mistakes. One of the biggest sources of mistakes derives from misinformation from the client, you! The tax professional may ask questions about activities and purchases with the hope of securing additional deductions. Incorrect statements result in a tax return with ineligible deductions, a higher refund, but serious problems for the taxpayer when the return is reviewed by government officials.
Protection: Educate yourself in a general way about the types of deductions you have taken in the past, and the “What’s New for [this tax year]” page in the federal tax return instruction guide. If you are ever confused about why a tax professional is asking a question, speak up. Clarification about what qualifies for a particular line item could save you headaches and hefty penalties later on.
Signing Up for Unnecessary Refund Now Programs or Tax Return Mistake Protection
Both of these products are useless. The first is actually a loan product and if your return is less than you anticipated, you will face payday loan type interest rates on the difference. It is not worth the hassle to get your refund check that day from the tax preparation firm. You’ve lived without that extra money the entire year; a few more weeks won’t hurt you. Additionally, many chain tax preparation firms now scare clients with “audit protection.” What is the point of hiring a tax professional to complete your tax return if you still aren’t sure you can trust their results?
Protection: Use direct-deposit for any tax refunds. You won’t bother with any loan products, debit cards that tack on fees for use, and on average a direct-deposit refund arrives within two to three weeks. Currently, CRA is depositing refunds within 10 days from filing. The “audit protection” programs are a waste because you should always be truthful with your tax preparer. Keep your records, and if there is an audit, it is unlikely it will be a major mistake. Even when an adjuster finds an issue during an audit, it doesn’t automatically mean a charge of tax fraud. Most minor cases require a payment of any difference, and modest penalties. Still an extremely rare occurrence if both you and the tax preparer are vigilant, so skip the useless insurance policy.
Exposure of Personal Information to Unscrupulous Individuals
For anyone to prepare your taxes, they will need social security numbers, bank account information and statements, and T-slip records showing your employment. In the wrong hands, this sensitive information can be exploited for great gain. Many chain tax preparation firms rely on seasonal labor, making detection of any wrongdoing by disgruntled employees more difficult once tax season ends.
Protection: Only bring the information you know you need, and keep it organized in a folder or some other collection. As your tax professional works with you, only give him or her the forms needed for that particular step. Ensure the forms are returned to you, other than some records which must be sent to CRA, for your records. Other than your physical tax return and records, the tax preparer shouldn’t be making copies of bank statements and other supporting documentation, unless it will be submitted with the return.
The bottom line is even when you are using a professional tax preparer, it is ultimately up to your own common sense to make sure your taxes are filed correctly. If a deduction sounds odd to you, or too-good-to-be-true, question it! Unless you have had major life changes between tax seasons, such as a large shift in income, the birth of a child or marriage, there should not be a large difference in your refund or taxes owed. If you encounter a problem, do not hesitate to speak with a branch manager. After all, it’s your money and tax obligation to the government, not theirs.
Renting Out Your Mortgage Helper? – The Taxman Cometh
Before You Start Your New Business, Ask Yourself These Five Vital Questions
Tax Implications of the New Pot Legalization
Avoid These Common Mistakes When Claiming Charitable Contributions
What Can I Deduct as a Business Expense?
Why does Your Marital Status Matter for Taxes?
Should I Teach my Kids About Taxes?
How to Retire the Right Way