As The United States Tax Code gets more complex, one would think that the number of individuals utilizing a paid preparer would be on the increase. However, that is not the case. More and more individuals are filing their own returns. I see at least two reasons for this. The individual tax return market can be viewed as consisting of two segments – very simple returns with no itemized deductions or other complications in the return and more complex returns utilizing multiple tax schedules and tax forms. As the standard deduction increases, more taxpayers are taking the standard deduction, so their tax return is fairly simple to prepare. Adding to the simplicity of the return is the second factor – availability of inexpensive or free preparation software. Since these typically guide the taxpayer in preparation, the task becomes even simpler.
However, taxpayers of all stripes should be aware of certain factors involved in filing their returns. I have provided my “Ten Best Tips for Filing your Return.” These tips can be useful for those preparing their own returns, but they can also guide the taxpayer using a CPA or other professional preparer in assembling their information for the preparer.
• File tax returns on time, even if you cannot pay now. You will be assessed a penalty and interest for failure to pay, but you will avoid the failure to file penalty. This penalty is 5% per month of the amount of taxes owed, up to 25%. If you don’t owe, there shouldn’t be a penalty. Read More