Finance Tax Time

Have you seen that ad for tax preparation software? You know the one I mean. It says that anyone, even a caveman - no, wait, that is a different commercial - even a “math impaired” or an “unorganized” individual can prepare his or her own income tax return by simply using the software package.

This is pure bull! No tax preparation software is a substitute for knowledge of the tax code. And no tax preparation software is a substitute for the services of a trained tax professional.

As with any software program the rule is “garbage in - garbage out”. If you don’t know how to enter the information, or what information to enter, you will not get the best, or even the correct, answer.

As a professional tax preparer I attend several tax preparation workshops, seminars, conferences and conventions during the year. I am constantly hearing instructors and participants alike discuss the problems with their tax preparation software, the answer often being that one has to override the system and “force” the correct entry.

IRS statistics indicate that taxpayers using do-it-yourself tax software spend an average of between 6 and 10+ hours longer preparing their tax returns (depending on the number of worksheets and schedules) than preparers who did manual calculations. Further, the IRS estimates that do-it-yourself software users spend an average of 10 to over 20 hours longer than a tax preparer, again depending on complexity.

H+R Block has sued the company that produces the tax software in the above mentioned ad, and has asked a federal judge to shut down the advertising campaign.

The bottom line is - if you don’t know what you are doing do not rely on a tax preparation software package to make up for your lack of knowledge. Using a tax professional will save you time, aggravation and money!

Speaking of tax season ads, the commercials for the Henry + Richard and Jackson Hewitt fast food tax preparation chains continue to emphasize the fact that you can walk into their office and walk out with a check, and not that they can prepare your return competently and accurately so that you pay the absolute least amount of tax possible (to be fair, H+R does have an ad that tells you they will pay the interest and penalty for their mistakes).

These chains are pushing Refund Anticipation Loans (RALs), which are very profitable. While a great thing for Henry + Richard and Jackson Hewitt, a Refund Anticipation Loan is NOT a good thing for the individual taxpayer. It is nothing more than a short-term loan at a usurious interest rate. The interest rate on some of these RALs is triple-digit, similar to a loan shark. A recent Washington State Journal article reported that the interest rate could be as high as 521%, with more than 10% of the refund going to fees!

Henry + Richard have gotten into a lot of legal trouble with their RAL programs. In December H+R Block reached a $62.5 Million settlement with an estimated 8 Million customers in more than two dozen states over Refund Anticipation Loans. But they continue to aggressively promote RALs during the tax season because of the huge profits.

Unfortunately, Refund Anticipation Loans appeal most to, and take unfair advantage of, the working poor and other low-income taxpayers who need every penny of their tax refund.

If you need your refund quickly use direct deposit. With direct deposit your refund should be deposited into your bank account within 10 days. If that is not good enough investigate other methods of short-term borrowing. Even a cash advance from a credit card is “more better” than a Refund Anticipation Loan, providing you pay back the advance as soon as the refund arrives.

copyright (c) 2006 by Robert D Flach LLC

Robert D Flach is a tax professional with 34 tax seasons of experience preparing 1040s for individuals in all walks of life. He writes and publishes the free monthly online newsletter STUFF AND SUCH (http://rdftaxpro.tripod.com/stuffandsuch) and several other websites, as well as several print newsletters and reports on tax planning and preparation. For more information on his websites go to http://rdftaxpro.tripod.com/websites

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Tax preparation is an arduous task, which many people prefer to neglect until the last minute. It is an overwhelming task to wade through the paper work, calculate taxes, make provisions and file for the returns. However, it is mandatory so it has to be done.

Tax preparation involves various steps: choosing the tax form, preparing the return, and sending the return. For this, you need to know certain things, like: what forms do you require? How are the calculations done? Are there any penalties? How do you get the best refund? What are the various deductions that I am eligible for? How do I confirm whether IRS has received by my return? How do I know my filing status? What do I do if I moved during the past year?

Tax preparation has now become relatively easy with the Internal Revenue Service’s easy-to-understand books and web pages. There is a lot of useful information on the IRS’s website that can be used for tax preparation.

The information required for tax preparation is: wage statements (Form W-2), pension, or retirement income (1099-Rs), Social Security card(s), driver’s license(s), dependents’ Social Security numbers and dates of birth, last year’s tax return, information on education expenses, commissions received and/or paid, sales of stocks and/or bonds, self-employed business income and expenses, lottery and/or gambling winnings and losses, state refund amount, Social Security and/or unemployment income, income and expenses from rentals, alimony paid or received, record of purchase or sale of real estate, medical and dental expenses, real estate and personal property taxes, estimated taxes or foreign taxes paid, cash and non-cash charitable donations, mortgage or home equity loan interest paid (1098), unreimbursed employment-related expenses, job-related educational expenses and childcare expenses and provider information.

There are also tax consultants and other professional tax preparers willing to help for a small fee. Using their services would help you to avoid any irregularities or blunders in filing. Tax preparation through these consultants can also be done online by using certain software tools. All the information has to be entered, and the form can be sent via e-mail to the IRS or it can be printed out and sent via post. There are special tax preparation software packages available that make it a very easy task. These can be downloaded from the internet. They can also be bought from stores. Some of the most popular tax preparation programs are: TurboTax, Quicken TurboTax and Kipplinger TaxCut.

Tax Preparation provides detailed information on Tax Preparation, Income Tax Preparation, Tax Preparation Software, Tax Return Filing Preparation and more. Tax Preparation is affiliated with IRS Tax Help.

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Filing for taxes and returns can be very complex, depending on the income. All the information provided to the IRS should be accurate to get a refund. Besides, the filing should be done so that the refunds are high.

You can file for returns yourself or you can take the help of a professional tax preparer. Professional tax preparers not only help in preparing the forms but also provide advice for obtaining maximum returns. There are certain forms that have to be filled for paying taxes as well as applying for any eligible refunds. The basic form 1040 (or 1040EZ or 1040A) has to be filled by everyone, apart from any other forms. Form 1040 is meant for all kinds of incomes, if the annual income is more than $50,000. This form is also used for itemizing deductions when not applying standard deduction. 1040EZ is for single people or when married and filing jointly. The applicant should not have any dependents, should be less than 65, not blind, and taxable income (from certain sources) is less than $50,000, the earned interest is less than $400 and deductions are not itemized. Form 1040A is for people who have annual income less than $50,000 and have itemized deductions.

The forms can be obtained from the public library or IRS. After selecting the right form, prepare the return using W-2s (wage and tax settlements given by the employer), 1099s (dividend and interest forms given by banks, mutual funds and other investments), and other receipts. Attach all the required documents to the form including the payment voucher form 1040-V (if required). Make sure that you sign the form and the social security number on the form is correct.

The information required for tax preparation is: wage statements (Form W-2), Pension, or retirement income (1099-Rs), Social Security card(s), driver’s license(s), dependents’ Social Security numbers and dates of birth, last year’s tax return, information on education expenses, commissions received and/or paid, sales of stocks and/or bonds, self-employed business income and expenses, lottery and/or gambling winnings and losses, state refund amount, social security and/or unemployment income, income and expenses from rentals, Alimony paid or received, record of purchase or sale of real estate, medical and dental expenses, real estate and personal property taxes, estimated taxes or foreign taxes paid, cash and non-cash charitable donations, mortgage or home equity loan interest paid (1098), un-reimbursed employment-related expenses, job-related educational expenses and childcare expenses and provider information.

These days, returns can be filed even online, or using certain software that can be downloaded online or bought from professional agents.

Tax Preparation provides detailed information on Tax Preparation, Income Tax Preparation, Tax Preparation Software, Tax Return Filing Preparation and more. Tax Preparation is affiliated with IRS Tax Help.

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