Thursday, March 17, 2011

Tax Professional vs. Tax Software

Preparing your own taxes is definitely doable and many people use tax software for assistance.  In last week's post, Business Write-Offs, I cautioned business owners to be careful when using tax preparation software such as Turbo Tax.  You may want to reconsider filing your own taxes if you have a large number of write-offs and deductions, or collected significant commissions and earnings.

TurboTax Deluxe Federal + e-File + State 2010

These softwares are only accurate based on the information you provide.  An incorrect answer to one of the yes or no questions may inadvertently cause errors.  For example, I talked last week about the "home office" write-off being a red flag for audits.  The tax software will ask you if you use part of your home for business.  If you didn't know more about the requirements for a home office, you'd probably select yes when in fact your usage may not qualify.  I also talked about the fact that donations made only to qualifying organizations can be used as a deduction.  A tax professional could ask clarifying questions or see your records first hand and properly file the deduction, where the software only uses the information you provide.

A tax professional can conduct a survey of you and your business and know immediately what you can and cannot deduct or write-off.  They may catch paperwork errors or find deductions you missed.  Most people who use a tax professional get higher returns or pay in less.  You also have a physical person who can work with you should you be audited.  Tax professionals can offer tips on how you should be filing or organizing your records and what you need to be keeping.  By working with a physical person, you'll be better educated about what you can and can't do. 

Any expense you pay for tax preparation is a write-off.  You may find more piece of mind and a better return far outweighs the frustration of trying to file on your own.  If an audit is conducted and errors are found, not only will you have to pay back taxes but additional fees as well.

Click here to find a certified professional in your area through the American Institute of CPAs website.  Or, ask a friend or another professional for referrals.


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