Professionals offer tips for tax preparation

By K.O. Jackson

Back before Josh Eller had a wife, kids and a home, tax preparation was a lot simpler and he prepared his own taxes.

However, tax preparation isn’t as simple for the Sharpsville man — or anyone else — anymore.

The tax book contains thousands of pages of code, confusing even to the IRS commissioner, Doug Shulman.

“If the IRS commissioner said he doesn’t understand all the tax laws, the average guy won’t get it either,” said California tax professional Bonnie Lee, an IRS enrolled agent who represents taxpayers in all 50 states.

With a plethora of professionals preparing tax returns — most states have no requirements about who can prepare taxes — then add in people who prepare their own returns, tax preparation gone far beyond simple.

As a result, for the past three years, Eller and his wife, Nicole, have handed off their taxes to the professionals at Hogan Community Tax Service, 1100 S. Goyer Road.

According to the IRS, more than 80 percent of taxpayers use a tax software or a paid tax preparer for their returns. An estimated 1.4 million people paid to prepare other people’s tax returns.

So, who do you select?

“You want to have someone who is familiar with the tax code and it can change yearly,” said Dale Hogan, whose family-owned business does bookkeeping and payroll in addition to preparing taxes.

“We are on a first-name basis with the IRS. If a person has a problem with them with a return, we can help. Because of tax law changes and the stimulus package, the average size of a return has changed. Last year, it was six pages. You want to go to someone who knows the new changes.”

From the traditional H&R; Block to mom-and-pop tax preparers, anyone can prepare taxes. But according to the IRS, the government agency only certifies enrolled agents to prepare tax returns.

Therefore, to help reduce fraud and errors, beginning with the 2011 filing season, paid tax preparers will have to register with the government, pass a test and adopt ethical standards.

IRS Commissioner Doug Shulman said preparers will have up to three years to meet the new requirements. Because lawyers, certified public accountants and enrolled agents are already regulated through their professions, they will not have to adhere to the new requirements.

Shulman said the changes are intended to protect the tax system and ensure consumers are not taking advantage of by unscrupulous tax-return preparers.

The IRS estimates there is an $300 billion tax gap from people who should pay taxes but do not.

“The IRS is cracking down on who prepares taxes,” said Lee, who has been preparing taxes since 1984 and is the author of “Taxpertise: The Complete Book of Dirty Little Secrets and Tax Deductions For Small Business the IRS Doesn’t Want You Know.”

“Not all tax professionals are equal. A CPA may not do taxes because it is not their forte. When selecting a preparer, even if a person is using Turbo Tax, they have to be a little savvy and comfortable to complete a basic return. I’ve seen many sad mistakes made. The way I look at it is garbage in; garbage out.”

While a regular income tax return can present a challenge, unemployment is posing a whole new set of issues for taxpayers. Anyone who has been unemployed within the last year needs to remember that unemployment benefits are taxable income, said Chris Robinson of Tipton’s Logan & Graham Accountants PC.

The first $2,400 of the benefits are tax free by the federal government, but not the state, said Robinson.

“There a good chance an [unemployed] person could owe money to the state,” said Robinson. “They need to be aware of that when they file their taxes or if they have someone else do them.”

Furthermore, for employees took a company buyout last year, Hogan said they need to be aware that lump money is also taxable if taxes were not initially withheld by the employer.

“Any income you receive, any form your employer has given you, bring it with you,” said Hogan. “Don’t forget about them. The IRS has one form to match every form you have.

“Most times, regardless of who prepares your taxes, if they know the tax code you should receive the same amount of refund. I’ve had to redo taxes for people who have done it themselves.”

With the annual April 15 filing date a little more than a month away, now is not the time in procrastinate in filing and selecting a tax preparer, professionals say.

“I advise people to get them done early. I encourage people to do that,” said Robinson. “Take your time to get everything together you need to file. It’s so easy to overlook things when you rush at the last minute.

“Plan ahead as much as possible to maximize your return as much as possible.”

• K.O. Jackson is the Kokomo Tribune’s business writer. He can be reached at 765-854-6739 or via e-mail kirven.jackson@kokomotribune.com

Text Only | Photo Reprints