Advanced Information Management Inc.

You might not need a tax preparer!

The old saying is true, the lawyer who represents himself has a fool for a client!  We don't want to give anyone the idea they can do their our return without any risks, but in some instances, the risks are minimal and the opportunity can be right to do it on your own.

If your return is not complex, and you're comfortable working with numbers, then you might be on your way.  By "not complex" we don't just mean that 1040EZ form.  If you have straight forward wages from an employer, a home mortgage, property taxes and maybe a deductible IRS contribution.  As for the math, your computer can do most of the number crunching, but you need to feel confident in getting the numbers together and typing them into the tax program.

You also need to be good at checking, and re-checking, the numbers and information in your return.  A slight slip and an error on your return might require preparing an amended return, add complications and delay refunds.

We also need to understand your return better than the say, "That's what the tax program did."  understanding your return means knowing what adjustments and credits are shown on your return, and why they should be there.  If your life hasn't changed recently, then it is easy to compare things to last year.  Most people will want to, and should, consult a tax advisor when the experience significant life changes. 

Finally, the biggest driving point of doing it yourself is the money.  Your time is limited and valuable, so make the most of it.  Consider that a tax professional is familiar with the tax laws and can process your return much quicker that you can do it yourself.  If you value money more then your time, and you meet the other conditions, then by all means, go for it! 

What to ask your accountant, before you hire them! 

Some people use the yellow pages.  The guys with the biggest ad must be the best, right?  Others just use the guy their Dad or Grandpa always did.  If they were good enough for Dad, then they'll be just fine for me.  Some go by recommendations from friends and business associates.  Regardless of which method you use, you owe it to yourself to follow our advice and evaluate how well each accountant can serve your needs.

Ask about your accountant's credentials.  You should know what formal education and training they have and how they are licensed.  Your accountant might be a CPA, Enrolled Agent, or simply a public accountant or tax preparer.  Credentials do not necessarily mean better service, but the are a good indicator or someone who has a broad understanding of accounting and taxes.  Also, the Internal Revenue Service requires your representative to be either a CPA or an Enrolled Agent for them to represent you.  

Find out what their specialties are.  Someone who does mostly personal tax returns might not be a good choice for your new retail shop or trucking business.  They are most likely qualified to handle your business, but might not be as efficient or enthusiastic as someone with other clients like yourself.

What kind of continuing education do they get each year?  Tax laws are changing daily it seems.  Last year there were hundreds of changes to the tax laws and simply having passed an exam a few years back does not indicate they are keeping abreast of the current tax code.  Licensing requirements for most professionals have a minimum set of hours annually.  Better professionals usually exceed the required minimums.

How do they handle their client relations?  Will the accountant be preparing your tax return, or simply reviewing their staff's work.  Do they return phone calls promptly and how do they ensure your matters are handled timely?  What happens during the "off" season?  Some tax preparers only work in the springtime, during "tax season".  If you need year-round assistance, then look for someone else.

Again, our last point is money.  How much is this going to cost?  Some professionals work by the hour, some by the tax form, and yet others work on a fixed fee.  Expect that other than those working for a fixed fee, you will probably only get an estimate.  In their defense, things change and problems arise as some of the most unexpected times. but you should know how they are going to charge you for their services and approximately what it is going to cost.

Payroll, do it yourself, or hire a pro?

Without a doubt, our advice is to hire the pro!  An unincorporated, sole proprietor with no employees has it made.  All they need to do is handle the quarterly estimated payments.  But hire that one employee, and the dam breaks loose with a flood of paperwork, reporting, payments and deadlines.  In fact, within reason, more than one employee is really no more difficult that first employee.  If you have one, ten or a hundred employees, the reporting and deadlines don't change much.  

Incorporating and paying yourself also brings on that tidal wave of paper.  It's not enough to simply set aside the money for taxes and deal with them at the end of the year or with your quarterly estimates.

Keep in mind that quarterly tax filings have nothing to do with tax payments.  Depending on your total taxes due, you might be required to make payments quarterly, monthly or even twice a week!  Your advisor can help you figure out what's required of you and prepare the necessary forms.

By the way, did you know that most states only give you 20 days to report all newly hired employees to assist in collecting child support payments?  Or that your friends at the Immigration and Naturalizations Service require you to complete a form for all new employees, verifying their eligibility to work?  Even if they are your brother! Speaking of bothers, if you have family members working for you, there might also be some special rulings to follow.  For once though, these special rules are in our favor!

Like we said, this is one area you don't want to tackle alone.

Do you know where your company is?

We're not talking about your street address!  Sure, you know how much money is in the checking account, and maybe how much you owe to your banker (you know they'll never let you forget).  What we're talking about here is the financial footing of your business.  Are you receiving more money than you are spending.  It sounds kind of basic, but you'd be amazed at how many business owners are "too busy" to find out.  Working with an accountant on a regular basis can help keep your business on track and make your life run smoother.  Like that old Fram Oil Filter commercial, "You can pay me now, or pay me later."  By keeping up with the books on a regular basis, not only do you avoid that mind-numbing crunch at the end of the year trying to get everything caught up for the taxes, you also receive the benefit of getting timely information on how your business is doing, today!

Are you in control?

Do you still try to manage your company with an old ledger book?  What about all that paper you have to dig through to find an unpaid bill or to argue about a bill?  Did you misplace some of last years receipts before they got to your tax Is there a better way to organize all this?

You bet!  There a many accounting programs on the market right today.  Even a few that are available on the internet that can make you financial information available anywhere with internet access and the password.  These programs run well if they are properly installed and maintained.  Unfortunately, the TV ads for some of these products lead you to believe you'll be an accountant just by buying their product.  While generally much more expensive than the software itself, professional installation in well worth the investment.  A properly installed system will provide information to manage your business, an improperly install system can be more trouble and cause more problems than the manual system being replaced!  

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Last updated: Saturday, July 27, 2002
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