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The Dangers of Preparing Your Own Tax Return

by
Jorge Gomez
on
10/11/2016
The Dangers of Preparing Your Own Tax Return

It is never too soon to start thinking about tax preparation, and one of the most important questions American taxpayers need to answer is whether they should attempt to prepare their returns for themselves. Many people do so, believing that they are saving themselves money – but there are dangers in following this course of action.

The American system of taxation was originally designed as a way to fund the government. It was a simple system that has, over the decades, become extremely complex. Though many politicians and talking heads speak to the need to rehabilitate the tax code, that has not yet happened: in fact, it has only become more and more complicated as Congress has used it as a way to facilitate social reform.  Though there are hopes for improvement, there is none on the immediate horizon, and that means that people need to work with the system as it exists – and with highly complex tax returns.

Should You Use a Professional Tax Preparer?

It is perfectly natural for people to consider dong their own taxes, but it is important to keep the facts in mind. Private individuals do not have the background or knowledge of tax law that professionals do. They are also utilizing software that is extremely low cost and that may be flawed or late to integrate the ever-changing tax code. By contrast, professional tax preparers are constantly continuing to update their knowledge and education of the law, studying the direct impact of how the tax code impacts individuals. They also have the benefit of using state-of-the-art software that costs thousands of dollars and which is designed to make sure that no credit, deduction, income exclusion, retirement benefit or filing option is missed. A professional tax preparer is paid to make sure that you get every possible benefit while paying taxes, and is well worth the money.

Tax Professionals Help You Avoid Problems

There is a lot to be said for getting a bigger return or being able to take advantage of little known tax loopholes. Perhaps an even bigger reason for using an expert is the fact that they are able to avoid the common pitfall of filling out the returns in a way that yields too big a tax refund, leading to a demand for reimbursement from the IRS years down the road.  Finding out that you’ve made this kind of mistake is unpleasant for many, and devastating for those for whom money is tight. The very people who think that they are saving much-needed funds by completing their taxes on their own – those who are living paycheck to paycheck – are also those who are placed in the worst position by improperly prepared returns. In some cases, the IRS letter itself may be difficult to understand. In all cases the taxpayers will have nobody to come to their aid and respond appropriately to the IRS. The letter may end up being ignored or mishandled, and therefore may lead to even bigger penalties and greater interest being assessed against them.

Premium Tax Credit Complications

One of the more recent additions to the tax code may be the biggest reason of all for seeking professional tax preparation. The Premium Tax Credit is available specifically to assist low or moderate income individuals and families afford health insurance. The credit is refundable and is an important benefit for those who have to buy insurance through the Marketplace, but it is only available to those whose tax returns are properly prepared and filed.  Many people who choose to prepare their own returns are disadvantaged as a result of their lack of understanding of what is required, and their improperly prepared returns.

Tax Professionals Help Taxpayers In Many Ways 

These are just a few of the reasons that it is worth it to have your taxes prepared by a professional. Though many believe that preparing and filing their own returns is as simple as transferring some numbers from paper into a computer and pushing a button for a calculation, there is a lot more to it than that. Using a professional means that you take advantage of all of the available benefits, while avoiding the potential pitfalls of an improperly prepared return.

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Jorge Gomez

Jorge Gomez

Marketbox Business Analyst was born out of a strong desire to fulfill the needs of the small business market segment with unparalleled tax preparation, accounting and software services. While most consulting firms target large companies, we offer affordable solutions in a customizable system that manages business operations, finances and investments. Based on software and policies & procedures that provide critical information for decision making, problem-solving and day-to-day operations, we are giving small businesses access to trusted, high-quality solutions. Whether you are looking for integrated services or a single tool, we have the knowledge and expertise to strengthen your business.

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