This annual ritual occurs time and again: Once your accountant finishes preparing your tax documents, you review them, put down your signature, and let out a sigh. It’s inevitable for doubts to creep in. Did you end up paying more (or less) than necessary? Was everything missed? Could the accountant have made an error?
The final question is especially tricky. It’s difficult to determine if your tax preparer handled your filings effectively. Even though you can look out for inaccuracies, some issues, slip-ups, or exclusions might impact your tax responsibility without you ever being aware of them.
Filing federal taxes, particularly intricate submissions, requires making several judgement decisions. Using the same information, you could prepare two versions of your return—one through tax preparation software and another with assistance from an accountant—and end up with differing outcomes.
It’s much more challenging to review what tax preparers are up to,” explained Kossandra McDuffie, an Atlanta-based certified financial planner and CPA. “However, you can search for warning signs.
For instance, self-employed people who conscientiously submitted their four quarterly estimated payments as advised by their accountants yet still encountered an underpayment penalty might have reservations about their tax professional.
Additionally, you must pay attention to your accountant’s management of tax-advantaged accounts, as per McDuffie. With various choices available—such as traditional deductible and nondeductible IRAs, Roth IRAs, and SEP plans—you should ensure that your tax professional grasps the intricacies of each type of account, identifies which ones suit you best, and knows how to steer clear of penalties related to incorrect contributions.
Math mistakes are concerning but relatively uncommon due to the advanced software used by most tax professionals. Instead, these experts might become careless, neglect important details, or lose paperwork, leading to incorrect filings. “Should your accountant miss significant aspects at an overview level, they could easily overlook minor points as well,” according to McDuffie.
To start with, she recommends choosing one of the tax forms completed by your accountant. Next, pose questions like:
- Could you guide me through your process of filling out this form?
- How do you ensure that all has been precisely recorded here?
- What kind of typical mistakes should one watch out for with regard to this form, and which ones could be easily overlooked by other tax preparers?
“This provides insight into their usual review process and what types of issues they generally identify,” McDuffie stated.
Regardless of whether you’re bringing on a new accountant or have been working with someone for an extended period, assess their dedication to continuous professional development. Inquire about how they stay current with evolving tax regulations and which trends they observe that could impact your finances.
“You want them to remain updated about tax matters throughout the year and concerning new laws such as the Secure 2.0 Act,” McDuffie stated.
Preferably, your accountant stays in touch with you all-year-round. Even if these check-ins include only emails such as reminders or newsletters instead of direct phone conversations, it still counts more than an accountant who doesn’t make any effort to connect with you at all.
“The effective advisors take initiative,” explained Corey Briggs, a certified financial planner based in St. Louis, Mo. “They keep their clients informed about alterations in the tax laws. Additionally, they could suggest tactics like executing Roth conversions, consolidating charitable donations, and engaging in tax-loss harvesting” to assist you with your planning throughout the process.
Briggs suggests that merely 10% to 20% of tax preparers take initiative. The rest do not offer significant tax planning or strategies; rather, they simply complete your filings according to the details you furnish them with.
If you’re uncertain about how well your present accountant is performing, consider hiring another professional or handling the task yourself using tools like TurboTax or TaxSlayer. Getting a new perspective might assist you in spotting deductions or credits that you overlooked before. Additionally, you could find an alternative approach for calculating depreciation or business expenditures.
Briggs stated, “When our clients change accountants, it typically stems from not receiving sufficient attention or lacking proactive guidance.”
Changing to a different tax preparer likely won’t reduce your expenses. In numerous areas across the U.S., there’s a scarcity of tax preparation experts willing to take on new customers. “Costs have skyrocketed,” according to Briggs. “People who used to pay between $500 and $750 before COVID are now facing charges of $1,000 to $2,500” for fairly straightforward federal filings.
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Also read:
How much should you spend on filing your taxes? You might not have to pay anything at all — if you’re eligible for free tax preparation services.
