published Friday, January 25th, 2013

Biz Bulletin: All you need to know about filing your taxes

By Jim Winsett
  • photo
    BBB Chief Exective Jim Winsett
    Photo by Leigh Shelle Hunt

Q. My goal is to get my taxes done early this year. Does the BBB have any advice should I choose to do my own taxes or when looking for a reputable tax preparer?

A. This year, because of new regulations Congress made on Jan. 2, the IRS will not accept tax returns until Jan. 30 in order to get most of the tax changes in working order in the system.

In the meantime, you can use the time to get your information organized and do some research.

BBB has the following advice for taxpayers who are getting an early start on their taxes this year:

• Accuracy is critical. The IRS sees millions of tax returns each year that contain mathematical errors, inaccurate information or fail to claim all deductions and credits, such as the Earned Income Credit.

• A common mistake is putting down incorrect Social Security numbers. Another common error is made by married women who have undergone a name change and did not notify Social Security, causing an inconsistency with their Social Security number.

Also, new babies need Social Security numbers before you can claim the child tax credit.

• Be sure you have used the correct tax table in your calculations. They are tiny and hard to read, but they contain critical information. See that you are using the proper table.

• Be sure to sign all lines where appropriate. Failure to sign the tax return invalidates it and causes the IRS to return it. This delays the refund process considerably.

• Do not leave out important documents like your W-2 employer statements, 1099 statements and investment income forms. If you are not sure what to include, contact the IRS and ask.

Eighty percent of taxpayers use a tax preparer or tax software when filing their returns. Because you are responsible for your tax return even if someone else prepares it, it is vital that you choose your preparer carefully.

These tips can aid in that effort:

• Ask others for referrals. Friends, family and colleagues can help you find a good tax preparer. Use BBB Business Reviews at www.chattanooga.bbb.org to check up on any business, accountant or tax professional.

• Check credentials. Are they a certified public accountant, tax lawyer or enrolled agent, or a certified E-file provider?

• Be sure to find out if the preparer is affiliated with a professional organization that provides or requires its members to pursue continuing education and holds them accountable to a code of ethics.

• Investigate whether the preparer has any questionable history with your state's Board of Accountancy (for certified public accountants), the State Bar Association (for attorneys) or the IRS Office of Professional Responsibility (OPR) for enrolled agents.

• Will they sign your return, provide a Preparer Tax Identification Number (PTIN) and provide you with tax form copies?

• A PTIN must be obtained by all tax return preparers who are compensated for preparing or assisting in the preparation of all or substantially all of any U.S. federal tax return, claim for refund, or other tax form submitted to the IRS.

• Remember that a paid preparer is required by law to sign your return and fill in the preparer areas of the form, including their appropriate identifying number on the return. In addition, the preparer must give you a copy of your return.

• Watch out for grand promises of big refunds. Until they know your specific situation, they cannot know if you will get a refund. Also, be wary of any tax preparation service that promises larger refunds than the competition, and steer clear of tax preparers who base their fee on a percentage of the refund.

• Check availability. Will they be around later if questions arise about your tax return? Many tax preparation services only set up shop for the months leading up to April 15. In case the IRS finds errors, or in case of an audit, you might need to be able to contact your tax preparer throughout the year; be sure to find out how you would do so.

• Where will the refund be sent -- to you or to the preparer? What are their charges and how are they calculated? Read the contract carefully to ensure you understand issues such as how much it is going to cost for the service, how the cost will be affected if preparation is more complicated and time consuming than expected and whether the tax preparer will represent you in case of an audit.

• Do not sign a blank return. Review the return before you sign it, have the preparer sign it (if applicable), and be sure you get a copy.

• An option you might want to consider as well is to file your taxes electronically; more than 80 percent of taxpayers decided to file electronically last year. The benefit is those who file electronically will receive their refunds much faster.

Remember that there are free tax preparation options available. If you make under $50,000, some IRS offices will prepare your tax return for free. Check with your local office to see if they provide this service.

The IRS also sponsors Volunteer Income Tax Assistance and Tax Counseling for the Elderly sites that offer free tax filing and help find special tax credits for those making under $51,000.

The Urban League of Greater Chattanooga helps coordinate VITA locations in and around Chattanooga. For more information and to find a location nearest you, visit: http://www.ulchatt.net/free-tax.

Do not forget about Free File. If your income is $57,000 or less, Free File offers free federal tax preparation and e-filing. It is available only through IRS.gov.

Avoid the temptation of getting a refund anticipation check. You may be in a pinch right now (especially with holiday bills piling up), but those checks include fees that will reduce the amount of money you get in the end.

Also, it may be the IRS finds a discrepancy and you actually end up with less of a refund than you expected, which can put you in a bigger bind to pay the money back.

Wait a few more weeks, and you will have the satisfaction of being able to keep all of your refund money and save on the hassle of having to pay back the money you borrowed plus high fees.

Get answers to your questions each Friday from Jim Winsett, president and CEO of the Better Business Bureau Inc., which serves Southeast Tennessee and Northwest Georgia. Submit questions to his attention by writing to Business Editor Dave Flessner, Chattanooga Times Free Press, P.O. Box 1447, Chattanooga, TN, 37401-1447, or by emailing him at dflessner@ timesfreepress.com.

Comments do not represent the opinions of the Chattanooga Times Free Press, nor does it review every comment. Profanities, slurs and libelous remarks are prohibited. For more information you can view our Terms & Conditions and/or Ethics policy.
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