When tax time comes around, we will start seeing a plethora of television ads from competing tax preparation companies. They will make claims like promising "instant tax refunds" or they will tell you that you don't need your W-2 forms to come in and prepare your taxes. Well the IRS does not process tax refunds any faster for these companies than for anyone else. What they are offering, if you qualify, is a short term generally high interest loan to be paid back by having your refund sent to them or the financial institution providing the loan. They will also usually be charging an extra fee for this service. The interest and fees will be deducted from the total amount of the refund as well as the tax preparation fee. As for not needing a W-2, except in certain situations where a substitute W-2 may be used, if you are employed for salary or wages you will need a W-2 to file your tax return. The ploy is to get you in the office to "start" your return so that you feel you have to come back to finish once the actual W-2 arrives.
Additionally, because there is still little regulation for who can prepare taxes for pay, when tax filing season comes along, unregulated preparers start popping up in temporary store front locations. They will start posting signs on street corners promising large refunds geared to attracting lower income individuals and when April 16th comes around they close up shop and disappear.
So what should you look for when selecting someone to prepare your taxes and also get tax loan?
* Be sure to select a tax professional with the appropriate credentials. Enrolled Agents and CPA's are licensed professionals, guided by a code of ethics set forth by the Internal Revenue Service. We are required to keep up with the constant changes in the tax code through continuing education and this is reported to the IRS.
* Your tax practitioner should have a Practitioner Tax Identification Number and should sign all tax returns.
* You should use someone who is going to be available all year round to answer questions that may come up. There are life changes that occur during the year that may affect your tax situation and you may need someone available to offer advice as necessary, or you may get a letter from the IRS that you may need help to respond to.
The author is an Enrolled Agent licensed by the Treasury Department with unlimited rights to represent taxpayers before the Internal Revenue Service. He is an experienced tax professional in the areas of tax preparation and tax resolution. Visit http://www.haroldjblotchertaxes.com or feel free to call him any time at (781) 363-5519 or (561) 429-3592 with any tax questions. We are available all year and happy to talk with you at any time with no obligation.