How to Ensure Your Tax Preparer Saves You Money and Avoids Costly Mistakes
Every year, after your accountant prepares your tax returns, you may find yourself wondering if something went wrong. Did you pay too much or too little? Did you forget something? Or did your accountant make a mistake? These questions can be tough to answer, especially since mistakes or oversights might not always be obvious.
- Judging a tax preparer’s work can be challenging, as tax filings, especially complex ones, involve numerous judgment calls.
- Two sets of returns—one prepared with software and another by an accountant—could yield different results using the same data.
Red Flags to Watch Out For
According to Kossandra McDuffie, an Atlanta-based CPA and financial planner, there are several red flags you can look for. Self-employed individuals, for instance, who made their quarterly estimated payments but still face penalties may have reason to doubt their tax pro’s accuracy.
- Pay attention to how your accountant handles tax-advantaged accounts. A thorough understanding of different account types—like Roth IRAs or SEP plans—is crucial for proper tax treatment.
- Ensure your accountant is familiar with all the options available and understands how to avoid penalties for improper contributions.
Another possible red flag is math errors, although these are rare with the software many tax professionals use. However, overlooking key details or misplacing documents can still lead to inaccurate returns.
- McDuffie suggests asking your accountant specific questions to understand how they review forms, such as:
- “Can you walk me through how you completed this form?”
- “How do you ensure everything is captured accurately?”
- “What common mistakes do you watch out for that others might miss?”
Professional Development and Communication
An important factor to consider when evaluating a tax preparer is their commitment to ongoing professional education. Tax laws change constantly, so it’s essential that your accountant stays up-to-date.
- Ask about their approach to staying current with new tax regulations, such as the Secure 2.0 Act.
Ideally, your accountant should be proactive, initiating contact with you throughout the year. Even if these touchpoints are just email reminders or newsletters, it’s better than a professional who only reaches out at tax time.
- Corey Briggs, a certified financial planner, points out that good accountants educate their clients on tax code changes and propose strategies to help with tax planning, like Roth conversions or tax-loss harvesting.
Unfortunately, only about 10% to 20% of tax preparers are proactive in this way. Most simply fill out your returns based on the information you provide.
Switching Tax Preparers: What to Consider
If you’re concerned about your current tax preparer, you can always switch accountants or use tax software like TurboTax or TaxSlayer. A fresh perspective may help identify missed deductions, credits, or even alternative methods for calculating business expenses.
- Briggs explains that clients who switch accountants often feel they aren’t receiving enough attention or proactive advice.
- However, switching won’t necessarily save you money. With a shortage of tax-prep professionals, fees have increased significantly, with some taxpayers now paying $1,000 to $2,500 for relatively simple federal returns.
To ensure your tax preparer is both saving you money and avoiding costly mistakes, watch out for red flags, ensure they’re proactive with tax planning, and confirm their knowledge of tax laws.
