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Feb. 21, 2001 - They
say time is money, but when it comes to preparing your
income and business taxes, the saying has never been more
true.
Many
people take pride in preparing their own taxes. And with the
advent of software programs like Turbo Tax, it’s gotten a
lot easier, so Millian says there’s nothing wrong with
preparing your own filing. If you don’t mind spending the
time, you can save yourself some money.
Those
instruction books and forms you get in the mail from the
state and the IRS can be daunting, she knows, but if you
don’t mind reading a little bit, it’s not that hard.
“All
you have to read are two pages for each return – pages 1
and 2 of the Federal 1040 and pages 1 and 2 of the state
1040 and you can do your whole return,” Millian says.
“You don’t have to look at the rest of the book unless
you don’t understand something.”
If
you read the instructions, however, and still don’t
understand what to do, then it’s time to go see a tax
preparer or an accountant.
Or,
if those books just seem too scary to even open, it’s also
time to find some help, she says. Fear is the biggest factor
here.
“Some
people are intimidated by the package they get in the mail.
If you get that fear – even if you don’t have any
deductions – you can go see a tax preparer.”
But
a tax preparer or accountant will cost you money, you say.
Well, aside from the time a tax preparer can save you, they
can also save you money. Their experience and know-how can
protect you from costly mistakes and find deductions you
might not know about.
“You
have to read each line of the tax form and follow the
instructions very carefully. For instance, the form might
tell you to add the amounts in the far right column
of lines 17 through 21. If you don’t add the numbers from
the correct column, that could be a very big error that
could cost you a lot of money.”
With
software like Turbo Tax and the IRS’ new e-filing program
can make doing your own taxes more attractive – even for
those who have used a preparer in the past. But that
doesn’t always work so well either.
“I
had a client whose taxes I did for some time, then she
decided to use Turbo Tax and do it herself, but she ended up
calling me five times with questions,” Millian recalls.
“When you have someone prepare your taxes, you’re paying
for something – their knowledge.”
Along
with the anxiety you might feel about filling out your
return, there is one other situation where Millian
recommends taking your taxes to a preparer.
“If
you get into the stock market and you have gains and losses,
it can get confusing,” she says. “A lot of brokers
don’t know the tax laws and don’t know how to advise
you.”
The
same can be true if you inherit an estate that includes
stocks and bonds or real property.
“When
you receive an inheritance, you don’t pay any tax. The
estate does before it’s transferred to you,” she says.
“But there is a basis value that transfers with anything
other than cash. Then you
need advice."
Millian M. Toms
is a Royal Oak-based CPA and business advisor. She is also an active
member of the community including The Optimists and Greater Royal
Oak Chamber of Commerce.
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