It is estimated that about 60% of taxpayers hire a tax preparer to file their returns. Most preparers provide a valuable and honest service. However, as it is the case in other service areas, there are those that may not be so much helpful and reliable. Those who are unreliable may evade the rules and commit the violations that would not only involve them, but also you, so you must be alert to avoid being a victim of the fraud. The common frauds in this regard include the following;
Misappropriation of Your Refund
Your refund must be delivered to you directly, either by check or deposited into your bank account. If the preparer’s fees and other charges are deducted from your refund, the preparer must show you exactly how much your refund is before and after such deductions.
Even though the taxation department does not state exactly how much a preparer should charge you, the fees must be reasonable and based on the service you require not on the amount of your refund.
No tax preparer can promise you that he will get a bigger refund for you. He can only promise you that he will give you a professional service and that he will work to obtain the reimbursement that corresponds to you under the margin of the law. It is true that the lack of experience and knowledge in the matter a preparer who can omit the credits and deductions that could benefit you and consequently get a lower reimbursement, on the other hand, a tax preparer who has more experience of tax preparation can do better work.
However, if your return is prepared including all the benefits that you can apply, the refund would be the same with one preparer or the other. Your tax preparer should definitely work to your advantage, and prepare your payroll in a way that reduces your taxes to the extent permitted by the law.
He should work with you to determine what deductions and credits you should apply for. Understanding your circumstances together, you can determine the best way to present your return. However, the preparer should never advise you to violate any governmental law or to proceed illegally when completing your return, even if such a procedure may be beneficial to you.
Tips to Reduce Your Taxes Considerably
There are legal ways to minimize the total taxes you have to pay. You can reduce your taxes if you take certain steps throughout the year. The idea is to reduce your income, increase your deductions and make sure you include all the credits for which you qualify.
Reduce Your Adjusted Gross Income (AGI)
It is very simple that the amount of income you earn determines the amount of taxes you have to pay. The more you earn, the more taxes you have to pay. The simplest way to reduce your taxes is to reduce your income. Like most people, you certainly do not want to reduce your income, since earning less means less money available to cover your expenses, actually, you can continue to receive the same amount of income and reduce your Adjusted Gross Income. AGI is the total income minus the deductions you can take to reduce it.
You can reduce your AGI in several ways, the main one being by contributing to your retirement plan which reduces your AGI. If your employer offers a retirement plan, contribute as much as possible. If you do not have access to this plan through your work, you can open an IRA withdrawal account with your bank or financial institution of your choice. The amount you contribute in the year is deductible from your income. If you have a retirement plan, avoid withdrawing money before your retirement age or you will end up paying penalties and taxes. There are other income deductions that help you reduce your taxes which include student loan interest, divorcee spousal pension and educator expenses.
Deductions in Form A
In addition to income deductions, certain expenses related to your job can be included in Form A to reduce the amount on which you must pay taxes. Basically, all taxpayers qualify for the standard deduction granted by the government and reduce the amount on which you must pay taxes, and this amount depends on your marital status for the purpose of your preparation. Some taxpayers are eligible to use the Form A, in which, you can include several expenses related to your work like medical expenses, state and local taxes, taxes and interest on housing, donations to nonprofit entities approved as deductibles, employee expenses which are not reimbursed by your employer, cost of tax preparation, transportation expenses, cost of travel, meetings and meals of work.
Include Appropriate Loans
The government offers several loans that can reduce your taxes and may even generate a refund. When preparing your return, you must ensure that the loans for which you qualify are included which are as follows;
- Earned Income Loan
- Additional child tax loan
- Loans for university education expenses
- Dependent care loan