As I said in my last column, most of us are thankful to see 2020 in our rearview mirror. But looking in the mirror right now you will see something from 2020 gaining on you quickly — your tax returns for 2020.
Thanks to COVID-19, the 2021 tax season is seeing a lot of changes, so, while you still have time, it would be good to start thinking about your situation and whether you will file your taxes yourself or seek the help of a tax preparer.
A few FYIs you should know whether you file your taxes yourself or use a preparer:
• Tax Day is back to the normal April 15, 2021 date. Unless you file an extension, your 2020 tax returns must be filed by this date.
• The standard deduction for 2020 increased to $12,400 for single filers and $24,800 for married couples filing jointly.
• The Coronavirus Aid, Relief and Economic Security (CARES) Act’s stimulus checks will not count as taxable income.
There are numerous other COVID-19-related changes to how income and taxes on this year’s returns are figured. If your taxes are simple, there are several easy-to-use tax software options available online that can make filing of your taxes an easy task. If, however, your taxes are more complicated or had unusual or special circumstances in 2020, working with a professional tax preparer is a smart move.
Most tax preparers are legit and competent, but if you do decide to hire a professional tax preparer here are some things to keep in mind when choosing.
• Possibly the best way to find a trustworthy tax preparer is to ask your friends and family for recommendations. After receiving several referrals from those you trust, contact our local BBB about complaints or consumer reviews to give you a clear view of what you can expect.
• Ask for your preparer’s Preparer Tax Identification Number. The IRS requires anyone who prepares a federal tax return for compensation must have a valid PTIN.
• You are responsible for your return. Check to see if your preparer has a history of disciplinary actions. If you’re using a CPA, check with the Accountancy Board of Ohio. For enrolled agents, go to IRS.gov and search “verify Enrolled Agent status” or check the Directory. Contact the Better Business Bureau about disciplinary actions against other types of preparers.
• In case the IRS later contacts you about your return, make sure that your tax preparer will be available after the April 15 filing deadline. If they won’t be available, consider using someone that will be. If you’re audited by the IRS, not everyone can represent you. CPAs can represent you, as well as tax attorneys and Enrolled Agents or EAs (people having passed an extensive IRS exam). Storefront preparers, such as H&R Block or Jackson Hewitt usually have training programs to make sure their preparers are up to date on the laws but normally employ someone that will represent you if audited by the IRS.
• Do not be afraid to ask how much the tax preparer charges for their services. Inquire about extra fees for e-filing state, federal, and local returns, as well as fees from any unexpected complications.
• Be wary, and avoid at all costs, any tax preparer that guarantees you a refund much larger than that of a competitor, asks you to sign a blank form, or charges a fee based on the size of your refund.
Start thinking about your tax situation now while you still have time on your side. We want you to be prepared to attack your taxes before they attack you.
Cheryl Parson is president of the Better Business bureau serving West Central Ohio. The BBB may be found on the Internet at www.lima.bbb.org.