If you’re an accountant for whom tax return preparation is among the services you provide, you likely find yourself pushed to meet demand at certain times of the year, such as tax season.
While making mistakes will of course be something you try to avoid doing while working on your clients tax returns, if you have a small in-house team and haven’t yet discovered the advantages of tax preparation outsourcing services, they may well be inevitable.
Here are some top tax prep mistakes that should be avoided at all costs, by individuals, companies, and accounting firms:
Failing to focus on bookkeeping
Bookkeeping is essential for accounting firms, and if they can’t keep their own books in order, how can they expect their clients to?
Tracking income and expenses accurately must be a priority throughout the year, otherwise errors will creep in to the tax return, deductions will be missed, and you might give the IRS cause to start sniffing around!
Accounting firms can easily outsource their bookkeeping requirements, while individuals and businesses must simply strive to keep clear records, all year round.
Not verifying personal information
All personal details should be meticulously checked before anything is handed over to your tax preparer, otherwise delays can occur due to errors, or while information is double checked.
Overlooking deductions and credits clients might be eligible for
As any tax preparer will know, tax deductions and credits can help individuals and businesses reduce their taxable income significantly, and yet so many of them go unclaimed every year.
If you’re failing your clients in this way, it could be time to invest in outsourced tax preparation services to alleviate some of the burden at busy times of the year.
Omitting income or underreporting
The best way to solve this problem for individuals and businesses when filing their taxes, is to work with a professional tax preparer. If you earn multiple incomes, all of them must be reported accurately, and a tax preparer can help you consolidate them so that you don’t run the risk of a penalty from the IRS.
Not recognizing taxable retirement contributions
IRA’s or 401(k)s are often misunderstood from a tax perspective, with many individuals not knowing which contributions may be tax deductible, and which ones are subject to taxes only when withdrawn.
Again, seeking help from an accounting firm can help you make the most out of your retirement savings plan.
Ignoring state and local taxes
CPAs and tax professionals know tax laws and regulations inside and out, and make it their business to stay on top of any changes to them that may occur. But when you don’t seek help with preparing and filing your taxes, you may be inadvertently ignoring your tax obligations both to the state, and locally.
Missing deadlines
If your accountant misses a deadline when preparing your taxes, you know that they haven’t yet invested in tax preparation outsourcing to India, and are struggling to meet the demands of tax season. However, this problem is usually experienced by those filing their taxes without professional help, and often results in hefty penalties.
If you’re an individual tax payer who has faced IRS penalties for any of the reasons listed above, then it simply makes senses to hire a tax professional to assist you. They are an investment, but they’ll help you avoid fines, and above all else, reduce the stress typically associated with filing taxes. For professional tax preparers making errors in their work, it could be time to start outsourcing to alleviate the burden.
