Tips for Trusting Your Tax Preparer

Most people get help filing their taxes, either from computer software or a professional tax preparer. Scams have some consumers concerned about who they can trust with their financial data and private information.

A paid tax return preparer is primarily responsible for the overall, substantive accuracy of your tax return(s). If there is a problem with your return or you are audited by the IRS, the tax preparer can help you address the issue and can often represent you. The preparer is required to sign your tax forms (paper or electronic) and provide their preparer tax identification number (PTIN), a number assigned by the IRS.

Better Business Bureau advises taxpayers to be extra cautious when choosing a tax preparer, since that person or company will have access to your personally identifiable information (PII). Here are some BBB tips to help you find a tax preparer you can trust.

Get Referrals. To find a tax preparer, start by asking friends and family for recommendations, then check BBB Business Reviews at bbb.org. Look beyond the letter grade; complaint details and Customer Reviews will tell you about others’ experiences.

Make sure they are properly registered. A tax preparer must obtain a PTIN from the IRS. Never let someone work on your taxes unless they have this number. Don’t be afraid to ask about this or other qualifications; a capable professional does not mind questions.

Look for credentials. Anyone with a PTIN can prepare your tax forms for you, but some tax preparers have more training and qualifications than others. Enrolled agents, certified public accountants (CPAs) and attorneys have unlimited rights to represent their clients to the IRS on all matters. Other preparers can help you with forms and simple IRS matters, but are limited otherwise, and they can’t help you if they didn’t prepare your form. Learn more about tax preparer credentials on the IRS website.

Keep a watchful eye for promises. Be wary of any tax preparation service that promises larger refunds than the competition, and avoid tax preparers who base their fee on a percentage of the refund. Also be wary of “refund anticipation loans,” which can take a hefty chunk of your refund in commission. Refunds are processed quickly these days, so it’s a better bet to just wait for the real thing rather than pay a premium to get it now.

Search for free tax programs. There are several free government programs that prepare taxes free of charge if you meet an income requirement; go to the IRS’s Free File page for more information. Check with your state government to find out about their program (search “file tax free” and your state’s name in a search engine, and look for .gov websites).

Tax Software and Apps. If you plan to file yourself, use tax software or an app that provides both excellent data security and good customer service. Some of the top names in tax prep software are BBB Accredited Businesses, so check with bbb.org first.

Newman at cash register

Tax Break Tips

April 15th: It’s the 105th day of the year, it’s Leonardo Da Vinci’s birthday, and it’s also Titanic Remembrance day (who knew?). But for most people, April 15th is dreaded tax day, where everyone must have their income taxes filed. If you are part of the 83% of Americans, who donated $358.38 billion(!!!) to charities in 2014, there are specific tax benefits that can help put money back in your pocket. While filing your taxes may be stressful, the BBB is here to help you on how to get the most out of your charitable contribution. Below are some tips on common deductibility questions.

General overview                     Leo Tossing Money

  • Only itemizers can deduct contributions. Contributions are deductible for the year in which they are actually paid or delivered. Pledges are not deductible until the year in which they are paid.
  • Direct contributions to needy individuals are not deductible. To be tax deductible, contributions must be made to qualified organizations.
  • Keeping records of contributions is essential for itemizers. Acceptable records include bank records and written communications from the charity. Contributions of over $250 require a contemporaneous written acknowledgment from the charity.
  • There are over 20 categories of tax-exempt status. In general, only organizations classified as 501(c)3 and 501(c)19 are eligible to receive contributions deductible as charitable gifts.

Charity Auctions, Dinners, Galas, and Balls  

Rihanna in big dress

  • The general rule of thumb is that only the amount above the fair-market-value of your auction purchase would be deductible as a gift.
  • For example: at a fundraising event conducted by a charity, you pay $1,000 for a week’s stay at a beach house. The fair market value of this vacation is $600. Therefore, only $400 of the purchase would be deductible in this circumstance.
  • If you buy a ticket to a dinner for $100 and a similar meal at the hotel is $25, then only $75 dollars is deductible.
  • Some events may be very expensive, so if you don’t feel comfortable spending large sums of money on a dinner, you always have the option of making a direct donation, instead of attending the event.

Thrift Stores

Macklemore dancing in Thrift Shop

  • Determine whether your goods are in good used condition, and if it’s something the organization accepts.
  • Make a list of the items you’re donating.
  • Be sure to get a receipt from the organization to which you donate.
  • If you donate an Item valued at over $500 it may be in “fair” condition, but you will need to include a qualified appraisal with your tax return. For any noncash contribution over $500 you will need to complete and attach IRS form 8283 on your next tax return.

Car Donations

Dog looking at Car

  • If you are not familiar with the charity that is soliciting, check its website and see how the donation will benefit the organization. Sometimes the names of well know nonprofits are used without permission.
  • Verify that the recipient is tax-exempt as a 501c3 nonprofit, and check the IRS guidelines on vehicle deductions(publication 4303)
  • If you are claiming a car donation of over $500, you will need to complete and attach form 8283. If the car is worth more than $5,000, you will need to get a written professional appraisal. Many taxpayers find appraisers by contacting local car dealers.
  • Make sure the title of the car is transferred to the charity’s name, not an individual, and keep a copy for record.

 

BBB always encourages consumers to do their research before making any donations to charities. If you are looking for a charity to donate to, or if you are looking for assistance during tax season, check out findacompany.org for Accredited organizations who adhere to BBB’s eight standards for trust.