5 Things Tax Preparers Wish You Knew About Taxes
1. Don't Try to Deduct Your Grown Children
Is your post-college child living at home while job searching? Odds are they won't count as a dependent. "Your idea of supporting your adult child is different than the IRS's idea," says Kristin Roberts of the Roberts Tax Group in Torrington, Conn. "Many parents who have adult children living with them say, 'He lives with me. I pay the rent. I support him. I can claim him.' But that's not so in most cases."
Explains Anabella D. Hampton, president and CEO of TBRE Consulting Co. in Oxford, Pa.: "If your child is 19 or over years old and does not go to school or goes less than half time, but works at a grocery store and made $4,000 last year, you cannot claim him as a dependent, even though you feed him and put a roof over his head."
2. Keep it Truthful
"When you ask a licensed tax professional to prepare your tax return, they are swearing that, to the best of their knowledge, their client has told them the truth," says Rhonda A. Mannes, a certified public accountant in Las Vegas, N.M. "Please do not ask us to lie for you. The IRS will impose penalties and in some cases bar us from preparing tax returns in the future. This is our livelihood, and we are not willing to risk it."
"There is no accountant or tax preparer/client privilege when it comes to the IRS," says Scott Patterson, a certified financial planner in Anderson, S.C. "If you don't want me to know, keep your mouth shut."
3. Forget About the Joneses
"Don't compare refunds with your friends," says Roberts. "I hear often "I make the same as my friend. Why is his/her refund bigger than mine?" Refunds are indications of nothing. They often try to use refund amounts as a way to gauge how "bad" they have it compared to their friends. But it is really like comparing apples to freight trains."
"No, your tax situation is not 'just like' your friends'," says Patterson. "Tax law is complicated, and every situation is unique. Stop trying to keep up with the Joneses."
4. Leave Your Retirement Accounts Alone
Feeling a financial pinch? It might be tempting to dip into retirement funds, but Hampton says that short-term solution could have longer-term consequences.
%VIRTUAL-article-sponsoredlinks%"If you take money out of your 401k or IRA, and are under 59½, you will be stuck with a 10 percent penalty, and it may put you into a different tax bracket," she says. "I can't tell you how many people do this, and then are shocked to find out they owe half of what they took out in taxes between federal and state.
5. Know When to Get Help
"Doing it yourself [with a tax preparation software] is an option only if you have a very simple return or are willing to put in some serious time learning the tax laws that might affect you," says Dan Connors, a CPA in Granite City, Ill.
"Most returns are not easy or quick," says Patterson. "While what we do may seem like it's those things, it's truly because we're just that good. Michael Jordan makes a three-pointer look easy; Tiger Woods makes golf look easy; and I make taxes look easy. Just claiming someone as a dependent has 12 separate rules."
For those still worrying about tax season, Connors has this advice. "You can't avoid death or taxes. Don't let worrying about them rule your life. Do your best to pay your share and get on with your life and follow your dreams."