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 It is a little disheartening, but not surprising, when someone asked me if a tax attorney or tax preparer is worth it. In truth, however, this is a loaded question. If you are asking me if the local store front office of the mega-tax preparer service is worth it, I would say probably no. If you are asking me if an experienced tax attorney is worth it, the answer is yes. And not just a little yes; a resounding yes.
Let me explain by way of illustration. If I decide that I want burnt ends (a Kansas City favorite) for dinner, I can either make them myself or go out. If I decide to make them myself, I would do what everyone faced with this situation would do. I would go to Google and type in “Burnt End Recipes.” I’m sure this would yield me many useful results. After perusing the many links, I would probably find one that sounded good and easy. I would then print it out and head to the store for ingredients. After getting the ingredients, I would come home, fire up the smoker, follow the recipe, and soon after, I would have my burnt ends. Now if I went to any of the fine BBQ restaurants in Kansas City, I could probably get better burnt ends, a variety of side dishes, and not be faced with the messy cleanup. Would they be significantly better? I would hope not! Could I not figure out the side dishes I like and just make those? Yes. Is the extra cost worth avoiding the cleanup? Maybe; my wife would say, “Yes!” So why don’t I cook every meal at home? Because, I like the variety the restaurant offers. I like the fact that the menu contains items I’ve never heard of but want to try. Most importantly, I’m only as good as the recipe. The restaurant, on the other hand, has the ability to explore and create new and unique items for me. I could try and do this, but I’m almost certain nothing I make would be edible. And yes, my wife likes the piece of mind of no cleanup.
The same goes for your tax return and your tax preparer/tax attorney. You can go out and purchase some great products that will help you complete your tax return. [continue reading]
In the ever changing world of estate tax and estate planning, here are three proposed changes that could significantly affect your estate plan: (1) the determination of tax basis; (2) valuation discounts; and (3) grantor retained annuity trusts (GRATs). And even though these are merely proposed changes, they are a signal to all individuals that many of the “once-in-a-generation chances to save money” could be coming to an end. All of these changes are part of the Obama administration’s proposed budget that was recently released (see Yahoo Finance Article).
Determination of Tax Basis
Under current law, a recipient of a gift also receives the giver’s basis in the property (i.e., “carryover basis”). The recipient of property through a will or intestacy, on the other hand, gets a step-up in basis (not in 2010; see my early post on the subject) to the value as of the decedent’s date of death. Basis is used to determine the amount of gain or loss an individual recognizes, and is taxed on, when the property is sold. For instance, if your rich grandma gives you property during her life that is worth $12,000 but she paid $1,000 and you sell it, you would have a $11,000 taxable gain. [continue reading]
Many of the large tax preparers our offering “refund anticipation loans and services,” while in theory these provide a valuable service, they offer little to no benefit to the average taxpayer. With the IRS’s stated position that “taxpayers can get their refunds in as few as 10 days” (emphasis added) by using e-file and direct deposit, paying any fee to receive an anticipation loan just doesn’t make much sense. Especially when some of the “loans” are being marketed as the appropriate vehicle when you need your refund within “8 to 15 days.”
– The State Line Lawyer
Update: Here is a great article from MissouriFamilies.org explaining how the annual percentage rates on refund anticipation loans can range from 40% to 1,800%. In case the embedded link doesn’t work: http://missourifamilies.org/features/financearticles/refundloan.htm.
Just yesterday, the IRS revealed the results of a six-month landmark study that requires paid tax preparers register, pass competency tests, and participate in continuing education. This is a step in the right direction of not only protecting taxpayers in one of their biggest financial decisions of each year but also ensuring quality service for all taxpayers. Unfortunately, these requirements will not be in effect for the current 2010 tax season. What is a taxpayer to do?
Choose the right credentials.
- Taxpayers should look to what the future requirements will be in determining who to choose this year. The requirements will require competency tests for all paid tax return preparers except attorneys, certified public accountants (CPAs) and certain enrolled agents as well as requiring ongoing continuing professional education for all paid tax return prepares except attorneys, CPAs, enrolled agents and others who are already subject to continuing education requirements. Thus, taxpayers should choose a preparer from one of these three areas: attorneys, CPAs, and enrolled agents. H&R Block, a Kansas City based company, and Jackson Hewitt have expressed support for these measures, but currently there is no quality control on their services other than what they impose. [continue reading]
Today, the House passed the Tax Extenders Act of 2009, which extends many taxpayer friendly provision for one more year (i.e., 2010). The Act extends more than forty provisions related to both individuals and businesses. These provisions encourage charitable contributions, provide community development incentives, provide tax relief in the event of a Presidentially-declared disaster, and support the deployment of alternative vehicles and alternative fuels. While most of these decisions have already been made for your 2009 tax year, knowing that these provisions will be around for another year will help you and your tax attorney make the right financial decisions for your future.
Some notable provisions are:
- The extension of the above-the-line deduction for qualified tuition and related expenses.
- The extension of the above-the-line deduction for certain expenses of elementary and secondary school teachers.
- The extension of 15-year straight-line cost recovery for qualified leasehold, restaurant, and retail improvements.
- The extension of 5-year depreciation for farming business machinery and equipment.
- The extension of tax-free distribution from individual retirement plans for charitable purposes (see my earlier post on the subject).
- The extension of the alternative motor vehicle credit for certain hybrids.
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It is a little disheartening, but not surprising, when someone asked me if a tax attorney or tax preparer is worth it. In truth, however, this is a loaded question. If you are asking me if the local store front office of the mega-tax preparer service is worth it, I would say probably no. If you are asking me if an experienced tax attorney is worth it, the answer is yes. And not just a little yes; a resounding yes.
