How Long Do You Need To Keep Tax Documents?

Taxes are a lifelong obligation, even after you retire. This makes it important to understand the nitty-gritty of the process, no matter how long you’ve been filing and paying in your life.

Today, we’re talking about documentation. Audits are a dreaded potential with taxes, but you can reduce your risk and lessen the impact—should you get one—by having thorough documentation from previous years. 

But how long do you need to keep tax documents? Learn the IRS suggestion and more information below.

The General Rule: Three Years

The general suggestion from the IRS is to keep tax documentation for three years. This period starts from the date of your tax return filing, or the due date if you file early. The IRS typically has three years to audit your tax return, which is why maintaining records for this duration is essential.

Your tax documents include income statements, receipts for deductions, and other supporting documents. By organizing these records for three years, you ensure that you are prepared in case of any inquiries from the IRS.

Exceptions to the Rule

While three years is the standard, there are exceptions to this rule. You shouldn’t worry about these exceptions if you haven’t filed false or misleading returns, but they’re essential to cover.

For one, if you underreport your income by 25 percent or more, the IRS has six years to audit your return. Secondly, in cases of fraud or failing to file a return, there is no time limit for audits, meaning you should retain documents indefinitely. 

Again, unless you’re guilty of these things, you shouldn’t have to worry about keeping documents for more than three years.

That said, records related to property sales, retirement accounts, or any transactions that could affect your tax obligations should be kept for at least seven years.

What To Do With Expired Documentation

Once the requisite time has passed—whether three, six, or seven years—and you no longer need certain tax documents, it’s important to dispose of them correctly. 

This documentation contains sensitive information that should never be in the hands of unauthorized or untrusted individuals. That means you should never just toss these papers into the trash can and call it a day.

Instead, use various paper shredding methods to protect your personal information from identity theft. For digital files, use secure deletion methods to ensure no recoverable trace remains.

Pro Tip

Maintain a document retention schedule to easily identify which records you can discard and when.

Being diligent about your tax documents helps you navigate this part of your finances confidently even as you enter retirement. 

By understanding how long you need to keep tax documents, you can avoid unnecessary complications while keeping your personal information secure.

Getting Ready for Tax Season is Best Done Early: 5 Reasons Why

Tax season is an inevitable period of the year that we all have to face. It can be daunting and overwhelming for many of us, so it's crucial to start preparing early.

Many people wait until the last minute to get their tax affairs in order, but this habit could lead to unnecessary stress and errors. By starting early, you'll have plenty of time to gather all the necessary documentation, review your finances, and file taxes without any rush. 

In this article, we'll discuss five reasons why getting ready for tax season is best done early.

Avoid the Last-Minute Pressure

One of the significant benefits of starting your tax preparations early is that you can avoid the last-minute filing rush. Filing your taxes at the last minute proves to be highly stressful and, in turn, increases the possibility of making mistakes. 

This increased pressure can often lead to incomplete returns, causing you to incur penalties and fines. Proactively starting early can avoid this hassle and ensure your taxes are filed promptly.

Get Your Refund Early

If you're eligible for a tax refund, you want to receive it immediately. By filing your taxes early, you'll get your return expedited. You can use this extra cash for essential expenses, paying debts, or investing in your future.

More Time for Tax Planning Strategies

When you start your tax planning early, you have the luxury of time, making it possible to determine the best strategy for your situation. It allows you to make sound decisions, affecting how you maximize tax credits and deductions. 

It also gives you time to hire tax preparation services, which can often help you get the most value out of filing your taxes. 

Additionally, you will be able to minimize your taxes while maintaining the highest level of accuracy with your filing.

Avoid the Late Fees and Penalties

Late filing fees and penalties are reasons you must be proactive in preparing your taxes. The longer you wait, the higher the potential penalty you risk incurring. Staying on top of your filings early allows you to detect discrepancies, rectify them, and avoid penalties.

Peace of Mind

Filing taxes is rarely anyone's idea of a good time. By starting early, you can eliminate the unnecessary stress accompanying the process. Going into the process, feeling calm and composed is crucial. It ensures that you file your taxes accurately without making any errors.

Final Thoughts

Starting your tax planning early sets you up for financial success for months. The benefits of early preparation range from avoiding the last-minute rush and penalties to getting your refund quickly and the peace of mind that comes with it. 

So avoid procrastination and be proactive this year when it comes to filing your taxes – it will be your best financial decision.

What You Can Do Now to Prepare for Tax Season

Tax season is around the corner, and it’s time to start preparing for it. Tax season can be stressful, and you don't want to get caught playing catch up when April rolls around. 

From gathering documents to tracking expenses and donations, there’s much to keep track of. But don't worry – this guide will cover everything you need to do now to have a smooth and stress-free tax season.

Gather Your Documents

Start by gathering all your important financial documents, such as W2 forms, 1099 forms, and any receipts you may have made throughout the year. 

This is the perfect time to check your mailbox for tax-related documents that may have been mailed to you. When you receive your documents, store them safely and keep them organized.

Register for Tax Software

You don’t have to wait until tax season to do your taxes. Many reputable websites offer tax preparation software that you can use year-round. 

By registering early on, you'll have time to familiarize yourself with the software and get a head start on completing your taxes.

Organize Your Expenses

If you plan on deducting expenses on your tax return, it’s essential to make sure all your receipts and records are in order. Take the time now to organize them, making sure that each receipt is labeled with the correct expenditure category. 

This will help you avoid the hassle of putting together scraps of paper at the last minute, which can lead to errors and missed deductions.

Update Your Profile

It's also a good time to verify that all your personal and financial information is up-to-date in your tax software or with your accountant. 

Confirm your address, social security number, bank account information, and any other relevant details. This will ensure that your tax return is accurate and filed smoothly, avoiding any delays or potential red flags.

Review Your Investments

Finally, take the time to review your investments for the year. If you have any capital gains or losses, there may be some tax implications. Consult with your tax planning advisor or software to find the best strategy for minimizing taxes while also diversifying your portfolio.

Final Thoughts

Getting ready for tax season may seem like a daunting task, but by following these simple steps it can be a relatively easy and stress-free endeavor. 

Make sure you gather all your documents, organize your expenses, update your personal and financial information, and review your investments before waiting until the last minute to start. 

With these tasks crossed off your list, you’ll be better equipped to handle any surprises and feel more confident and in control of your financial future.

Working Out the Wrinkles During Tax Season

When it comes to filing taxes, there are a lot of things you need to take into account. From potential issues to ways to overcome them, it's important to be prepared.

Here's a look at some things you should remember during tax season.

Filing your taxes can be a daunting task, but there are ways to make it less stressful

Filing taxes can seem like a complex and overwhelming task, but there are steps you can take to make the process smoother. Knowing what to expect and how to plan ahead is key, so it's important to educate yourself on the tax filing process and all of the potential issues that may arise. 

Doing so can help save time in the long run and reduce stress as you work toward preparing your return. And if any problems come up during the filing process, seeking professional advice or assistance may be a helpful option. 

No matter how daunting it may seem, with a little planning and knowledge on hand, you can approach tax season feeling confident and prepared.

One of the biggest issues you may face is finding all the necessary paperwork

When filing your taxes, making sure you get all crucial paperwork or forms can be daunting. One of the biggest issues that may arise is finding all the documents you need for your taxes. 

It is important to remember to include all income statements, health care documentation, and other documents that could be pertinent. If you have had a busy year, it can become challenging to keep up with all the necessary items for filing. 

To make this process easier, it is helpful to create a checklist of documents to help ensure that you are gathering the correct information when preparing your taxes. 

Additionally, having a system where all tax-related papers are stored together can make finding what you need much simpler. Having a streamlined approach makes filing your taxes less stressful and more successful in the end.

Another potential issue is making sure you're taking advantage of all the deductions and credits you're entitled to

One of the most common mistakes that tax filers make is failing to secure all available deductions and credits. It’s possible to forget about certain opportunities for discounts depending on individual circumstances, but with this in mind, it’s still important to be aware of all the options out there lest you miss out on significant savings. 

Fortunately, there are many resources you can look to for advice. Whether it's a tax lawyer or a financial advisor specializing in taxes, there are people you can contact to inform you of ways you can save money.

If you're self-employed, there are additional forms and requirements you need to be aware of

Being self-employed often brings a sense of freedom and flexibility but also comes with an extra level of responsibility when it comes to filing taxes. 

If you're a freelancer or entrepreneur, there are additional forms and requirements that you will need to be aware of to ensure your taxes are filed correctly. Knowing the rules will help you avoid any potential issues associated with incorrect filing. 

With the right information and a bit of preparation, filing taxes successfully as a self-employed individual is achievable—and manageable!

Fortunately, resources are available to help you through the tax filing process

Filing taxes can be a daunting task, so it's important to remember that you don't have to go through it alone. Fortunately, plenty of resources offer knowledge and insight into the filing process. 

From consultants who can answer all your burning questions on tax forms to online tools that automate calculations and simplify return preparation, finding the right help has never been easier. With the right guidance and advice, anyone can make it through tax season with minimal stress.

Filing your taxes doesn't have to be a headache. By organizing your paperwork, familiarizing yourself with the forms you need to fill out, and taking advantage of available resources, you can make tax season a breeze.

5 Tips for Tax Season if You Aren't Sure What to Do

If you are like a lot of people, you might dread tax season. This might be particularly true if you don't know much about filing or paying taxes.

It's normal to be nervous and to feel a sense of dread when it's time to do your taxes, especially if you aren't knowledgeable on the subject. But no need to worry, as these tips for tax season can help you out a lot if you don't know what to do.

Don't Wait Until the Last Minute

First of all, do not wait until the last minute to start making plans to do your taxes. If you file your taxes late, you could be charged a penalty for doing so. 

Even if you don't end up filing late, you could end up feeling rushed or could be more prone to making mistakes if you wait until the last minute to file your taxes, too. 

Therefore, you should start thinking about what you need to do and how you are going to file and pay your taxes well in advance, if at all possible.

Gather as Much Documentation as Possible

Be aware that you are probably going to need quite a bit of documentation when you file your taxes. You'll need the social security number for each person you are filing on your taxes, including any dependents. 

You'll need proof of income and expenses and other documentation. Bringing along everything you need when you go get help with filing your taxes can help you avoid delays and issues. Keep sensitive documentation handy, such as W-4s, I-9s, and any charitable donations you’ve made. 

Try to keep track of any IRAs and medical funding, such as HSAs, and keep tabs on any new changes to your family, such as a new baby or a change of dependents.

Know When to Hire a Tax Lawyer

Not everyone has to hire a lawyer during tax season, but in some cases, it does pay to seek legal representation. You might need to hire a tax attorney if your tax situation is particularly complicated or if you have ever found yourself working with the IRS, for example. 

If you do think you need to hire a lawyer, make sure they have plenty of experience in helping people with taxes and that they have a good reputation.

Don't Try to Do Your Taxes On Your Own

It can be tempting to try to do your taxes on your own, especially since you might have seen advertisements for do-it-yourself tax software programs or since you might know people who claim that they do their own taxes and that it isn't difficult for them to do. 

However, you should not try to do your taxes on your own. Instead, you should hire a professional tax preparer to help you, even if you aren't going to be hiring a lawyer.

Be Truthful

Lastly, always be truthful when filling out your tax return. This can help you avoid getting audited, and it can help you avoid penalties and even legal issues with the IRS.

It's normal to not know what to do during tax season. However, these tips should guide you, even if you know little to nothing about filing your taxes, so you can go forward with a good bit of knowledge and peace of mind.

How Retirement Can Affect Your Taxes

As you plan for and ultimately begin your retirement, you'll be thinking about the many things you want to do and places you want to see. But to see many of these plans come to fruition, it takes money. 

Though you've been a careful planner for many years, you may not understand just how many ways retirement can affect your taxes. To help you make the right decisions regarding your retirement accounts and taxes, here are some important tips to remember.

Paying Income Taxes

If you assumed paying income taxes was a thing of the past once you retired, you may need to rethink this idea. Should you have income that is not tax-exempt, filing and paying taxes will still be part of your life each year. 

As of the tax year of 2020, if you filed jointly with your spouse who is also at least 65 years old and your income exceeded $27,400, this income could be taxed. Also, if you have income from a part-time job, you may meet the threshold necessary for you to pay taxes.

Maximize Benefits with Roth IRA

Since any contributions you make to a Roth IRA are done so with after-tax dollars, this means any withdrawals you make from this account during your retirement are tax-free. 

By working with a tax preparation expert on this, you can enjoy a steady retirement income without paying income taxes. Be sure to find a professional since handling your taxes incorrectly could result in serious legal consequences.

Take Advantage of Tax Credits

Once you retire, take full advantage of any and all tax credits that are available for you and your situation. For many retirees over age 65, the Credit for the Elderly or Disabled can be very helpful, especially if both you and your spouse are over age 65 and have a lower income.

Self-Employment and Retirement

If after retiring from your 9-5 job you decided to become self-employed, you can take advantage of some deductions regarding Medicare. 

In fact, you can deduct your Medicare Part B and Part D premiums, so long as you do not currently have access to healthcare through your spouse's employer. 

Also, even if you do not itemize on your taxes, you are allowed to deduct your costs for Medicare Advantage or any supplemental Medicare coverage, which could save you thousands of dollars per year.

Since you spent so many years planning for your retirement, it makes sense to do the same regarding your taxes after you're retired. From maximizing your Roth IRA contributions to knowing which tax credits you can take, you'll soon have even more money to spend on the fun things in life.

How to Be Financially Smart With Your Tax Refund

We should be proud of the long-term success when we look back at our finance progress. One should think of spending tax refunds in pleasurable but profitable ways that will relatively give you happiness at some point when we look back. Think about it.

Instead of spending that cash infusion in a way that leaves your finances neutral or even worse off, here are several ways Tax Refund smartly leaves you better off if you want to gain some real momentum with your finances.

1. First of all, pay off high-interest debt

One of the biggest hurdles to overcome if you want to build wealth is High-interest debt. Just remember that it is difficult to get ahead when so much of your payment goes to interest-only if you owe money on credit cards or carry personal loans with high-interest rates. But use your tax refund to repay this debt, you would save yourself almost four years of monthly minimum payments, and monstrous interest payments.

2. Emergency fund savings

Experts have suggested that people should stock an emergency fund with at least three to six months of expenses, even a smaller amount is a good place to start in case of any emergency, so as not to blame one’s self when the bills come. Build an emergency fund is exceptionally essential for your financial health whether you carry some high-interest debt or live a debt-free lifestyle. 

You’re prone to struggle if you face unexpected financial emergencies without an emergency fund such as unexpected home repairs expenses and all the significant unforeseen bills that you can think of. Consider adding your tax refund to the pot if you have a savings account.

3. HAS Contribution –Health Savings Account Contribution

Once you open a health savings account (HSA) which is a tax-advantaged saving account set up specifically to pay for healthcare cost, you’ll be able to deduct contributions up to a certain limit, watch your money grow tax-free, then use your funds for qualified healthcare expenses on a tax-free basis. You can withdraw funds for several purposes if you don’t use up your HSA funds by the time you turn 65, --even to pay for retirement.

4. Self-Investment

Let me remind you that you’re your own greatest asset, so if you receive enough cash in your tax refund to invest in anything, spending that money to improve yourself. And as we may have it, there are several ways you could decide to invest to upgrade your status towards a better income. 

Pursue professional skills or a type of certification that adds values to you. Bear in mind that any investment you make in yourself will likely pay off in the short term and throughout your life and career.

5. Initiate several savings buckets

Starting several different savings accounts can be a smart move if you have competing financial goals and want to save for all of them. Also, commit to weekly or monthly contributions after you might have spread your tax refund across several accounts. You may want to save up for a newer car or update your kitchen. Learn to give yourself a head start toward achieving everything you desire by growing different savings buckets.

Now, it’s up to you to put your tax refund to good use whether it’s a huge or small amount. Also, if you can’t wait to get the money you need, you can always try and to get a cash advance on tax refund. Just make sure that you do your research before making any financial decision!

Checklist For Tax Preparation

Ready or not, it’s time to start thinking about your taxes. Gathering the appropriate documents in advance can speed up the preparation process and help you take advantage of money-saving tax breaks. Here’s a list of items most taxpayers need to file their tax return.

Personal information

• Social security numbers and birth dates for you, your spouse and your dependents
• A copy of your prior year tax return
• Routing number and account number to receive your refund via direct deposit

Income

• W-2 forms for you and your spouse
• 1099-C forms for cancellation of debt
• 1099-G forms for unemployment income, or state or local tax refunds
• 1099-INT, 1099-DIV, 1099-B forms for investment or interest income
• 1099-MISC forms for independent contractor income
• 1099-R forms for distributions from IRAs or retirement plans
• 1099-S forms for sale of property income
• SSA-1099 for Social Security income
• Alimony received, paid
• Income and expense from a business
• Income and expense from rental property
• Miscellaneous income: jury duty, gambling/lottery winnings, scholarships, Medical Savings Account (MSA), unreported tip income, prizes and awards

Expenses

• Forms 1098 for mortgage interest, points and private mortgage insurance
• Form 1098-E for student loan interest
• Form 1098-T for tuition paid
• Federal and State estimated tax payments
• Medical and dental expenses (including medical mileage, long term care health insurance)
• Real estate and personal property taxes
• State and local taxes
• CASH and NON-CASH charitable donations (including mileage driven)
• Casualty and theft loss (only for federally declared disasters)
• Gambling losses to the extent of winnings
• Child care costs including care provider identification
• IRA contributions
• Qualifying energy expense for home improvements
• Receipts for classroom supplies (educators in grades K-12 only)
• Receipts for moving expenses (members of the military only)

Other

• Form 1095-A, Health Insurance Marketplace Statement
• 1095-B, 1095-C Health Insurance Verification Form

ezTaxReturn.com is the fastest and easiest way to do your taxes and get the biggest possible refund, guaranteed.

Taxes 2018: 4 Ways to Make the Process Seamless and Simple

As the deadline to file your taxes draws closer and closer, you might find yourself panicking, wondering how you’ll ever complete your taxes on time. Taxes can be quite challenging as you go back over an entire year of financial transactions, many of which may have happened several months ago. 

Fortunately, with the right planning and advice, you can be well on your way to having your taxes filed quickly and easily.

Prepare in Advance

The best way to make your tax preparation easy is to prepare everything you’ll need in advance. It might be tedious if you haven’t had a chance to keep track of tax receipts throughout the year but it’s much better than missing something that ends up shorting you on your refund or getting you audited. 

Go through all of your bank statements, earnings reports, online transactions, and loose receipts to look for anything which might be applicable to your tax return. Even if you’re not sure, go ahead and set the receipt aside so you’ll know right where it is if you do need it. 



Then, as you begin to prepare your return, you can work through the receipts on the fly to have the correct figures for each form.

Ask Questions

If there’s anything on your return that you’re not absolutely sure about, be sure to ask someone who knows. Whether you do an online search or consult the knowledge database associated with a tax preparation program, it’s likely the answer to your question is already out there. 

If not, find a way to ask your question and be sure it’s answered to your satisfaction before you complete the form the question was in regards to. Again, it’s better to take the extra time to have your question answered than to guess and be wrong.

A Hired Hand

By far, the best way to ensure your taxes are done quickly, easily, and correctly is to hire a CPA to do your taxes for you. CPAs understand all the laws concerning your tax return, so you can rest assured that you’re getting your maximum refund without doing anything that could cause you trouble down the road. 

Many a professional CPA offer guarantees so that if you do run into trouble, you’ll have someone to assist you, rather than trying to fight it alone.

All at Once

Whether you do your taxes yourself or hire someone else to do it, be sure you work to get your return entirely completed in one sitting if at all possible. If you start to do it over a long period of time, you may forget progress you have already made, potentially leading to costly mistakes. 

Not only that, but if you’re like most people, taxes aren’t the most fun way to be spending your time, anyway, so spending as little time on it as possible will lessen the misery you have to endure.

For all the info collecting and researching you have to do to get your taxes completed correctly, remember that there is a finish line to the process. 

There will be a day when you’re finally able to submit your return and maybe even get a little money back in the process. If you keep this in mind during the tax return process, you’ll be much less likely to be overwhelmed by it so it won’t cause more stress than it needs to.

3 Awesome Tax Apps for Android

Taxes (Photo credit: Tax Credits)

When it gets closer and closer to tax time, stress comes into play more and more. Everyday nearer to the deadline just means more paper work, more digging up financial records and receipts, more hassle from the man. Sometimes it gets to be too much. Some people even bypass all the stress by hiring tax preparation professionals to do all the work for them, but unfortunately some people do not have the money to do that. But, with the way technology has advanced, preparing taxes has perhaps not been any easier than it is now. With the use of an inexpensive, or even entirely free, tax app that is compatible with your smart phone and personal computer, preparing taxes can be a breeze- no professional help needed. 

The best tax apps are intuitive and easy to learn and use. Some offer a no frills approach, while others go deep into the information and get you the best results. In the end, it all really depends on what kind of taxes you are looking for- whether you are going for a complicated tax filing, or whether you are just looking for the simplest solution available to you. The Android phone in particular offers a wide variety of tax apps that can ease the stress of tax season and make your life a much more enjoyable experience in the process. Here are some of the most awesome tax apps available on the Android: 

Awesome Tax App #1. TaxAct Central 

This app will transfer information automatically from your personal computer to your Android phone, and vice versa. Versatility is the name of the game when it comes to the TaxAct Central app for the Android. It provides you with a checklist of everything you need to get done before the tax return deadline, lets you check the status of you return, has a tax calendar with live updates and reminders, a tax glossary that defines terms for you and many more very useful features. 

Awesome Tax App #2. TurboTax SnapTax 

TurboTax is one of the leading names in the tax preparation business, and for good reason. This app allows you to take a picture of your w2 form and submit it electronically without all the hassle. Then it just asks you a few questions, and just like that your tax return is filed. 

Awesome Tax App #3. H&R Block Tax Central 

This app will pretty much answer any and all questions you have in regards to your personal taxes, tax law and tips on how to prepare your taxes properly and efficiently. 

Calvin H. works as a full-time freelance writer. His work can be read on numerous news and arts blogs, community newspapers in the Pacific Northwest region of the country, lifestyle magazines and on various web forums. The freelance lifestyle makes for a messy tax season, which is why he uses these apps as much as possible when the deadline looms largest. Click here to learn more about what software solutions Powered by Sharefile can do for you.

Handy Tips on Effective Tax Returns

taxes (Photo credit: 401(K) 2012)

After the back to back financial slumps in and after the year 2008, the structure of the world economy has greatly changed. There are millions all over the globe, who do not have a proper credit history. Hence it becomes a difficult task for them to get a loan. Besides getting the loan, one also needs to make sure that they manage their taxes in a proper way. In this article we will provide the correct tax planning tips that will help one to manage their taxes correctly.

Possessing the correct information on Taxes

Having the correct knowledge of the tax that you need to pay is the most important thing. There are various kinds of tax that one needs to pay such as local tax, federal tax, income tax and others. Often it is found that one finds it difficult to understand the nature of the tax and how much exactly they should pay. In such cases it is a beer idea to hire a professional who has a fair idea in tax returns. Such professional will also be able to help you to find ways to save on your taxes. There are numerous ways in which one can save on their taxes using legal methods.

Maintaining a Record of the transactions

Keeping a record of the tax payable is an effective way of managing your tax payments. That way you will not lose track of the amount of tax that you need to pay and the time at which you need to pay it. Many a times it is found that individuals inadvertently skip their tax and eventually end up paying more. Maintaining a folder or a file will help one to keep abreast of the tax returns that they need to make.

Hiring a Professional Tax Consultant

Hiring a professional tax consultant is of utmost importance. The entire scope of tax returns is huge and it is virtually impossible for an individual to get a proper idea of it. There are numerous ways in which one can benefit by hiring a tax consultant. The most important benefit of hiring professionals is that, they will be able to help you in saving money on your tax. Moreover they will also be able help you to easy ways of tax return.  Hence resorting to the help of a professional is certainly a great way to manage your finances.

On a Concluding note

On a concluding note it can be said that in order to manage your finances in the best possible way, you need to keep in mind all the above mentioned points. A recent study has shown that many individuals lose thousands in penalties for not paying their tax on time. Hence you should consider hiring a consultant to manage all the aspects of tax return. There are many tax consultants out in the market. Make sure that you choose an experienced one to address your needs.

Author’s Bio: Alisa Martin is a freelance writer, professional blogger, and social media enthusiast. Her blog Money Exchange Rates focuses on Finance bloggers. You can follow her on Google+

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• A Quick and Easy Guide on Tax for Charitable Donations (50plusfinance.com)
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Does Your Tax Preparer Have the Proper Credentials?

Taxes (Photo credit: Tax Credits)

As we approach the end of the year, many people are starting to prepare for income tax season. Whether you prepare your own taxes or have a professional do it you need to gather the necessary documents. 

I use an accountant to do my taxes. I used to do my taxes myself but they became so complicated I hired an accountant. It's not cheap but I can feel sure they are done right. The last thing I want to have is any encounters with the I.R.S.

All individuals who prepare tax returns for compensation must have a preparer tax identification number (PTIN). This requirement generally applies to all attorneys, accountants, and enrolled agents who prepare returns, as well as to registered tax return preparers who are authorized by the IRS to prepare returns.

In order to become a registered tax return preparer, an individual must pass an IRS competency examination. The PTIN requirement also applies to “supervised preparers” who do not and are not required to sign returns, but who are employed by an attorney or CPA firm and who prepare returns under supervision.

Enrolled agents and registered tax return preparers are subject to continuing education requirements set by the IRS, while attorneys and CPAs are subject only to continuing education requirements (if any) required to maintain their professional credentials.

What is an Enrolled Agent?

Enrolled agents (EAs) are the only federally-licensed tax practitioners who both spe­cialize in taxation and have unlimited rights to represent taxpayers before the Internal Revenue Service. These tax specialists have earned the privilege of representing taxpay­ers before the IRS by either passing a stringent and com­prehensive three-part examination covering individual tax returns, business tax returns and representation, practice and procedure, or through experience as a former IRS em­ployee. All candidates are subjected to a suitability check conducted by the IRS.

What are the differences between enrolled agents and other tax professionals?

The enrolled agent is the most expansive license IRS grants a tax professional. Enrolled agents are generally un­restricted as to which taxpayers they can represent, what types of tax matters they can handle, and the IRS offices before which they practice.

Unlike attorneys and CPAs, who may or may not choose to specialize in taxes, all enrolled agents specialize in taxa­tion. While CPAs and attorneys are licensed by the states, enrolled agents and registered tax return preparers are fed­erally licensed. Registered tax return preparers must pass a basic, one-part exam and complete a minimum 15 hours of continuing education per year. They do not have the unlimited representation rights held by enrolled agents, CPAs and attorneys. The enrolled agent license is the highest credential the IRS issues.

The advantage of working with an enrolled agent lies not only in the depth of experience and understanding of how to prepare a tax return, but the knowledge of tax law that may be used to represent taxpayers before the IRS. If you get a letter from the IRS, or worse, are audited or are the target of a collection action, your EA can speak directly to the IRS on your behalf.

How can an enrolled agent help me?

Enrolled agents advise, represent and prepare the tax re­turns of individuals, partnerships, corporations, estates, trusts and any other entity with tax reporting require­ments. EAs prepare millions of tax returns each year and their expertise in the continually changing field of taxation enables them to effectively represent taxpayers audited by the IRS. In addition to tax preparation and tax representa­tion, many enrolled agents offer other business-related ser­vices which may include:

• Bookkeeping
• Financial planning or budgeting
• Payroll services
• Financial statement preparation
• Mortgage assistance

Are enrolled agents required to take continuing professional education?

In addition to the stringent testing and application pro­cess, the IRS requires enrolled agents to complete 72 hours of enrolled agent continuing education every three years to main­tain their licenses. The National Association of Enrolled Agents (NAEA) raises the bar even further in that its members are required to complete at least 90 hours in a three year period.

What are the key points to remember when hiring a tax professional?

Your tax needs are best served by an enrolled agent. How­ever, no matter who you hire there are certain things to keep in mind.

• Always use a qualified professional to prepare your return.
• The preparer should always sign the return and include their Professional Tax Identification Number (PTIN).
• Beware of preparers who encourage you to lie or otherwise modify your information in order to get a bigger refund.
• The taxpayer is responsible for what’s on a tax return.
• Enrolled agent continuing education requirements are met.

Reputable preparers will ask to see receipts and will ask multiple questions to determine whether ex­penses, deductions and other items qualify. By doing so, they are trying to help their clients avoid penalties, interest or additional taxes that could result from an IRS examination.

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Walmart Offering Free Tax Preparation

Image via WikipediaStarting this week, free preparation of simple tax forms will be made at over 3,000 Walmart Stores nationwide. Walmart is partnering with H&R Block Inc. and Jackson-Hewitt Tax Service Inc., to set up kiosks inside its stores where customers can have their tax returns completed by trained preparers.

Last year, H&R Block offered free preparation of 1040EZ forms. To retain market share, H&R Block has offered this free service to keep customers coming through it's doors. The company had been struggling over the last few years and this strategy has worked well to keep H&R Block in the fore front of tax preparation.

H&R Block will only offer their free preparation of 1040EZ forms at Wal-Mart through Feb. 29. Block will have kiosks in about 250 Wal-Mart stores. The Feb. 29 cut off point is not much of a inconvenience because the Internal Revenue Service has reported that 40 percent of the 133 million individual returns filed were submitted before the end of February.

Jackson-Hewitt will provide free preparation of the simple forms throughout the tax season at about 2,800 Wal-Mart stores, up from 2,000 last year. Some of its retail outlets may also offer free 1040EZ prep, but doing so is not companywide policy.

While the ways to receive your refund are still the usual ways: direct deposit into a bank account or to a prepaid card, or a mailed check. Direct deposit has gained popularity because it shortens the period to a ten day time period. The I.R.S reported that last year 74 percent of refunds were sent via direct deposit.


For those that are bank less, Walmart is offering prepaid cards that the refunds can be deposited onto. There are fees but if the refund is over $1,000, then no fee is charged. If you have a I.R.S. refund check Walmart is happy to cash it for a charge of $3 for checks up to $1,000 and $6 for checks that range above $1,000.

Walmart has made filing the average tax return very simple and convenient for those that have a simple return. Thanks Walmart.