Thinking of changing how you prepare or file your taxes?
Here are some things to keep in mind
This is the time of year when we start gathering information to file federal and state taxes. For most of us, little will change and we’ll do what we’ve done every year. Some people will prepare and submit their own taxes using IRS forms. Others will use software to enter information and submit it electronically. Many people will work with a tax professional who prepares and submits their tax paperwork.
As a Daily Money Manager (DMM) I have clients who have long done their own taxes, but are considering a different approach. For those looking to move away from self-preparation, I’d like to cover a few options as well as possible red flags when evaluating potential help.
The first thing to think about is if you’d like help getting the materials together. While this was second nature for years, it may have become more burdensome, and the materials are less organized than before. An area where DMMs excel is organization. Some people choose to hire a DMM just to collect and organize their tax materials each year.
The next choice is whether to self-prepare or to hire someone else to do your taxes for you. If you choose to do them yourself, there are a couple of options available depending upon your level of confidence and comfort with technology.
Since the IRS is moving toward electronic-only filing and away from paper, those who are comfortable with the forms and instructions can now enter this information on forms online on the IRS website. If your Adjusted Gross Income is $89,000 or less for 2025, then you can file for free with the IRS using a trusted IRS partner who agrees to not charge for federal return. Some partners will also do the state return for free, while others charge for the state return.
Another option for doing it yourself is to work with either an online service or tax software. This can be a useful option if your taxes are straightforward. However, when I used this type of software, I found sometimes it asked me questions I wasn’t sure how to answer. That was when I knew it was time to engage someone else.
If you are considering switching from self-preparation to engaging someone else, there are two categories of tax preparers. First, there are people with limited representation rights. These people have been trained to prepare tax returns, and they sign returns as the preparer, but they have limited ability to represent your return to the IRS in case of an issue. They can basically talk to support reps and IRS agents but only for the returns they prepare. They cannot represent your return for appeals or collection issues.
The other category of preparers has unlimited representation rights. These people can represent you to the IRS in case of any issues and have undergone higher levels of training. The most common is an Enrolled Agent (or EA). They must undergo significant and ongoing training to receive and maintain that designation.
Another common designation is CPA. The CPA is both credentialed by the accounting industry and has undergone tax training. Lastly, some attorneys focus on tax preparation and tax planning and also undergo tax training. The cost is usually lower to work with an EA than a CPA or attorney since the latter two have more than just tax knowledge, experience and training. However, CPAs may have package rates for standard tax preparation that are lower than if they also apply their accounting expertise.
If you are considering hiring a tax professional, here are a few critical items and red flags to watch for:
- All tax preparers need to have a Preparer Tax Identification Number and must sign all tax forms they prepare. Be wary of anyone who prepares but doesn’t sign your forms and then asks you to file them.
- Look for someone who will be available throughout the year. Tax questions (and IRS communications about taxes) can arrive at times other than around the filing deadlines. You don’t want someone who disappears after April 15.
- They should appear in the listings for tax professionals with the IRS. All tax preparers who charge for services must have a preparer tax ID and will appear in this database
Lastly, there are services like tax preparation through AARP or the Volunteer Income Tax Assistance (VITA) and Tax Consulting for the Elderly (TCE) programs. The VITA and TCE programs are both administered by the IRS and work with volunteers who can help with tax preparation. The VITA program is focused on those with lower incomes, disabilities or people with limited English-speaking skills. The TCE program is often provided by AARP volunteers and can help with tax preparation for older adults. They are more familiar with retirement types of income such as social security, pensions, and tax-deferred account withdrawals. There is an IRS webpage that lets you find these volunteers to help with tax preparation.
If you are considering a change to your income tax process this year, keep this guidance in mind.
Thomas Lapp is the owner of Triad Personal Paperwork Services, and spent nearly 30 years in the information technology field prior to starting his DMM business.
