Tax preparation services basically are the services of an accountant, or an independent tax professional, utilized to review tax records and prepare tax forms for individuals and businesses. Tax preparation services fall into two general categories: Individuals’ services and Business’ services. Individuals’ services mainly consist of preparing federal and state income tax forms for individuals, preparing state income tax forms for businesses, and preparing federal tax forms for students and non-residents.
In individuals’ services, taxpayers may opt to have an accountant prepare their federal and state income tax returns and file the forms at the end of the year. In some cases, taxpayers may choose to have the accountant prepare the federal tax forms and file them electronically. Some taxpayers, however, prefer to have their own tax preparer preparers prepare the tax forms and e-filing, thus ensuring accuracy and timeliness. Business owners, on the other hand, use tax preparation services to prepare their business taxes. This includes preparing payroll taxes, ensuring compliance with tax laws, collecting cash taxes and quarterly payments from customers, and making tax-related decisions. Some business owners also prepare annual reports and statements to be sent to management or shareholders.
Both types of taxpayers require different types of services from tax preparation services and tax preparers. Individuals have different needs, but all taxpayers can expect a number of standard services. Individuals need a tax calculator that estimates their net earnings from all sources (e.g., interest, dividends, capital gains, and payroll deductions). The calculator should provide comprehensive information about deductions and standard deductions, as well as provide comparable figures for other taxpayers who meet similar standards. It should allow the taxpayer to vary the level of deductions and take full advantage of tax credits.
Business owners also need a tax preparation service that provides advice about whether a business owner should itemize his/her income or take the standard deduction. Business owners typically file their income taxes at the end of the year, so it is difficult to take the standard deduction. However, it may be helpful to itemize in order to take as many deductions as possible. For some individuals and small businesses, an online calculator that presents both options provides the best advice about taking a complex tax situation and getting through it quickly and easily.
When individuals and small businesses need assistance preparing their taxes, they usually turn to tax preparation services. Taxpayers who hire such services have a number of choices. Tax preparation software allows the taxpayer to prepare his/her own tax forms, print them off, and then send them to the tax preparation service. The service then prepares the tax forms and sends them to the IRS for processing. Many tax preparation services also offer online help, which allows taxpayers to download tax forms and answer the questions they may have about filing their taxes.
Although tax preparation services can be valuable for the average taxpayer, there are also some circumstances when they are not appropriate. Individuals who are self-employed or have other financial situations that make it impossible to prepare their own taxes, such as owning boats, art collections, or other costly properties, should consider talking to a financial advisor before preparing their own financial documents. The IRS will not take kindly to someone attempting to cheat the system. Similarly, taxpayers who own businesses should only work with a tax preparation service if they are confident in their knowledge of how to read business tax forms. Any time someone prepares their own financial documents, they are putting themselves at greater risk for making mistakes that could cost them time, money, and even their business.