Tips for a Successful Tax Season
By Jim Glass, JD
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The IRS says it will start accepting and processing 2017 tax returns on January 29 and expects to issue nine of 10 refunds within 21 days. To get the fastest refund possible, file electronically and request direct deposit of the refund amount. The IRS says it won't start processing paper returns until mid-February, and requesting a mailed paper check adds more time to processing and delivery.
The due date for 2017 returns is April 17, 2018, since April 15th is a Sunday and the 16th is Emancipation Day, a legal holiday in the District of Columbia.
Time for a tax advisor
Surveys show that many more Americans prepare and file their tax returns themselves using tax preparation software, or "by hand", than use a professional tax advisor.
But this may not be the year to do that. With the new Tax Cuts and Jobs Act revising the entire tax law from the start of this 2018, this year's filing season objective should be not just to prepare and file your 2017 tax return, but also to update your tax planning going forward. The process of preparing your 2017 return presents an opportune time to review your tax situation line-by-line in light of the new law to find new and better tax strategies for the future. Waiting until you prepare your 2018 return next year to discover what you should have done at the beginning of this year may prove costly.
Finding a tax professional
Say you are one of the many taxpayers who until now prepared your tax return on your own but now wish to review your tax situation with a tax professional. How do you find one?
One excellent way is by a referral from your financial planner or another professional you already employ. Remember that your tax advisor will have access to confidential information about you and your family, investments and business. A personal referral from a professional you already know and trust can give you the confidence you need. It's also important that your tax advisor have a good working relationship with your financial advisor and other professionals.
But even so, you will want to check a prospective tax return preparer's professional bona fides to be sure you will receive all the services you may need. The first thing to check about a candidate tax return preparer is his or her Preparer Tax Identification Number (PTIN). An individual must have a PTIN to legally prepare tax returns for pay, so lack of one is an immediate disqualifier.
You will also want to know that if your tax return is audited or another problem arises with it, your tax professional who prepared the return will handle this problem with the IRS for you. While anyone who meets minimal requirements can obtain a PTIN, it takes more to qualify to represent clients before the IRS.
Certified public accountants (CPAs), attorneys and enrolled agents can represent any client before the IRS in any situation: through audits, collection disputes, and the full appeals process. Preparers with only a PTIN have much more limited ability to represent clients. CPAs and attorneys must meet education and professional standards set by their state licensing boards, while enrolled agents must pass a challenging IRS certification exam (many enrolled agents are former IRS agents themselves).
The IRS web site can help here. Go to IRS.gov and in the search box enter "Choose a Tax Professional." You'll find detailed information about preparer credentials and qualifications, as well as a national directory of preparers that is searchable by both location and qualifications.
Correcting past mistakes
People who have prepared their own tax returns are more likely to have made mistakes in past years than those who had their returns prepared by a professional. Finding these mistakes is a good reason to have your new tax preparer review your old returns, as it may more than pay for itself through tax savings that result.
If you've underpaid tax in the past, generally the IRS has up to three years after a return's due date or filing date, whichever is later, to assess tax on it. But when gross income is underreported by more than 25%, the limit is six years. There is no time limit in cases of fraud, willful tax evasion, or when no tax return was filed. Correcting errors voluntarily can sharply reduce tax penalties compared to if the IRS finds them first.
On the other hand, if you overpaid taxes in the past you can claim refunds on returns filed up to three years back. That, plus a refund for 2017, could give you as many as four refund claims by April 17 or earlier -- a happy start to the new tax year.