Many happy returns — Tax preparers can help sort through laws, credits, and deductions

For Glen Mitchell of Tax Center, the busy income tax preparation season is beginning. People have received the income forms they need from their employers — and those who are expecting a refund tend to file their taxes earlier than those who will be paying, he said.

  Mitchell and other enrolled agents, take yearly classes to stay on top of the ever-changing tax laws. Having income tax returns professionally prepared can save people thousands in tax credits and deductions they might not know of, he said. Credits for energy-efficient improvements are a maximum of $1,500 for federal, and up to $1,500 for Michigan.

  “The tax code becomes more complex every year — especially this year with so many new tax credits and other rules as the federal government attempts to provide some taxpayers with relief during the economic downturn,” said National Society of Accountants President Robert L. Cross, PA, ABA, and ATA. “With the constant changes and new provisions, it pays to have a professional tracking all the potential tax breaks for their clients, who may miss them on their own. Even one extra deduction or tax credit can more than cover the fee paid to a professional tax preparer.”

 In addition to energy credits, there is the newly modified earned income tax credit, college tuition credits, saver’s credit, deduction for the purchase of a new vehicle, deduction for property taxes for non-itemizers and more, Mitchell said. Michigan also has credits for certain, energy efficient appliances, such as furnaces and water heaters.

  Besides knowing what income tax credits are available, professional tax preparers can look at tax planning for clients. “This is especially important when there are changes in your life,” he said. “Retirement, becoming unemployed, moving, selling assets, becoming self-employed and changing an occupation are some of the many reasons someone should seek a tax professional.”

 In addition, the Make Work Pay Tax Credit reduced people’s withholdings. The idea was to get more money into the economy, Mitchell said. However, having a little less taxes withheld from a paycheck means many people might owe more than they expected. The change in withholding, while small, adds up over a year.

  Small businesses, and those who have moved from one state to another, are among those who can especially benefit from seeing a professional. “It can be very complicated when they move between states,” Mitchell said. “If you’re good at the business doesn’t mean you’re good at doing taxes.” 

 The taxpayer can perform simple tax returns, he said. Software such as TurboTax can assist. However, many people like the peace of mind they receive when someone else prepares their return. In addition, a tax professional can substantially cut the time needed to prepare an accurate return.

 People could also benefit by obtaining tax preparation estimates from more than one preparer, and from different size companies. For example, a recent National Society of Accountants (NSA) survey found tax preparation fees for an itemized Form 1040 with Schedule A and a state tax return averaged $217 at one-person firms, and rose to an average of $245 for firms with three or more staff.