What does a Tax Preparer do?

What does a Tax Preparer do?

For business owners, focusing on financial management can be a little stressful. This is because it requires focus, accuracy and credibility. This might be difficult for business owners to focus on other aspects of their business, that’s why they hire professionals who would manage their accounting. This is also same for individuals who wants a professional that would handle their accounting, especially on filing taxes.  This professional who files taxes is called a tax preparer. But what does a tax preparer do?

Who is a Tax Preparer?

A tax preparer is a professional who calculates, file and sign income tax returns on behalf of the business or an individual. He/she can also represent the taxpayer during IRS examination of tax returns. A tax preparer holds a lot of responsibility as tax-payers trust them personal and other sensitive data of their financials- their income, marriage, children and social security number.

It is important to note that there are many types of tax preparers, so choose which type of tax professional will best suit your needs.


Responsibilities of a Tax Preparer

1. Gather important information from the clients

Before preparing the tax return, the tax preparer must ask first the client regarding the tax form required and if the client owns a business. This is for the tax preparer to be able to identify the client’s annual income, exemptions, deductions and expenses. The tax preparer may also examine the prior year’s tax forms changes if he/she is the one who handled the client’s tax during the past year.

2. Gathering Financial Data

Another responsibility of a tax professional is to collect and discuss the client’s current year financial data, before completing an income tax return. The financial data include income statements such as Form W-2, expense documents, the names and social security number of the client’s dependents and any other relevant forms. These forms are required to be able to determine if there is supporting documents needed to complete the tax return.

3. Completing and filing the forms

In completing the forms, many tax preparers use income tax software to prepare income tax returns. These software programs usually present them with a checklist, which helps the program determine which forms are required to complete the return. For those who are not tech-savvy, tax preparers may use fillable forms from the IRS which perform the calculations automatically. While preparing the forms, the tax preparer will search for tax-saving deductions or credits and they will try to reduce or remove the client’s tax. Once the forms are completed, the tax preparer will advise the client of the tax due or amount of the refund.

In filing the forms, most tax preparers file it electronically. If there is no available software for the tax professional, the IRS offers a free service to file them. Clients who choose to file electronically must present the tax preparer with the previous year’s adjusted gross income and PIN number. For clients who would file the tax return through the mail, the tax preparer must assemble the return, request the client’s signature in the tax return and prepare the envelope.

Hiring a tax preparer is also a great responsibility. A tax preparer should be credible, accurate and must be trusted. With the increasing financial transactions of businesses and individuals nowadays, hiring a tax professional is now becoming a necessity. It ensures a timely, correct filing of tax returns and for businesses, a secured and good financial management.

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