Are Tax Preparation Services Worth the Cost?

Are Tax Preparation Services Worth the Cost?

Katie Macomb |Aug 13, 2019

Which Route Will You Take Come Tax Season?

Tax preparation is a necessary, but sometimes complicated and borderline painful, annual task for most Americans. Some will take all of their records to a tax preparer, while others will attempt to file on their own or through online software or another similar service.

eFile.com, an authorized IRS e-file provider, reports that more and more people are filing their own taxes each year, instead of using tax professionals. Roughly 56 million people filed their returns as “self-prepared” for the 2018 tax year. However, still another nearly 72 million people utilized a tax professional to have their taxes completed.

Many people choose to use online software, free tax preparation services like VITA or TCE, or have friends or family do their taxes instead of utilizing a tax professional for the simple reason that it saves them money. Tax preparation services can be very costly. Even if you have a relatively simple tax return, professionals can still charge hundreds of dollars to do your taxes for you.

However, using a tax professional helps ensure you are taking full advantage of available deductions and credits, and gives you a helpful go-between with the IRS if there are any problems or concern areas. They can also answer any questions or concerns you may have about your return.

Even with all of the benefits that tax professionals provide, is the cost worth it? Do tax preparation services add that much value?

What Are Tax Preparation Services?

Tax preparation services are more than just using tax software like TaxCut or TurboTax. It involves actually speaking to a human to have your taxes done. This can be through a tax attorney, tax preparation company (like H&R Block or Liberty Tax Service), or local tax professional firms that employ CPAs and other similar professionals.

In general, the tax preparation process with a tax professional uses the following steps:

  1. Gather all of your supporting documents for your taxes, set up an appointment with your tax professional, and go in to talk through your tax situation.
  2. The preparer will work through your tax forms on your behalf.
  3. The preparer will contact you if they have any questions about the documentation you provided or if they are missing information as they go through the process. They may also reach out to discuss potential options for tax savings that you might not have noticed.
  4. Once the return is prepared, your preparer will often set up another appointment to go through your draft forms with you.
  5. Once you have approved the form and signed off, your tax preparer will file your tax forms on your behalf.

Your tax professional will sometimes pay the filing fee for you as part of their overall service fee or charge it back to you as part of their final bill.

Tax professionals often charge for their services at a flat-rate fee. The fees vary a great deal from person to person because they often depend on how complicated your tax return is and how much time it will take to prepare. In many cases, a tax professional cannot tell you for certain how much preparing your taxes will cost until after the process is completed. They may be able to give you an estimate, but these are not always accurate.

Using a tax preparation service varies from using a tax preparation software because you have a live person actually doing the preparation for you. When you are using tax software, you are going through the process of preparing your return yourself.

When Do I Need to Use a Professional to Do My Taxes?

There is really no easy answer to this question. In short, you are never required to hire a tax professional. You can always prepare and file your taxes on your own. However, in some circumstances, having a professional look at a complicated tax situation is a good idea to avoid the time, hassle and potential for costly mistakes.

You should think about the following questions as you consider whether getting a tax professional is a good idea for you.

Are You Unsure About What Deductions, Credits and Other Benefits You Should be Taking?

Perhaps the number one reason people retain professionals is that they are not confident in their ability to do their own taxes. They may have no idea where to start, or they may simply be unsure of which tax benefits are available to them. Getting a tax return wrong has stiff penalties, including suffering through an audit and paying penalties and interest on any underpayment of taxes.

A tax professional does this type of work literally every day, and having that experience is extremely helpful. They also have tools and resources available to them that the average person does not.

If you are not confident or comfortable going through the process on your own, having a professional may be a good idea. They can also provide insights on tax savings that you did not realize were available to you.

You Do Not Have Much Time to Devote to Preparing Your Taxes

Doing your own tax preparation takes time. This is especially true if you do not have a base-level understanding of how taxes work or what savings might be available to you. You need to educate yourself about your options at the outset, and that is a time investment.

Once you teach yourself, however, that information will stay with you from year to year, and the process will get easier. Nonetheless, tax laws change, and you must familiarize yourself with the new requirements as they are altered each year.

If you do not have the time or energy to devote to this process, hiring a tax professional may be a good idea for you.

Are You Interested in Taxes, Curious or Willing to Learn?

Some people are genuinely interested in taxes and the tax process, and preparing their own taxes is interesting for them. They may also like the control and in-depth level of understanding their own finances that comes along with tax preparation.

Others do not have this same curiosity and just want to get the process out of the way. Your personality will have a lot to do with whether you are willing to prepare your own taxes.

Are You Willing to Spend the Money on a Tax Professional?

Tax professionals provide a unique service, and that service can be costly. Very complex tax returns can cost thousands of dollars, while the average tax preparation fee is around $176, according to the National Society of Accountants (as of 2017).

These fees vary throughout the United States and based on your tax situation. If you have a sole proprietorship and need a Schedule C, for example, the average fee increases to $457. Taxes prepared on the west coast and in the New England region are also about $100 higher, on average, compared to those in, for example, the Midwest.

For some taxpayers, paying any preparation fee is simply not an option for their financial situation. For others, the idea of saving money generally pushes them to file on their own. Your individual situation will dictate whether investing in a tax professional is the right option for you.

While there are many benefits to using a tax professional, it is not an option for everyone. It may not even be necessary for many taxpayers. Ultimately, your personality, willingness to invest the time and effort, and tax situation will dictate whether using a professional is a good idea for you.

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5 of the Best Auto Insurance Companies

Eric Bank | August 13, 2019

Protect Against Collisions and More If you drive a car in the United States, liability insurance must cover it. This type of policy pays for medical and property damage resulting from a vehicular accident. You can also purchase comprehensive and collision insurance to cover other costs. These additional coverages help protect the value of your car should it be damaged. If you are calculating how much it will cost to buy a car, you need to take into consideration the cost of insurance as well. In this article, we’ll review the basics of car insurance and the best auto insurance companies in America, including costs, pros and cons. This is a brief introduction to automobile coverage. Liability Coverage When an accident occurs, liability insurance covers you, household members and authorized drivers for the costs associated with property damage and bodily injury. It covers the cost to repair or replace property damage that you caused. [youmaylike] You are also covered if you cause the bodily harm or death to someone else while you are driving the car. This includes medical expenses, loss of income and specified legal defense costs. Collision Insurance If you are involved in a collision, this type of insurance will help pay for repairing or replacing your vehicle. If the collision is your fault, the coverage may extend to other damaged vehicles involved in the accident. States do not mandate that you buy collision insurance, but your lender or car dealer will if you finance or lease the car. Policies offer a range of deductibles, which is how much you’ll have to pay for repairs before the insurance kicks in. Larger deductibles lower the policy premiums but expose you to more out-of-pocket expenses if a collision occurs. Comprehensive Insurance Comprehensive insurance covers damage to your car that occurs for reasons other than a collision, including theft, fire, vandalism, weather and natural disasters. This coverage is often required if you finance your automobile. You can add riders to this insurance to provide coverage of additional costs, including auto towing, glass repair, daily rental while your car is in the shop and emergency roadside service. As with collision insurance, you can set the deductible on your comprehensive insurance policy to cut your premium costs. Gap Insurance If your car is severely damaged in an accident or other incident, you might find that your comprehensive and collision damage won’t provide enough coverage to pay off the amount you owe on the vehicle. Many policies pay only the fair market value of a totaled car, which might be only 80% of the amount you owe. You can buy additional insurance to plug this gap and ensure you can pay off the car loan in full if the vehicle is destroyed or stolen. Normally, car leases require you to buy gap insurance. If you pay cash or pay off your loan, you can save money by avoiding or dropping gap insurance when no longer needed. Top Five Auto Insurers These five insurers all offer full coverage policies and many additional services. Amica Amica is a superstar among car insurers, winning accolades from Consumer Reports and J.D. Powers. It’s known for handling the claims process smoothly. The average annual cost for full coverage: is $1,360. Pros You can have your car repaired at any body shop, without restrictions. Offers a premium package which, for an additional cost, provides full glass coverage, rental coverage, good driving rewards and identity fraud monitoring. Superior financial stability rating from A.M. Best. Cons Missing some discounts, such as military, low-mileage and prepay discounts. Must speak on the phone to get a quote. Sparse website when it comes to customer education. State Farm State Farm is the country’s largest multi-line insurance company. It excels in customer service and regularly garners high marks from customers. The average annual cost for full coverage: is $1,337. Pros Superior financial stability rating from A.M. Best. Excellent online quote tool, getting customers a quote in as little as five minutes. Easy claim handling and top service from its more than 18,000 agents and its easy-to-use mobile app. Cons Doesn’t offer coverage for new car replacements or uninsured motorists. Missing prepayment and automatic payment discounts. The Hartford While only 11th in size, The Hartford is big when it comes to policy options. It offers rates based on your actual driving as well as full replacement of new cars when destroyed shortly after purchase. Average annual cost for full coverage: N/A. Pros Solid benefits, including superior roadside assistance and towing programs. High marks from customers for their purchase experiences. One of the few insurers with mechanical breakdown coverage for out-of-warranty repairs. Cons Mediocre service interaction according to J.D. Power surveys. Sparse online learning materials. Geico Geico is the second-largest U.S. car insurer. It is a favorite among tech-savvy geeks who appreciate the insurer’s mobile app and excellent online service. The average annual cost for full coverage: is $1,627. Pros Geico offers plenty of ways to save, such as multi-vehicle, driving history and vehicle safety equipment discounts. Special savings for active and retired military members and federal employees. Full-featured mobile app for getting quotes, buying insurance, managing your policy, submitting claims, summoning roadside assistance and making payments. Cons Human help may be in short supply, as just about everything is handled online. No gap insurance is offered. USAA No insurer matches USAA for service to military members. Unfortunately, it's only available to active service members, their families and retired veterans. Average annual cost for full coverage: $896. Pros Superior financial stability rating from A.M. Best. Top-ranked purchase experience score from J.D. Power. Cons Missing gap coverage. Doesn’t offer interior vehicle coverage or new car replacement coverage. Limited availability. The Right One for You Competition in the insurance industry helps drive down prices and prompts insurers to offer money-saving features. For example, your carrier might reward you for a safe driving record and for having a long-term relationship with the insurer. The right insurer for you is highly rated for service, offers the exact coverage you want and does so at an unbeatable price. You should always gather multiple quotes before selecting an insurer, and make sure you get credit for all applicable discounts.

How to Apply for a Business Credit Card

Myles Leva | August 13, 2019

Paying for Business Expenses Applying for a business credit card is something a small business should seriously consider for itself. Business credit cards can provide a range of benefits to a business. They allow a company to build up credit for better borrowing conditions down the road. They’re also quite easy to apply for. In this article, we’ll go over how to apply for a business credit card and other important points to note. What Is a Business Credit Card? A business credit card is a credit card that is intended for business expenses. These cards are not meant for any individual’s personal use, but they are available to businesses of all sizes. What Is a Business Credit Card Used For? Business credit cards are meant for business expenses, and as such, they come with several perks that you wouldn’t get with a normal credit card. Business credit cards typically have far higher credit limits than normal cards, but they are also harder to qualify for. [youmaylike] As a business phenomenon, business credit cards vary their offers greatly, and certain cards are meant for certain businesses. They are also highly customizable when it comes to individual payment terms. Businesses don't always have consistent incomes like individuals do, and business credit cards handle this problem. These cards are used to gain access to a long line of credit, to control employee spending on business expenses and more. One of their other common uses is to make accounting easier, as putting all business expenses on one separate account makes reporting to the Internal Revenue Service easier. In the end, there are many uses for a business credit card. Why Would I Need a Business Credit Card? You might not need one, but if you run a business, you’ll be leaving money on the table by not at least looking into them. Business credit cards can solve many of the problems business owners face. If you need employees to make purchases for the business, a business credit card is the safest option. These cards can be given to authorized users, a status you can easily give to any of your employees. From here, these cards make it easy to monitor employee spending and spot any discrepancies. You can attach customized user privileges to each card to limit spending and place limits on where the card can be used. As mentioned, if you feel like your credit is too limited, business credit cards are a sure way around low credit. According to the American Bankers Association, the average monthly payment on a business credit card is twice as high as the average payment on a normal one. If you’ve found yourself annoyed with the Internal Revenue Service over the complicated reporting processes for business owners, you’re not alone. This is where a business credit card can solve another problem. Simply handing over your business credit card statements to your accountant will make them love you. It will also provide them with the information they need to predict future spending. Another great use for a business credit card is lifting your liability for debts. Liability for credit card debt is determined by the liability offered by the card. If you’re using a personal credit card for business expenses, you are liable for all debts. On the other hand, if you use a business credit card with commercial liability, your business is liable for any debts, which changes the game. Keep in mind that some cards offer joint liability, which leaves both you and your business liable for any debts. Make sure you know what you’re getting into before signing any paperwork. Lastly, just as personal credit cards offer rewards programs, so do business cards. The main difference here is that business credit card rewards are tailored to your business needs. How to Apply for a Business Credit Card Before you apply for a business credit card, you should make sure you’re eligible. For the most part, you only require the following to be able to apply for one: A legal name for your business. A business structure to apply with, such as a Limited Liability Corporation. An explanation of the nature of your business. You’ll typically be given a list of industry types to choose from. A tax ID number issued by the Internal Revenue Service Your roll in the business you’re representing Various business/financial information including: Annual revenue. Number of employees. Length of time in business. Estimated monthly expenses. If you have this information ready, you can apply for a business credit card. At this point, it would be wise to shop around and find the best option for your business. Your decision on the business credit card you choose will have larger ramifications than your choice of a personal credit card. Applying for a business credit card is much the same as applying for a personal one. There are a few differences, but the main thing to remember is that business credit cards are taken more seriously than normal ones, so you’ll have to face a higher bar of entry. This doesn’t mean getting a business credit card is hard, but it does mean you need to arrive more well-prepared than you normally would. To make things easier, you can prepare for certain obstacles in advance. You may need to sign a personal guarantee that you will pay off any debts. Also keep in mind that if you’re the one applying for a business credit card, and your business doesn’t already have one, they will conduct a personal credit check. It may be best to try to optimize your personal credit if you plan on applying for a business credit card in the future. Some Options at a Glance Here are some of the most popular options for small business credit cards: Chase Inc Business Preferred This is a great option for a few reasons. With the Business Preferred card from Chase Inc, you get 80,000 ultimate reward points when you spend $5,000 with the card in the first three months. The card also provides generic, but highly useful benefits for business owners. Business Platinum Card from American Express The Business Platinum is ideal for businesses that spend a lot on flights and travel. This card offers numerous rewards on flight and hotel expenses and makes sure you get something serious back if you use it for these expenses. Chase Inc Business Unlimited The Chase Inc Business Unlimited offers unlimited 1.5% cash back. While we’ve said enough already, they also offer several other perks that are overshadowed by their first one.