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Tax preparers help individuals and small businesses keep the proper records to determine their legally required tax and file the proper forms. They must be well acquainted with federal, state, and local tax laws and use their knowledge and skills to help taxpayers take the maximum number of legally allowable deductions.
The first step in preparing tax forms is to collect all the data and documents that are needed to calculate the client's tax liability. The client has to submit documents such as tax returns from previous years, wage and income statements, records of other sources of income, statements of interest and dividends earned, records of expenses, property tax records, and so on. The tax preparer then interviews the client to obtain further information that may have a bearing on the amount of tax owed. If the client is an individual taxpayer, the tax preparer will ask about any important investments, extra expenses that may be deductible, contributions to charity, and insurance payments; events such as marriage, childbirth, and new employment are also important considerations. If the client is a business, the tax preparer may ask about capital gains and losses, taxes already paid, payroll expenses, miscellaneous business expenses, and tax credits.
Once the tax preparer has a complete picture of the client's income and expenses, the proper tax forms and schedules needed to file the tax return can be determined. While some taxpayers have very complex finances that take a long time to document and calculate, others have typical, straightforward returns that take less time. Often the tax preparer can calculate the amount a taxpayer owes, fill out the proper forms, and prepare the complete return in a single interview. When the tax return is more complicated, the tax preparer may have to collect all the data during the interview and perform the calculations later. If a client's taxes are unusual or very complex, the tax preparer may have to consult tax law handbooks and bulletins.
Computers are the main tools used to figure and prepare tax returns. The tax preparer inputs the data onto a spreadsheet, and the computer calculates and prints out the tax form. Computer software can be very versatile and may even print up data summary sheets that can serve as checklists and references for the next tax filing.
Tax preparers often have another tax expert or preparer check their work, especially if they work for a tax service firm. The second tax preparer will check to make sure the allowances and deductions taken were proper and that no others were overlooked. They also make certain that the tax laws are interpreted properly and that calculations are correct. It is very important that a tax preparer's work is accurate and error-free, and clients are given a guarantee covering additional taxes or fines if the preparer's work is found to be incorrect. Tax preparers are required by law to sign every return they complete for a client and provide their Social Security number or federal identification number. They must also provide the client with a copy of the tax return and keep a copy in their own files.