Common Mistakes New Tax Preparers Make and How to Avoid Them

Starting a career as a tax preparer can be exciting, but it also comes with its challenges. New tax preparers often face a steep learning curve, and even small mistakes can have big consequences for both the preparer and their clients. Understanding and avoiding these common pitfalls can set you on the path to success. Here’s a guide to the most frequent mistakes new tax preparers make and how to avoid them.

1. Misinterpreting Tax Laws

The Mistake: One of the most common errors new tax preparers make is misinterpreting or misunderstanding tax laws. Tax laws are complex and frequently updated, which can lead to errors in tax filings if you’re not careful.

How to Avoid It:

Stay Updated: Make it a habit to stay informed about the latest changes in tax laws. Websites like the IRS and tax news outlets are great resources. For example, go to https://www.irs.gov/newsroom/tax-updates-and-news-from-the-irs and you can sign up for automated updates directly from the IRS.
Use Reliable Resources: At In and Out Tax, we provide access to accurate and up-to-date information through our In Out Tax Pro software. Our software is designed to help you navigate the complexities of tax laws with ease.
Continuing Education: Engage in regular training sessions or continuing education courses to deepen your understanding of the tax code. At In and Out Tax, we’re committed to supporting you throughout your entire tax journey. We offer approachable customer service to help you navigate any challenges and ensure you’re always up-to-date with the latest tax laws and best practices.
Leverage your peer network: Do you have a coach or a mentor? Whether you’re just starting out or looking to expand your knowledge, we’re here to help every step of the way. Besides chat groups online, who do you go to for advice when you run into unfamiliar situations? At In and Out Tax we are designed to provide you with a personal human touch. When you are with us, you can pick up the phone and a live person can help direct you to the right answers!

2. Overlooking Deductions and Credits

The Mistake: New tax preparers might miss out on valuable deductions and credits that could benefit their clients. Overlooking these can result in clients paying more taxes than necessary.

How to Avoid It:

Thorough Client Interviews: Conduct detailed interviews with clients to uncover all possible deductions and credits. Do you have a customer intake form that provides you with the relevant data needed to do the best for your clients? Why reinvent the wheel when we can provide that for you with In and Out Tax.
Use Tax Software: Our In Out Tax Pro software is designed to help you identify all eligible deductions and credits, ensuring your clients get the maximum refund possible.
Stay educated: Be sure to keep up with tax laws and best practices for each tax year.

3. Inaccurate Data Entry

The Mistake: Simple data entry errors, like incorrect Social Security numbers or wrong income amounts, can lead to rejected returns or IRS audits.

How to Avoid It:

Take Your Time: Rushing through data entry increases the likelihood of mistakes. Always take your time to enter information carefully.
Use Software with Error-Checking: Our In Out Tax Pro software includes built-in error-checking features that alert you to potential issues before filing.
Cross-Verification: Verify data by cross-referencing with the original documents provided by your clients.
Input W2 and 1099 income data exactly how it appears in documentation provided to you

4. Poor Record-Keeping

The Mistake: Failing to keep organized records can lead to trouble during an IRS audit or when trying to reference past tax returns.

How to Avoid It:

Implement a System: Establish a systematic approach to record-keeping, including digital and physical filing methods.
Use Digital Tools: In and Out Tax provides tools that allow you to securely store and organize your clients’ tax records electronically, making it easy to retrieve information when needed.
Use Paper Files: While keeping records digitally and in the cloud is very convenient for streamlining your work, also securely keep paper files as a backup, in case problems arise with your digital files. IRS auditors will often want to see your signed and completed paper files.
Regularly Update Records: Don’t wait until tax season to organize your records. Keep them updated throughout the year.

5. Failing to Communicate Clearly with Clients

The Mistake: New tax preparers may struggle with explaining complex tax situations to clients in a way that’s easy to understand, leading to confusion or mistrust.

How to Avoid It:

Simplify Language: Always use simple, clear language when discussing taxes with clients. Avoid jargon that might confuse them.
Foreshadow The Process: People generally like to feel in control and telling clients what your process is helps them understand what happens next, which provides a feeling of comfort and control.
Check For Understanding: Sometimes we think we are communicating clearly, but we could do better. Consider the strategy of asking clients to repeat important information to make sure they understand you.
Be Transparent: Keep clients informed throughout the process. If there are problems, be up front, discuss the situation, provide options and stay on the same page.

6. Not Using Professional Software

The Mistake: Relying on outdated or basic tax software can lead to errors, missed opportunities for deductions, and inefficient workflows.

How to Avoid It:

Invest in Quality Software: Using professional-grade tax preparation software like In Out Tax Pro can significantly reduce errors and increase efficiency, at a low cost. Our software is tailored to meet the needs of both new and experienced tax preparers.
Stay Updated: Regularly update your software to ensure you have access to the latest features and tax law updates. With the cloud-based In Out Tax Pro, no need to worry about updates. That is done automatically for you!

Conclusion

Starting as a tax preparer can be challenging, but by avoiding these common mistakes, you can build a successful and trustworthy practice. At In Out Tax, we’re here to support you every step of the way. Our In Out Tax Pro software is designed to help you confidently navigate the complexities of tax preparation, ensuring you deliver the best possible service to your clients. Remember, besides marketing success in tax preparation comes down to continuous learning, attention to detail, using the right tools, working ethically and leveraging a useful network of peers to help you succeed.