While established tax preparers will be putting their tax software into overdrive this season, we’d like to take this opportunity to talk about the importance of NOT using tax software as a student learning to prepare taxes.
Why? Here’s why we assign students paper tax returns to file and encourage them to learn how to prepare by hand before using tax software.
You Have to Learn First
You know that old adage “You have to learn to crawl before you can walk”? That’s pretty much true for learning anything new. For tax preparation, you need to learn, in depth, how tax preparation is done without having a program guide you. If you use tax software when starting out, the program does the work and you are not learning what you need to learn – which is tax law and the flow of a tax return.
The flow of a tax return can only be learned and understood by going through the process manually (the hard way). For example, before Form 1040 can be completed, the completion of other forms may be required. As those forms are completed, they too, may require the completion of additional forms. So you need to understand how each form reports back to the others and ultimately to Form 1040 in order to accurately complete the return.
You Can’t Always Trust Tax Software
Preparing returns by hand aids in preventing errors when entering information into tax software.Software is developed by humans, and humans make mistakes. So chances are, your tax software isn’t always correct. Knowing how to prepare a return by hand aids in the checking process to ensure the return is flowing correctly and that totals are reported on the correct forms.
Tax software programs also don’t always ask all the right questions – which means you could miss something along the way. You could also end up entering information in the wrong places if you don’t have a firm understanding of the tax law or the flow of forms and are relying on tax software to know that for you. The result in both situations would be an incorrect return that you may not even notice if you don’t know the tax law.
In addition to all of this, sometimes certain tax forms are not available in a program.
It Makes You a More Competent Preparer
Clients want a preparer to be able to explain how their return was prepared. If you don’t understand the flow of a tax return, you can’t explain how the return was prepared.
Without a good base of understanding you could miss things. Once you have a good understanding, then you can add tax software.
The Best Way to Learn
Have we convinced you that you need to prepare returns by hand so that you understand both the flow of a tax return and the tax law itself? The best way to learn is to prepare tax returns manually while going through a tax course. By applying the knowledge learned in a tax course in this manner, you can internalize it. After completing the tax course, you can be introduced to whatever tax preparation software you choose and will become a competent tax preparer given practical experience.
Thinking about learning tax preparation or need to train new employees? Check out our Chartered Tax Certificate Programs.
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