Six Reasons Why Education on the IRS Tax Code is Essential

Relying on tax software is a slippery slope – one that tax preparers should not fall for. Sure it’s Tax-education-booksconvenient, but nothing can replace a deep knowledge of tax law. The tax law is extremely complicated and there is a lot to know. So much so that the stack of books to the right are materials for teaching just the basics of tax preparation! That’s a lot of knowledge just to prepare taxes for the general public.

As a professional, it’s your duty to have a deep knowledge of the tax law and not rely on tax software. Here are six reasons why education in tax code is essential.

It’s your responsibility

Anyone who prepares a tax return, for payment, has a moral and ethical responsibility to obtain the necessary education to accurately prepare returns, prior to initiating the practice of preparing tax returns.  They also have a responsibility to continue their education, at the minimum, on an annual basis to ensure their knowledge of the current tax laws and to expand their knowledge. 

You need to be able to catch a mistake

Mistakes will happen when relying on software only.  If you don’t understand the tax laws and flow of a tax return, you will not know whether or not the software is transferring totals to the correct pages or if the tax law is being applied appropriately for your client’s circumstances.

Also, tax software companies make mistakes in programming.  If you have no formal tax training, you aren’t going to realize there is a programming issue within the software.

Some forms need to be done by hand

Sometimes a form (or series of forms) need to be prepared by hand to determine if the software is correct in the calculations for the return. Without tax knowledge, there is no way to determine the accuracy of a calculation.

When quick calculations are needed

Taxpayers often need a quick calculation of basic income, standard deduction and exemptions to determine an estimated tax liability. Without an understanding of the tax law, there is no way to provide an accurate calculation.

Tax preparation is more than filling out forms

Penalties can be costly for the taxpayer and preparer, when a return is inaccurately prepared.  An uneducated preparer may not realize that a statement is required to accompany a return (required by some forms and types of income); therefore, omitting the statement.  The omission of the required statement could result in a costly fine for the taxpayer and preparer.

In special circumstances

Exceptions to the tax law are not always clearly defined in tax software, thus allowing a huge margin for error in certain situations.  An un-educated preparer will most likely miss those exceptions, causing the taxpayer to either overpay or underpay his tax liability. 

Tax software is a tool, not a replacement for a well-informed and educated tax professional.  If you’d like to increase your tax knowledge, we can help!