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How to Choose a Tax Preparer

1.

Make sure you really need a preparer. If your return is straightforward and simple, spending money on professional tax preparation may be a waste. You might only need the help you can get from a software program (see How to Buy Personal Finance Software).

2.

Choose a preparation service if your return isn't too complex. A chain service like H&R Block may be perfectly suitable, and chances are it's the least expensive choice. If you want continuity, however, don't go with a chain tax service. Turnover may make it difficult for you to use the same preparer from one year to the next.

3.

Hire a qualified individual if your return is more involved and you need that one-on-one relationship. Your options include a public accountant, a certified public accountant (CPA) or an enrolled agent. A CPA must pass an exam (a standard public accountant has not yet) and keep up with ongoing education. An enrolled agent is licensed by the federal government to prepare taxes and, if need be, represent taxpayers in the event of a problem.

4.

Know precisely what you're getting for your money. Although CPAs may have a formal designation, not every one is a tax specialist. Enrolled agents, on the other hand, specialize in taxes.

5.

Make certain you and your tax preparer are a good fit philosophically. If you're conservative, steer clear of a preparer who wants to aggressively push the envelope on your deductions. You'll simply end up convinced that April is the cruelest month.

6.

Check references to learn how responsive a particular accountant is. A tax preparer who is slow to respond can end up costing you money in late fees and penalties.

7.

Save money on fees by giving your tax preparer organized files and receipts. The cleaner your records are, the less time a tax preparer has to spend in organizing them (and the less likely it is that you'll miss a valuable deduction).

8.

Review your return carefully before filing it, even if a professional prepared it. Tax pros are human, but their mistakes can ultimately cost you money.

Tips and Warnings

  • If you're unsure whether a tax pro is worth the money, bear in mind that you may get back more in tax savings than your preparer charges. After all, it's a preparer's job to stay current on any changes that can work in your favor. And the fee is tax-deductible.
  • Know who's going to prepare your return. In some larger tax services, subordinates do the actual preparation and company principals only look over the final product.
  • Tax shelters are a major red flag with the IRS, so make sure you understand any program suggested by a preparer. If it sounds too good to be true, it may be.


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