With the growing number of tax preparation software programs on the market, many taxpayers feel comfortable calculating and submitting their own taxes. However, if you don't feel comfortable doing it, or you have a more complex tax situation, you may be in the market for a tax preparer. Unfortunately, anyone can call themselves a tax preparer. So, in order to find one who will do the best job for you, you need to delve into their background and services a little deeper.
TUTORIAL: Personal Income Tax Guide
The consequences of choosing the wrong tax preparer can be high. Any mistakes, made on your tax return, could come back to haunt you, not the preparer. If you are audited by the IRS and owe further taxes, you will have to pay the additional tax plus any penalties and interest. Choosing an experienced professional gives you some assurance that your return will be prepared the right way.
Here are four things you need to know about your potential new tax preparer:
As of 2011, all tax preparers, who charge money for their services, must be registered with the IRS. That doesn't mean they all have the same credentials. You can choose a certified public accountant (CPA), an enrolled agent or even someone with no professional training to do your taxes. A CPA has a very uniform background of knowledge in tax matters, and is bound by a set of professional ethics guidelines. With other preparers, finding out their background and training may be more difficult. If your tax situation is simple, you may not need a professional accountant, but the more complex it becomes, the more highly-specialized you will want your preparer to be. (The phone book isn't the best place to start your search. For more, see Crunch Numbers To Find The Ideal Accountant.)
The experience your tax preparer has had, with situations like yours, is just as important as their credentials. Going to a business accountant when you have complex investment transactions may result in missing out on deductions. Ask potential preparers what types of tax returns they work on, and how many they do every year. If you think you may need someone to represent you in an audit situation, be sure to choose a preparer who has participated in many audits and is comfortable doing so.
Clarity of Fees
When comparing potential tax preparers, get their fees in writing, and make sure that you are comparing apples to apples. For example, one preparer may say the fee is $75 for a return. Without further information, there is no way to know if this includes related schedules, such as Schedule C, or whether there are extra charges if the return takes longer than expected. The preparer should be given enough information about your tax situation so that they can calculate a fixed fee and guarantee it. Avoid those who want to charge you by the hour, as you have no idea how long it will take them to prepare your return. You should always know the fee upfront.
Never underestimate the importance of how comfortable you feel with your tax preparer. If they cannot communicate with you without resorting to techno-speak, you will most likely miss out on important information. Your tax preparer should be able to go over your return, with you, in a way that you can understand what does and does not appear on your return. Having a preparer you communicate well with also makes it easy to pick up the phone, during the year, and ask questions about your tax situation. (For related reading, see Surviving The IRS Audit.)
The Bottom Line
Choosing the wrong tax preparer can cost you significant dollars, both in errors and in missed deductions. Take your time, upfront, and compare professionals so that you know that your tax return will be done correctly the first time.