Thanks to programs like TurboTax, people with relatively simple tax returns can prepare their own documents without paying a professional. This works well for those who believe they have the knowledge to prepare their own return but if you have a complicated tax situation or you would rather not prepare your own return without help, you need a tax preparer.
Much like investment advisers, tax preparers may be attorneys or CPAs but they may be much less qualified. The only requirement for being a tax preparer is an IRS tax competency exam and a high school diploma. Because of this, hiring somebody without first doing some research could be a costly mistake. If they make a mistake on your taxes, you are left paying the interest and penalties. Its tax season time again so let’s review what to look for in a good tax preparer.
Not just general experience preparing taxes but experience with preparing taxes like yours. If you’re a small business owner, you don’t want somebody who only prepares individual returns. If you have complicated investments, paying the extra money for a CPA or a professional with experience in that area is a must. Find somebody with at least a few years of experience.
Stay with tax preparers who can give you an upfront fee. Don’t pay by the hour, don’t accept an estimate, and don’t be satisfied with hearing that they won’t know until they actually start your return. The price should be dictated by the number of forms they need to prepare for you. That is easy to figure out by asking you the right questions about your finances.
As with any product or service, take the time to get three or more price quotes. You’re not looking for the cheapest price; you’re looking for the most qualified person at the best price. Paying a little more for experience and expertise is worth the cost.
Retail Tax Franchise?
During the early parts of a year, we’re subjected to the many advertisements for retail tax franchises. They not only have their own dedicated locations but they also appear inside of grocery stores and like the Halloween stores, may take up temporary locations in strip malls.
One prominent tax franchise proudly boasts on their franchisee website that being an owner requires no prior tax preparation experience. Don’t assume that a preparer working for one of these places is any more qualified than an independent tax preparer.
Word of Mouth
Still, the best way to find somebody is by asking people you trust. That is true of tax preparers, plumbers, attorneys, doctors, and anybody else you hire. Do you have friends that tend to be difficult to please? They might be tough to have as friends sometimes but they’re perfect for professional referrals.
Don’t underestimate your own abilities. One study found that 56% of tax returns prepared by a professional had a significant amount of errors compared to only 47% of those prepared by an individual. Although tax preparers are completing more complicated returns in many cases, this still appears to indicate that preparing your own taxes with the help of popular tax software like TurboTax may be worth a try this year. If you choose to hire a professional, don’t settle for the person who greets you at the door of the local office, do your due diligence and get someone that matches you.
Finally, don’t be afraid of tax audits . Most of the time it comes down to bad luck. 🙂
(Photo: aidanmorgan )