Tips for Choosing a Tax Pro
Which type of tax professional is best for you.
Preparing your own tax return can be a time-consuming and hair-pulling experience. So let’s get right down to it: how do you know which tax professional is right for you?
How to Choose a Good Tax Pro
There are several different types of tax professionals. You can choose between tax preparers, national tax franchises, independent tax firms, CPAs, enrolled agents, and tax attorneys, for example. I’ll give an overview of each type, so you can determine which one may be best for your personal situation.
A tax preparer is someone who’s willing to help you complete your tax return for a fee. Anyone can run an ad or print a business card and call themselves a tax preparer. They may or may not have any specialized tax education or experience. So it’s critical that you make sure someone who claims to be a tax preparer is truly qualified or comes highly recommended. Never work with an unknown tax preparer if your tax situation is at all complex due to ownership of a small business, rental property, investments in the stock market, or working outside of the U.S., for example.
National Tax Franchises
The national tax franchises such as H&R Block or Jackson Hewitt, for example, have thousands of offices in the U.S. They employ tax professionals with varying levels of education and experience. Here’s a quick tip for working with the tax franchises—always request to work with the most senior tax preparer in their office. It won’t cost you any more, but should result in you getting to work with a more seasoned professional. If your tax circumstances are somewhat complicated, be sure to ask if they can provide the specialization that you need.
Independent Tax Firms
Independent tax firms are locally owned accounting businesses that work with individuals and companies. They usually have accountants on staff with a range of tax specialization and experience. If you have a fairly complex tax situation, a local firm may be your best option. In my experience, independent firms can get to know your individual needs and offer a high level of consulting and customer service.
Certified public accountants, also known as CPAs, are professional accountants licensed by the state where they work. They must pass a rigorous exam and usually go on to specialize in a certain area such as business consulting or corporate accounting. They can even represent you before the IRS; but not all CPAs handle tax issues. The American Institute of Certified Public Accountants website at aicpa.org has more information about this profession. You may find CPAs that specialize in taxes at a tax franchise office or at an independent firm.
Enrolled agents are another type of licensed tax professional. Like CPAs and attorneys, they can represent taxpayers before the IRS in the event of an audit or dispute. They must pass a rigorous exam and are qualified to prepare tax returns for individuals and businesses. They must complete continuing education and adhere to a code of professional conduct. They may work for a tax franchise office or an independent tax firm. You can learn more at naea.org, the website for the National Association of Enrolled Agents.
Tax attorneys are lawyers who have chosen to work exclusively in tax law. They’ve been admitted to their state bar by passing a licensing exam. Tax attorneys are needed for complex legal matters such as disputes that go before the U.S. Tax Court. In special cases they may prepare or assist with extremely complicated tax returns for businesses or individuals.
If your tax return should be uncomplicated, a qualified tax preparer or tax franchise office may be a fast and inexpensive option for you. But if your tax return has any degree of complexity, they may not have the expertise to maximize potential deductions. Use a CPA or an enrolled agent to manage a complicated situation and help lower your tax liability.
Always consider whether anyone who prepares your tax return will be in business in the future if you need their help to explain information on your return to the IRS. Whether you choose to prepare your own return or hire someone to do it for you, remember that the person ultimately responsible for its accuracy is you!
Join me again next week for more about tax preparation. I’ll share important questions you should ask any tax professional, the red flags to watch out for, and the best tax software for doing your own taxes.
I’m glad you’re listening. Chi-Ching, that's all for now, courtesy of Money Girl, your guide to a richer life.
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