Choosing The Right Tax Preparer For You
© by Charles E. McCabe
Why Not Do It Yourself?
If you enjoy the challenge of tackling Form 1040 and have ample time to study the
tax laws, plus the ability to comprehend them, by all means, you should save money and
prepare your own tax return. But if you're like the majority of American taxpayers, the
"do it yourself" route could be a costly mistake. Even if you can find time to
muddle through the tax laws, you're not likely to learn everything you need to know to
minimize your tax bill. Chances are you'll spend many frustrating hours and still wind up
paying more than your fair share. Given The complexity of our income tax laws and the
ever-increasing demands on our time, becoming a once-a-year tax expert just isn't
What Factors Should You Consider?
Who you choose as your tax preparer and what you pay for this service depends on
the complexity of your personal tax situation and your personal preferences. Here are some
considerations to help you select the best tax preparer for you.
Tax Knowledge: If your situation calls for a
"Short Form" (1040A or 1040EZ) and you prefer not to handle it yourself,you
obviously won't need a high-priced tax professional. Yet, unless you are interviewed by a
relatively knowledgeable tax specialist, you may file on the wrong form or overlook
important tax considerations that could save you money. Even if you should file Form
1040A, you might still be eligible for tax advantages such as Head of Household status,
Child/Dependent Care Credit or Earned Income Credit. Every taxpayer needs an advisor who
knows all the questions to ask pertinent to his or her specific tax situation. Yet a CPA
or a tax attorney is "overkill" for a simple tax return.
Credentials: Virginia has no licensing laws for
tax practitioners--anyone can "hang out a shingle" and set up shop as a tax
preparer. Also, an individual might have credentials generally associated with tax
knowledge and not be qualified to prepare non-routine individual tax returns. Relevant
education and experience are necessary for anyone to competently prepare the wide array of
individual income tax returns filed by the general public. A tax attorney or a CPA who
specializes in individual income tax law is obviously qualified. But many CPAs and
attorneys learn and practice corporate taxes only. Individual income tax preparation is a
complex and specialized field of study. A very significant credential in the field is
Enrolled Agent status, attained by passing an intensive exam administered each fall by the
IRS. An Enrolled Agent is authorized to represent taxpayers before the IRS. Another good indicator
of individual competence is experience in teaching tax preparation at a recognized school.
Regardless of credentials, competent tax preparers must keep current on the ever-changing
tax laws through education. And a tax preparer who doesn't continue to practice will
quickly become "rusty." Ultimately, knowledge and experience are the best
Accuracy: There can be only one correct result
for an individual's income tax returns; the one that yields the lowest legitimate tax,
which translates to the smallest tax bill or largest refund possible. Judge Learned Hand,
a renowned American lawmaker, once said:
"Anyone may so arrange his affairs that his taxes shall be as low as possible;
he is not bound to choose that pattern which will best pay the Treasury; there is not even
a patriotic duty to increase one's taxes..."
Since anyone can make a mistake, your return should be checked for accuracy, both in math
and theory, by a tax specialist other than the preparer. Computerized processing of tax
returns can help ensure thoroughness and accuracy, assuming a good software package is
used by a knowledgeable tax professional.
Professionalism: Getting your taxes prepared can
actually be a pleasant experience if you're being served by a true professional; and you
shouldn't have to pay a premium for professional service. You should expect a pleasant
office atmosphere with a reasonable degree of privacy and comfort. You should also be
treated with respect and courtesy. You shouldn't feel as though you're just another number
being processed in production line style. Of course, your personal and financial information
should be held in strict confidence. Finally, the person or firm you select should have
Personal Service: Your tax preparer's job is to become
thoroughly familiar with your personal financial situation and to help you provide the
information necessary to minimize your taxes. He or she should inform and educate you on
the tax laws affecting your personal situation. This information will enable you to make
decisions as to how your return is to be prepared. Your tax advisor should be working to
help you avoid problems with the IRS, but should not behave like an IRS auditor. By the
end of your interview, you should have no question in your mind that all your personal
concerns were addressed and your best interests were served. Basically, the best tax
preparers are not "tax technicians." They are knowledgeable individuals who are
not condescending or aloof, but have empathy and genuine concern for the best interests of
every one of their clients.
Convenience: Most people prefer to have their taxes
prepared at an office near where they live, shop or work. Many taxpayers can only find
time to get their taxes done in the evening, or on a Saturday or Sunday. Fast service is
also important to most clients. Some people are willing to pay a premium to have their tax
advisor come to their own homes or offices. Others prefer to walk-in at their convenience,
and many prefer to make a specific appointment. Convenience is important, but other
factors should outweigh convenience when your personal tax situation becomes more complex
than average. Ideally, you will find a convenient tax preparer with all the other
qualities you are seeking.
Availability: Will your tax preparer be there for you
in July when you get a letter from the IRS? If you're not sure, you'd better look for
another one. A reputable tax professional will be readily available all year round to
provide assistance with any tax problems or questions you may have.
Guarantee: What happens if your tax preparer makes a
mistake that costs you penalties or interest? Suppose you are audited by the IRS? What if
you're not satisfied with the way your return was prepared? Before you contract with a tax
preparer, you should find out the answers to each of these questions.
Stability: Even if your tax preparer meets all of your
criteria, you should ask yourself if you think he or she will probably still be around to
help you this summer, or next year, or five years from now when you need tax assistance.
The greatest stability may be available through an established, reputable firm rather than
an individual tax practitioner. Yet, most people who seek tax assistance prefer to see the
same friendly face year after year. Therefore, a firm that retains its good people for a
long time would probably be a good bet, all other things considered.
Price: The cost of preparing any tax return can vary
dramatically among different tax practitioners. IRS law prohibits tax preparers from
basing their fees on the amount of tax refund obtained by the client. Many tax
practitioners charge by the hour, others operate from a standard schedule of charges, and
some simply charge "what the traffic will bear." Higher levels of tax expertise
typically command higher fees. Ideally, you will find a tax professional with the level of
expertise you need for a price you can afford. Perhaps the fairest basis for setting fees
is the complexity of the income tax return, determined by the schedules and statements
required. This method enables a price to be quoted in advance that will apply regardless
of how long it may take for the tax preparer to complete the return. If your tax return is
complicated, a tax practitioner may have difficulty quoting an exact price before
conducting a thorough interview. However, your candidate should be able to give you a
rough idea of the probable fee.
Most people who inquire about price simply want a "ball park figure" to
determine whether the cost will be reasonable and affordable. Be wary of tax practitioners
who avoid disclosing the basis for their fees in advance. You should also ask if you will
be charged extra for tax information should questions arise later, or for assistance in
the event of an audit.
Types of Professional Tax Preparers
Advantages and disadvantages of the following types of tax practitioners should be
considered in choosing the best source of professional tax assistance for you.
Independent Tax Practitioner:
(1) You should get highly personal service;
(2) You won't see a different face each year;
(3) Since overhead will probably be lower, the fee may also be less;
(4) You will be able to closely scrutinize the tax preparer's qualifications.
(1) The practitioner could stop practicing at any time;
(2) Math or theory errors could go undetected with no one available to check the sole practitioner's tax returns;
(3) Guarantees may be undefined or unavailable;
(4) Assistance may not be readily available during the off-season.
Small Accounting or Tax Firm:
(1) You should get relatively personal service;
(2) Fees should be more reasonable than large accounting firms;
(3) Stability should be greater than independent practitioners;
(4) Tax preparers may cross-check one-anothers' work, thereby reducing the possibility of errors and omissions;
(5) Help should be available during the off- season.
(1) Guarantees may be undefined or unavailable;
(2) Office location or hours may not be convenient;
(3) The firm may have a limited range of specialized skills represented among its tax preparers.
Large Accounting Firm:
(1) You should get very personal service;
(2) The firm will be stable;
(3) Accuracy level should be high;
(4) Help will be readily available year 'round;
(5) The firm should have a number of highly qualified specialists.
(1) Fees will probably be "out-of-reach" for most individual taxpayers
unless the tab is picked up by their employers;
(2) Office location and hours may be inconvenient;
(3) Service may be slow;
(4) Actual tax return information gathering and preparation may be delegated to less qualified para-professionals and reviewed by a tax
(1) The institution is most likely very stable;
(2) Accuracy level should be high;
(3) Year 'round help will be available;
(4) Personal service should be provided;
(5) The institution should have some qualified tax specialists on staff;
(6) Convenient locations may be available.
(1) Fees will probably be high;
(2) Convenient office hours may not be available;
(3) Service may be slow;
(4) Tax Returns may be "farmed out" to computer tax processing services;
(5) Actual tax preparation may be delegated to less qualified para-professionals;
(6) Tax services may be available only to preferred customers of the financial
Financial Planning" Firms:
(1) Personal service should be available.
(1) Fees may be high;
(2) Tax knowledge may be limited;
(3) The primary goal of some planners may be to earn commissions by selling you
Major Tax Preparation Firms:
(1) The company will probably be quite stable;
(2) Degree of accuracy should be high;
(3) Year 'round assistance will be readily available;
(4) The company will have some very knowledgeable tax specialists on staff;
(5) Convenient locations and office hours will be available;
(6) Adequate guarantees will be available;
(7) Service should be very prompt;
(8) Fees will be affordable for most taxpayers.
(1) Quality of service may be inconsistent from office to office;
(2) You may not get the same tax preparer each year;
(3) Professionalism may be lacking;
(4) Service may resemble a production line. Not every tax preparer can be classified into
one of the broad groups described above. And some
preparers in each category will have characteristics
different than those typical of the group.
How to Pick the Best Preparer for You?
Like any other consumer purchase, unless you obtain a strong recommendation from
someone whose judgement you trust, you need to shop around for the best value. Before
starting, you should determine the type of tax preparer you can afford and decide how far
you are willing to drive, as well as when you can find time for a personal interview. To
obtain a price estimate by phone, be prepared to describe your tax situation in detail.
Having last year's tax return in front of you may help. To help you determine the
preparer's professionalism, you could inquire about professional affiliations, references
and memberships in organizations such as the Better Business Bureau and your local Chamber
of Commerce. You may also want to visit the preparer's office to assess the atmosphere and
privacy. The checklist below may help you compare the acceptable alternatives you can
Checklist: Choosing a
Professional Tax Preparer
About the author:
Charles E. McCabe, a 25+ year veteran income tax preparation industry executive, has
managed hundreds of tax preparation offices in New York, New Jersey, Maryland, D.C.,
Virginia and Brazil. He is Founder and President of Peoples Income Tax, Inc. a
Richmond-based firm which operates income tax preparation offices throughout metro
Richmond, Colonial Heights and Fredericksburg, and has independent licensees nationwide.
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