How to Select and Work With a Tax Preparer

Tax filing season has begun, and millions of Americans are trying to decide whether to file on their own or hire a professional tax preparer.

Since the tax law is more complex than ever this year, it is likely that more Americans will seek professional help. Already about half the taxpayers hire someone to complete returns for them.

However, consumers should realize that there is a huge disparity in the education and skills of tax preparers. Virtually anyone with a calculator can hang up a shingle and offer to fill out your return for a fee.

There are no national educational and professional requirements for preparers. A handful of professional organizations license or certify tax professionals. However, the designations are not required to fill out returns.

If you are hiring a tax professional, you should look for one of the professional designations. Why? The professional organizations require their members to take continuing education courses to keep up with the law.

They must pass tests that require a minimum level of competence. And if you have a problem with one of them, you can complain to a professional organization that may investigate and pull the preparer’s license.

Unlicensed preparers have nothing to lose but your business.

The one exception may be unlicensed preparers who work for national tax services such as H & R Block, Jackson Hewitt and Triple Check. The reason: These chains usually have education requirements of their own. And the chain is unlikely to disappear if the consumer gets audited.

There are three basic designations: Enrolled agents, licensed public accountants and certified public accountants. CPAs generally must pass the most rigorous exams, and they tend to charge the most. Enrolled agents usually offer the most moderate prices. All three can generally represent you in an audit.

Which kind of tax preparer you choose should depend on your income and circumstances. Those with moderate incomes and simple returns might be best served by an enrolled agent or a national tax service chain. Paying more for additional expertise might not be worth the money.

Those with complicated returns--tax shelters and elaborate itemized deductions--might consider a certified public accountant that specializes in taxes. Additionally, high-income individuals who need major tax planning advice might also opt for a CPA or even a tax attorney.

In any case, those who try professional preparers should use them cautiously. You should make sure you know how long the preparer has been in business. Where have they practiced? How much experience do they have with your type of tax situation? What steps do they take to keep up to date on the tax law? Are they able torepresent you with the Internal Revenue Service if you are audited? Do they stand behind their tax advice? Does the firm charge by the hour or the form filed? How much will it charge to do your return?

Finally, before you bring in your return, you should get organized. If you bring in a shoe box stuffed with receipts, it is going to take your preparer far longer to fill out your return. If your preparer charges by the hour, you’ll pay dearly for that laziness. Tax preparers typically charge between $50 and $300 an hour.

A good way to start is to ask any tax preparer how you can cut down on the charge. Assuming that he or she doesn’t charge by the form, the accountant is likely to offer a number of suggestions. Among them:

* Get organized. Many tax preparers will give their clients questionnaires to fill out. Properly filled out, the forms make the accountant’s job quick and easy. Don’t go in until you’ve got the forms finished.

* If your accountant doesn’t use these organizers, pull out a copy of last year’s tax form and use it as a guide. From this you should be able to determine what informationyour accountant is going to need this year.

* Assemble the appropriate receipts in order, putting statements of income in one pile, statements verifying deductions in another. You do not need to give your accountant all the receipts if you are certain of the numbers. Instead, write down the amounts in neat categories--earned income, interest income, investment income, mortgage interest, business expenses, medical expenses, etc. It will save your accountant time fiddling with the documentation.

* If your return is fairly standard and has changed little from year to year, you might try filling it out yourself, using last year’s form as a guide. Then ask your accountant to simply review the form--it’s usually far less costly than having someone fill it out.

* Finally, go in early. If you wait until the final days of tax season, your accountant is going to be frantically busy. Those who go in early are likely to get better and faster service.