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Educational Consumer Tips

Hiring a Tax Professional

Author: Better Business Bureau

The Informed Consumer's Guide to Hiring a Tax Professional Appleton, WI 54912-8002 December 22, 2005 What is your time worth to you? It is a good question to ask yourself when it comes to preparing tax returns. Each year, tax laws become more complex, thus returns become more time-consuming. According to government statistics, the average 2004 itemized tax return with interest and dividends took taxpayers an average of 33 hours to prepare. Surprised? Think the answer lies with tax software? Think again. From IRS statistics, those using software spent nearly ten hours more to complete their taxes than those who did not use tax software. "Although software is updated annually to address the changes, using a software program requires time and it only works if you know what information to enter," says NATP member, Bruce Hicks of Brentwood, TN. The outcome of software-assisted completion is directly related to information being entered correctly by the taxpayer. The use of a paid professional will save you time, money, and stress.This year, many tax returns will be directly affected by new legislation signed by President Bush in eight recent tax bills, as well as the annual inflation adjustments. To deal with the constant changes in tax law, tax preparers study and equip themselves year-round to understand and work with the latest guidelines. They are familiar with software glitches and have insight about frequently overlooked deductions. Often, consulting a tax preparer not only pays for itself, but also offers you a learning experience that will help you better structure your financial decisions for future savings. "Most clients think of their tax preparers as someone to consult just one time a year, but they should be using their preparer as a resource the entire year," notes Nick Popolo of Birch Tax Service in Staten Island, NY, another NATP member. "Clients should consult a tax preparer when they are obtaining a mortgage, considering an investment, or starting a business." Life changes such as a death or a divorce are additional critical times to consult a tax preparer. So where do you start to find the right preparer?Assess Your NeedsSeveral elements factor into the type of professional that is best for you. Just as it is not a good idea to hire a home-repair contractor or a nanny without doing some personal-needs assessments and careful investigation, it is never a wise idea to hire a tax professional without doing the same. Just as importantly, never base your decision solely on cost. "Consider the reason you are thinking of having your return prepared - tax audit, a special problem that you are not sure of, a change in tax laws, or your records are not what they should be. In many cases, the answer to these questions will impact the cost of the return - especially recordkeeping, or lack thereof," advises Kenneth Morales of Lexington, KY. Compare what services are available and included, and assess how the professional meets your personal expectations. These factors will help you determine where you will receive the best professional advice based on your specific needs. Deciding on a PreparerWhen choosing a tax preparer, consider:- The complexity of your tax return. - Your occupation or industry. Does the preparer have specialized training in dealing with your tax situation (i.e. home-based day care providers, elder issues, real estate activities, etc.)?- Is future financial advice important to you?- Do you want someone who will also help you out after tax season if the IRS questions something or audits your return? Is this an included service or will it be an additional charge? Is the preparer available year-round?- What is the fee structure, and does it make sense to you? How does the preparer charge? Flat rate? Per form? If so, how many forms are anticipated? By the hour? How many hours do they estimate? Which way would you feel best paying?- Do you feel that you can trust the person you select? Trust is crucial. Other criteria worth thinking about:- How many and what types of tax returns does the preparer file? Do they help you with clear, professional answers to your questions? If you are a business client, do they help with business-related planning as well? - How long has the preparer been in the tax business?- What type of credentials or designations do they maintain? Do they continually upgrade their knowledge by meeting continuing-education requirements? - Does the preparer belong to any professional organizations? Belonging to a reputable professional organization indicates a commitment to excellence in his or her chosen profession. Professional organizations provide their members with the latest tools necessary to enhance business knowledge as well as providing a valuable resource for information.- What do other clients say about the tax preparer? Referrals from friends and acquaintances are great, but references are important to check too; satisfied customers attest to reliability.A good preparer will be forthcoming with references.Know Your Tax ProfessionalTax professionals can have a variety of designations, each reflecting various areas of specialization. A designation alone, however, does not always demonstrate tax preparation experience. There are many specializations within the accounting/taxation field. Ask specifically about tax preparation. Also, be aware that many professionals hold multiple designations. The most commonly known designations include certified public accountants (CPAs), certified financial planners (CFPs), enrolled agents (EAs), and attorneys. All of these credentials and others require substantial amounts of continuing professional education credits to maintain the designation. - "EAs specialize in taxes," emphasizes NATP member Marilyn Meredith, EA, of Port Huron, MI. EAs are required to pass an extensive tax exam that is administered by the IRS, pass a stringent background check, and maintain sufficient continuing education credits in taxation to retain their certification. EAs, as well as CPAs and attorneys, are qualified to represent taxpayers in audits before the IRS.- A CPA has a college degree and has passed an exam required for certification. CPAs are especially qualified to maintain business records and financial statements. Many also prepare tax returns. - Accredited tax advisors (ATAs) and accredited tax preparers (ATPs) specialize mainly in tax preparation for business. Both require the completion of an exam in taxation.- CFPs specialize in assessing individual needs and financial planning for the future. They handle investments and advise on "big-picture" planning to help individuals achieve their financial goals using the most advantageous means available. Changing legislation continually gives reason for reviewing planning strategies using IRAs and trusts. - Many tax professionals do not carry a particular designation but are still qualified and reputable individuals. As a consumer purchasing services, use caution. Use the criteria stated above and check references carefully until you feel confident about a tax preparer. As you would for any other business, check with the Better Business Bureau ( as an added safety measure. Finally, once you have enlisted the professional help of a tax preparer, it is critical that you check to see that he or she has signed your return before submitting it to the IRS. Despite the fact that it is the obligation of the taxpayer to attest to the correct representations on the tax return, " want your tax professional to be willing to stand by their work," says Popolo. "Paid preparers are required by the IRS to sign the completed return," adds NATP member Kevin Huston, EA, of Asheville, NC. "This is because they have to stand behind the theory and reasonableness of everything on that return. An unsigned return leaves the taxpayer solely responsible to the IRS for the calculations and entries." To receive a free brochure on how to find a tax preparer, visit the NATP Press Room at and download a copy of NATP's "Finding the Right Tax Preparer" brochure. To find a professional tax preparer, look to NATP. NATP maintains a listing of professionals in your area at Members of the National Association of Tax Professionals (NATP) assist taxpayers with tax preparation and planning. NATP is a nonprofit professional association founded in 1979 and provides professional education, tax research, and products to its members. The national headquarters, located in Appleton, WI, employs 43 professionals and 25 instructors. NATP exists to serve professionals who work in all areas of tax practice and has more than 17,500 members nationwide. Members include individual tax preparers, enrolled agents, certified public accountants, accountants, attorneys, and financial planners. Learn more at National Association of Tax Professionals (NATP)