How to Find a Tax Preparer

As we make our way through yet another tax season, wading through W-2’s and 1099’s, you may find yourself feeling slightly overwhelmed — or simply out of time. If so, you’re not alone. More than half of all taxpayers feel the complexity of tax laws and forms makes preparation too difficult and time-consuming.

Considering the multitude of tax preparation software and online resources available to aid taxpayers in filing their own return, at what point does it make sense to use a professional tax preparer? And if you decide to use a professional, how do you choose the right one?

To self-prep or not to self-prep…

While there isn’t a black and white rule for determining if you should or should not self-prepare, there are certain situations in which you may want to get help from a professional. Major life change, such as marriage, divorce, inheritance, changes in your family or getting a new job are among the most common. If you are self-employed, you may need the guidance of a tax professional when it comes to deciding what qualifies as business expenses and how to minimize your tax burden.

Generally, if you have complicated financial affairs or simply don’t want to deal with tax season, help from a professional is likely needed. The U.S. Federal tax code contains 9,834 sections! And each one of them is a reason to ask for some help.

Who do you choose?

You’ve familiarizing yourself with 9,834 sections the tax code isn’t for you, your next step is to determine what kind of professional to use.

Tax professionals fall into a few different categories:

  • National tax services: H&R Block, Jackson Hewitt, etc. These services are best for taxpayers with relatively simple tax preparation needs.
  • Enrolled agents (EAs): Federally licensed individual tax practitioners who have passed a 2-day IRS-administered exam. They are qualified to handle tax preparation at various levels of complexity levels.
  • Certified public accountants (CPAs): Tax professionals who have a bachelor’s in accounting and have passed a grueling series of tests to gain the licensing. They prepare returns, can represent you in the event of tax problems, and can assist you with tax planning.
  • Tax attorneys: Lawyers who specialize in tax planning.

The fees charged by professional tax preparers can range from as little as  $100 to $1,000 or more, with fees largely driven by the complexity of your situation and the sophistication of the tax strategies employed by the professional you are working with.

At Precedent Asset Management, we generally find that the services of a CPA who specializes in tax planning and preparation are best suited for the vast majority of our clients.

Even though you are paying these professionals to help improve accuracy and minimize your tax liability, always check your own completed tax returns carefully before signing them. You are ultimately responsible for the accuracy of your return.

To reduce the chance of error — particularly if you are self-preparing —  you should become familiar with basic tax principles and regulations, check all documents for accuracy, and request an explanation of any items on your return that you don’t understand.

How do you choose?

Since you are legally responsible for your tax returns, it is important to choose the right person to prepare them for you. Here are a few things you can do to help you find the best tax preparer to work with.

  • Make sure that a prospective preparer has a PTIN – which all paid tax return preparers are required to have. These are issued by the IRS and you can search their database for any preparer who has one.
  • Make sure they don’t have disciplinary actions and check the status of any licenses they hold.
  • Be sure to compare fees and make sure you understand and accept the fee for services rendered. Never work with a preparer who asks for a percentage of your refund.
  • A good preparer will request records and receipts and ask you about your income and expenses to get a feel for your tax situation. If a preparer offers to file your returns without seeing your W-2 or other records, do not work with them!
  • Never use a preparer who asks you to sign a blank tax form. Never sign a document until you are able to review and verify it’s accuracy.

Here at Precedent Asset Management, we help clients with tax planning and can assist you in gathering the tax documents you will need to file your return. We will work with you and your tax professional to ensure your tax season goes as smoothly as possible.

If you are in need of a trusted tax preparer, we would be more than happy to refer you! Contact us to set up a time to talk.

Patrick Daniels is the Financial Planning Analyst at Precedent Asset Management, serving clients as a fee-only advisor in the Indianapolis, Indiana area and nationwide, through coordinated financial planning and investment management.