The tax code is quite a complex beast. Trying to stay on top of ongoing changes to the tax code is extremely challenging and not too appealing for most. As a result, many people opt to visit a professional tax preparer when tax season is upon them. For those who are choosing this avenue for the first time, here are some tips that should help with the search for a qualified professional.

Chain Service or Licensed Tax Professional
If your return is simple and you place a high value on speed and affordability, then a chain (H&R Block, Jackson Hewitt, etc.) may fit the bill. However, be aware that because of potential turnover you may not be able to meet with the same individual every year. Also, if your return is somewhat straightforward, there are a number of very good, and easy to use, software applications that are available to help with your taxes. This can be a much more affordable option.

If your return is a little more complex, and you value more personalized service, you may want to set up a meeting with a licensed tax professional. These include certified public accountants (CPAs) or enrolled agents. A CPA is required to pass an examination and keep abreast of tax planning through ongoing education. An enrolled agent is a federally-licensed tax practitioner who has passed a comprehensive examination or has worked at the Internal Revenue Service for five years in a position that regularly interpreted and applied the tax code and its regulations. It is important to note that not all CPAs are tax specialists (enrolled agents are).

Ask for a Recommendation
If you have a friend or a relative in a similar tax situation you find yourself in, ask if they can recommend a tax preparer. Ask why they chose this individual (or chain) and why they continue to use their services. Can you contact this person after the return has been filed? Have they been responsive?

Questions to Ask
Whether you get a recommendation or decide to conduct the search on your own, there are a few important questions that should be asked. For example, you will want to know how long they have been preparing taxes, if they participate in ongoing education, if they are experienced with your type of return, and whether they will represent you if you are audited. You may also want to ask about professional licenses and designations, whether they can provide references, whether they have ever been disciplined by any government authority, and, of course, about the cost.

Hopefully you will get a sense as to whether or not you can work with this individual after speaking with them. If you do not get a good feel, it may be in your best interest to move on. Having a level of comfort is critical.

Other Items to Consider
The IRS recommends that you avoid preparers who claim they can obtain larger refunds than other preparers. They go on to say that if your returns are prepared correctly, every preparer should derive substantially similar numbers. The IRS also warns that one should beware of a preparer who guarantees results or who bases fees on a percentage of the amount of the refund. Additionally, a practitioner may not charge a contingent fee (percentage of your refund) for preparing an original tax return.

When your tax preparer finishes with your taxes, he or she should sign the return and include their appropriate identifying number. Make sure you are provided with a copy for your records. Review your return very carefully before you sign it. Be sure to ask any questions that you may have—now is not the time to be shy. While it may be very obvious, it is still worth mentioning that you should never, under any circumstances, sign a blank return.

Last, but not least: Always remember that you are legally responsible for everything that is on your tax return, even if it was prepared by someone else.


©Morningstar 2014. All Rights Reserved. Used with permission.