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Is a tax pro worth the money?

Since taxes are complicated, you may think a pro is always the way to go. But if you don't need certain kinds of help, you're wasting your money.

By Stacy Johnson Feb 14, 2012 7:19PM

This post comes from Brandon Ballenger at partner site Money Talks News. are any number of ways to file a tax return: You can do it yourself, use software or pay a professional. The IRS isn’t particular.

You, on the other hand, should be concerned about who does your taxes, for a very simple reason. Because regardless of who helps fill out your return, you're going to sign it, and you're going to be the one responsible for it.  So it pays to have your taxes done right.

Starting last year, all preparers must have a preparer tax identification number, or PTIN, and eventually all must demonstrate at least some knowledge of the federal tax code by passing an exam. Once they do that, they'll earn the designation of IRS registered tax return preparer. It's something you should ask about wherever you get your taxes done this year, and every year from now on.

But that's not all you should ask about. Check out the following news story we recently shot about finding the right tax pro, then meet me on the other side for more. (Post continues below video.)

Before we get into more detail about picking a pro, let's address a more fundamental question: Do you really need one?

Check out this recent news story I did on free tax help. If you made $50,000 or less last year, it will cost you nothing to sit across the desk from a live, human tax preparer. And even if you made more than that, if you’re willing to do varying degrees of the work yourself, you can still file free.

Two other options are to buy software and install it on your computer, or use an online-only  preparation service. Of these two options, online generally offers more choices and lower prices. There’s a ton to pick from: One way to check out a bunch in one place is at the IRS Free File website. That’s the website set up for those who qualify for free filing, but it links to a ton of online companies that are happy to accept money from taxpayers in all situations. As with many things in life, you'll find that companies that don't advertise heavily often cost less.

For the vast majority of people, software is the perfect solution for taxes. Because while income taxes may seem exceedingly detailed and complicated to you, doing math and remembering a few thousand rules is exactly what computers were invented to do.

If that doesn't convince you, maybe this will: Virtually every human tax preparer is also using software to prepare your return. You’re giving them your information, they’re doing the same thing you could do: enter it into a software program that spits out a completed return. In other words, in many cases when you’re sitting across the desk from a tax professional, what you’re really doing is paying someone $50 to $500 an hour to do your typing for you.

So why go to a human preparer? There’s only one reason: Sometimes human beings can do things that software can’t. For example, by asking the right questions they can ferret out deductions that software might miss. By getting to know your situation, they might help you formulate a strategy to minimize future taxes or answer other financial questions.

So don’t be penny-wise and pound-foolish: If a pro can really help you, buck up. But if you don’t need or receive valuable personal advice, don’t pay for it. Use software and do your own typing.

And if you decide you need the human touch, here are nine tips to find the right tax pro:

  1. Ask your friends or co-workers for referrals, especially if you suspect their tax situation is similar to yours.
  2. Check out credentials. In order of education and price, when it comes to taxes, there’s tax attorney, then CPA, then enrolled agent. There are also other designations and none: Other than the registered tax return preparer designation mentioned above, professional credentials aren’t required to charge for tax preparation.
  3. Ask about experience. A license and education are nice, but experience is critical, especially experience in dealing with people in situations similar to yours. If you can get someone with 30 years' experience for the same price as someone with three, don't you want to?
  4. Ask for references. Any professional in any field should be happy to provide them. Of course, only an idiotic professional would provide you with the name of a customer who is s going to bad-mouth him, so you can’t put too much weight on references.
  5. Talk to several professionals before you decide. This is the single most important thing to do before hiring virtually anyone. Only after talking to several people will the attributes you’re seeking surface in one of them.
  6. Ask about continuing education. Take it from a CPA who’s skated through correspondence courses simply to keep a license active: This isn’t a guarantee the professional is up to speed. But it’s better than nothing.
  7. Ask about professional organizations. Belonging to an organization is not the be-all and end-all, but it might be an indication of interest in the profession.
  8. Make sure he or she is around all year. You could need help with an audit in August.
  9. Compare prices. If one pro charges more than another, what is he going to do for you to justify the premium price?

Bottom line? Most people start their search for the right pro before considering if they even need one. If you've got a complex situation, have questions or want to talk strategy, hire someone. But don't pay three (or 30) times more than you have to just because you've always done it that way. Or worse, because the commercials told you to.

More from Money Talks News and MSN Money:


Feb 26, 2012 2:57PM
Ask for references. Any professional in any field should be happy to provide them
no, actually I'm NOT happy to provide references.  My clients expect and receive absolute confidentiality regarding their circumstances and I will not reveal anything about them to anyone, especially not a name and contact information.  I may vaguely reference a similar situation to reassure a potential client that I have had experience in a particular area, but that's pretty much it.  And please don't think of making an appointment with me to try to find out if I'm a good fit for you.  The time to do that is in the off-season, not in the run up to April 17th.  Also, number 9 seems to contradict some of the other points.  Sometimes you DO get what you pay for, and if you want certification, education, experience, representation and availability, you should anticipate that you will  pay a little more for that.
Feb 15, 2012 3:20AM
When you hire a tax pro, you are paying for our knowledge. My last 2 clients had 1099-MISC, Box 7 non-employee compensation, and they had zero clue they could write off their expenses in relation to that income until I informed them. I also printed out the correct pubs and instructions for them.
Mar 6, 2012 11:00PM
This article doesn't even mention the VITA and AARP free tax help programs. And while it does mention preparer certification (testing), it failed to mention that paid preparers have only been required to be tested for the last two years - while the volunteers have been required to pass the tests for many years now. Furthermore, volunteers are tested at progressive levels and do not give tax help in those cases where they are not certified.
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