9 tips to pick a tax pro

Here's how to determine if you need a professional to prepare your tax return and, if you do, how to find the right one.

By MSN Money Partner Feb 12, 2013 4:57PM

This post comes from Brandon Ballenger at partner site Money Talks News


Money Talks News logoDo it yourself with paper and pencil, use software, or pay a professional: As long as it's accurate, the Internal Revenue Service doesn't care how you file a tax return. But you should, because your name is on it and you're responsible. 


If you're going to go to the hassle and expense of using a paid preparer, you want to get your money's worth. 

In recent years the IRS tried to clamp down on shady and otherwise unprofessional professionals with a program requiring all paid preparers to have a preparer tax identification number, as well as continuing education and some kind of credential. However, that program was recently struck down in court. So for now, anyone can charge money to prepare taxes, which means it's vital to ask about background, education and credentials.


But before you ask a pro about qualifications, there's a question you should ask yourself first: Do I even need one?


Image: US government 1040 tax form © Steven Puetzer/PhotographerDo you need a pro?

If you made $51,000 or less in 2012, you can sit down with an experienced tax preparer for free -- often without an appointment.


If you made $57,000 or less last year, you can use free software, courtesy of the IRS Free File program. There's a variety to pick from.


In fact, the Free File website is a good place to visit even if you made more than $57,000 last year. That's because the same companies providing free software to those eligible for Free File will also provide it for a price to those who aren't. And you may find better prices from lesser-known providers than from their heavily advertised competitors.


For most of us, software is the perfect solution for taxes. While income taxes may seem exceedingly detailed and complicated to you, doing math and remembering a few thousand rules is exactly what computers were made for.


Is the human touch worth the money?

Whether you use H&R Block or a local CPA, everyone preparing taxes for a living is doing the same thing you could be doing: typing your information into a software program that spits out a completed return. In many cases when you're sitting across the desk from a tax professional, what you're really doing is paying someone from $50 to $500 an hour to mash a keyboard for you.


That being said, human beings can do things software can't. They can provide projections and  strategic advice, suggest tactics to reduce your taxes, prepare business plans and evaluate investment opportunities. They can refer you to other useful professionals, from lawyers to real estate agents.


If a pro can really help, find one. Here's how to identify a qualified professional: 

  • Ask your friends or co-workers for referrals, especially if you suspect their tax situation is similar to yours.
  • Check out credentials. There are lots of designations that could indicate tax expertise, from registered tax return preparer to tax attorney. Generally, but not always, the most educated and expensive are, in declining order, tax attorneys, CPAs, and enrolled agents. You obviously don't want a $500-an-hour lawyer answering questions a $75-an-hour agent could answer.
  • 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, do it.
  • Ask for references. Any professional in any field should be happy to provide them. Of course, only an amateur or an idiot would provide the name of a client who's going to bad-mouth them, so don't put too much weight on this one.
  • Talk to several before you decide. This is easily the single most important thing to do before hiring virtually anyone. Only after you talk to several people will the positive attributes you're seeking surface in one of them. And you might learn something each step of the way; think of it as getting free samples.
  • Ask about continuing education. A license alone isn't enough. Ask what they do to stay on top of their game.
  • Ask about professional organizations they belong to. Again, not the be-all and end-all, but it might be an indication they at least take an interest in their profession.
  • Make sure they're around all year, just in case you need help with an audit in August.
  • Compare prices. If one pro charges more than another, what are they going to do for you to justify a higher price?

Bottom line

Don't start searching for pros before considering whether you need one. If you have a complex situation, have questions that need answering, or want to talk strategy, then 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.


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