Your preparer should be a good fit
Ask someone to recommend a professional tax preparer, and chances are good they'll pass on a name given to them by their boss, their co-worker, their best friend, or even their mother-in-law. They, of course, got the name from a friend or relative, who in turn got the name from a similar personal source.
Word of mouth is a potent search engine for finding a professional tax preparer. Even the pros say that using your personal network improves the odds of finding a good fit.
''You want someone who has clients who are similar to you," explains Kevin Long, a certified public accountant and tax lawyer in Boston. ''You want to be comfortable with this person. At the end of the day, this is a relationship."
Today, a growing number of people are embracing such tax-driven relationships. In Massachusetts, the IRS says, the number of individual returns signed by a paid preparer last year rose to 1.8 million -- about 60 percent of individual returns filed -- up from 1.7 million a year earlier.
One reason is the complexity of the tax code. Yearly changes make it tough for people to keep straight the rules governing things such as tax credits and deductions. Even efforts to simplify the code, such as this year's revised definition of who qualifies as a child under certain tax programs, create changes that can easily confuse filers.
''The way Congress is passing tax acts, they're not simplifying the code," says Leon Rudman, president of the Massachusetts Society of Enrolled Agents, who has an office in Stoughton. ''They're building layer upon layer upon layer."
People worry not only about making mistakes, he says, but also that they will miss opportunities to cut their tax bills.
Hiring a professional isn't a panacea. It won't, for example, eliminate the need to gather all the necessary tax documents. IRS statistics show that individual filers who hire a paid preparer still spend an average of nearly 11 hours preparing their annual return. And while a paid professional will sign your return, you're still the one who will be responsible for interest and penalties should the IRS find something wrong.
How do you sort through that list of recommendations? No formal training is required to be a tax preparer -- anyone can hang out a shingle. So start by checking out your prospect's training and expertise. Preparers at the big chains like H&R Block and Jackson Hewitt Tax Service take company courses to ensure they have basic tax skills, but some at these offices have more advanced training. Certified public accountants -- tested and certified by their state -- offer a variety of services that commonly include tax preparation. Then there are enrolled agents, who have either passed a tough IRS tax exam or spent at least five years working for the IRS in specific tax areas.
The level of expertise you need will depend on the complexity of your return. Someone who has nothing more to report than wages, an individual retirement account, and a home mortgage may only need some hand-holding if they decide they don't want to tackle their own returns. But if you own a rental property, have started a small business, are divorced, or recently moved to the state, you may want a more sophisticated preparer.
Price is a consideration. It will vary according to the complexity of the return, the type of preparer, and even the location. At H&R Block, for example, the national average per return is $155. In the Boston area, accountant Long estimates that a CPA typically might charge anywhere from $250 to $2,500. So make sure to ask not only how much your specific return will cost, but also what services are included in that fee. Does the fee, for example, include questions that may arise after the return is filed?
Opting for a bargain basement preparer can be a mistake. ''The person who does your tax return knows more about you than your doctor or perhaps even your minister," explains Tom Ochsenschlager, vice president of taxation at the American Institute of Certified Public Accountants in Washington. So you may want to interview several people before making a choice.
With April's deadline looming, some tax professionals may already be booked for the current tax season. Others may wait until March 31 before closing the door to new clients who want to file by the April deadline, says Rudman, the enrolled agent.
But if the preparer you want is no longer taking new clients, you're not necessarily out of luck. Ask if you can file an extension -- making sure to cover your tax liability -- so that the preparer you like can tackle your return after the deadline rush.
The details
Background check Ask not only about training and the number of returns they've prepared, but find out if your prospective preparer has dealt with topics -- home office deductions, perhaps -- that may show up on your return. Ask for references.
The IRS isn't happy? Only CPAs, enrolled agents, and lawyers can represent you before the IRS in matters such as appeals and audits. If your preparer doesn't have these credentials, find out who will be available to help.
The bottom line Some charge by the form, others charge by the hour, and others will quote you a specific fee. Ask about additional fees in case the IRS has questions or decides to audit your return.
Looking back Preparers should ask to review your recent tax returns. They may find filing errors that could save you money.
Looking ahead A good tax professional also provides year-end tax planning that can save money on next year's return.
Go online Find enrolled agents at www.maseaonline.org and CPAs at www.mscpaonline.org. The IRS offers tips on finding a preparer atwww.irs.gov.
