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Tax Filing: Tips for Picking the Right Tax Preparer (Hint: It's Probably Not Uncle Ed)

Tax preparerSure, your Uncle Ed might be happy to prepare your tax return for you, but think twice before accepting his help. The price might be right, but he might cost you more than you know in the long run if he misses tax credits or deductions that you should have taken advantage of.

The tax code is incredibly dense and complicated and changes frequently, so it's often worth enlisting the help of a skilled pro. Just choose wisely.

Types of Preparers

There are several different kinds of folks who can prepare your return, besides well-meaning friends and relatives. Certified public accountants are an obvious choice, though not all of them deal with individuals' taxes. Enrolled agents are an excellent option, too. They're federally licensed pros who focus solely on taxes and are allowed to represent clients before the IRS. The National Association of Tax Professionals includes CPAs, enrolled agents, and other tax pros, and is another source of candidates.

You can gather candidates by asking friends or family for referrals. You'll also find preparers waiting for you through tax-preparation service companies such as H&R Block (HRB), Jackson Hewitt, and Liberty Tax Service. And the folks at AARP offer the AARP Foundation Tax-Aide program, offering free tax-return preparation, targeting those with low to moderate income and those age 60 or older in particular.

Military personnel have an extra option, the Volunteer Income Tax Assistance Program, or VITA, which offers free tax-prep assistance. Low-income non-military taxpayers may also be able to tap this program.

Ask the Right Questions

Once you have some candidates for your business, check them out before signing on with them. Ask for referrals, and for a (no-charge) interview, as well. Here are some questions to ask:
  • What's your experience, education, and familiarity with new tax laws? You need to be confident that the preparer is a savvy one.
  • How much will you be charging me? Get at least an estimate, as you don't want to end up unpleasantly surprised. Find out how the fee is calculated, and avoid any fee based on the size of your refund.
  • How soon will the work be completed?
  • Who exactly will be preparing my return? Are you speaking with the preparer, or will your work be handed off to someone else in the firm? This question can give you a sense of how important your business is to the preparer. If an underling will be preparing your return, what are his or her qualifications and training? You also want to know who you will speak to if you have problems or questions down the road.
  • Do you have continuing professional education requirements, and how much of that do you complete each year? Ideally, a candidate will be regularly keeping up with tax-law changes, and perhaps even exceeding requirements. This is especially important if your tax situation isn't routine.
  • How aggressive or conservative are you? Tax returns are not always simple matters. When an issue falls in a gray area, it's good to know how the preparer will treat it.
  • Will I be able to contact you throughout the year? Remember that tax issues and questions can come up at any time, such as if you change jobs or marital status or are dealing with a loved one's death.
  • What security provisions do you have? You want to see steps taken to protect your privacy and prevent your information from going where it doesn't belong.
  • If I'm audited, will you represent me before the IRS? The ideal response is yes. Some preparers outsource your work, though, and may not represent you. Others may require you to be present, as well, which is not ideal. Be sure you're OK with the answer to this question.
The IRS itself offers some additional questions to get answers to before signing up with any preparer.

Be wary of any candidate making seemingly lavish claims (such as promising you a surprisingly hefty refund) or pitching his services aggressively. Also, do not sign any blank forms, and make sure that the preparer includes his own tax identification number and signature on your return, as required on the form.

If you choose not to hire a pro to prepare your return and would rather do it yourself, consider using tax-prep software, such as Intuit's (INTU) TurboTax. Be smart about your tax preparation, and you can save a lot of money -- and headaches, as well.

Motley Fool contributor Selena Maranjian has no position in any stocks mentioned. The Motley Fool recommends Intuit. The Motley Fool owns shares of Intuit.


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